Imports and Exports
Imports and exports, these both terms are so important in the world that all the world economy is based on these two terms. Before explaining them briefly, we should throw some light on their definition.
“Imports are those goods and services that are purchased by a country from rest of the world zones”
“Exports are those goods that are made by a country and it is sold to rest of the world zone”
The lifeblood of the global market is trade and imports and exports are the 2 key terms of trade. The more a country has an export ratio, the better it’s the economy will. While the more a country has an import ratio, the worse circumstances it will face internally and externally. Imports and exports are also important because it is an easy method to place your feet in global trading.
What countries export? A country exports those goods and products on which it has a command on the international level. Every country has its pros and cons. According to this, it competes in the world market to lift its trade.
Natural resources are also a very important factor. Every country is rich in natural resources according to its position, climate, and region in the world. It uses these resources to make innovative products and then introduces them to the market.
How exports affect the economy? When a country makes a product, it wants to sell it to its people and other countries as well. In this way, it learns how to sell a product in the international market.
Government always supports the companies who want to export their goods. For this purpose, the government provides incentives and opportunities to these companies. In this way, unemployment decreases in the country. People live happily and support their leaders. It decreases inflation.
How to decrease imports/increase imports? The mutual understanding of entrepreneurs and government is very necessary to implement the following statement. Some of the points that are mentioned below are useful in this process.
- Impose taxes: Government should impose taxes on those products which are being imported at a high level. it will decrease their importing and companies use domestic products.
- Subsidies: Government should provide subsidies to the companies to reduce the cost of expenditures. It will make the prices of domestic products cheap and exports will also improve by this method as foreigners want to purchase these products which have cheaper prices.
- Currency devaluation: Another method of increasing exports and decreasing imports is by devaluing the domestic currency. Governments devalue their currency intending to bring down the prices of domestic goods and services, the ultimate goal being to increase net exports. The currency devaluation also makes purchasing from other countries more expensive, thus discouraging imports.
Advantages of imports and exports:
- It is one of the simplest routes of entering into global trade and import and export generate huge employment opportunities.
- Requires less investment in terms of time and money when contrasted with other
methods of entering into the global trade.
- Is comparatively less risky when compared with different routes of entering in international business.
- As no nation can be 100% self-sufficient, import and export are very crucial for the functioning and growth of that nation.
- Can help Countries to access the best technologies available and best products and services in the world.
- It gives better control over the trade than setting up a market and the risk is considered low.
Limitations of imports and exports:
- It includes extra packaging, transportation and protection, and insurance costs which build up the total cost of items.
- Exporting isn’t doable if the foreign nation prohibits imports.
- Domestic organizations which are closer to the client could serve them better than firms outside their national borders.
- Merchandises are subject to quality standards any low-grade merchandise which is exported will result in Country reputation and remarks on countries.
- Obtaining licenses and documentation for foreign trade is a difficult and frustrating task.
- If you are not careful, you can lose grip on the domestic market and existing customers.