Export Trade

11/08/2020 1 By indiafreenotes

Exports are explained as the goods and services manufactured in one country and acquired by citizens of another country. The export of good or service can be anything. This trade can be done through shipping, e-mail, transmitted in private luggage on a plane. Basically, if the product is manufactured domestically and traded in a foreign country, it is known as an export.

In International trade, exports are one of the components. The other component is imported which means the goods and services purchased by a country’s citizens that are manufactured in a foreign country. Both the export and import combined contribute to the country’s trade balance. Whenever the country’s export is more than the import, it is called a trade surplus. However, when the import is more than the export, it is known as a trade deficit.

Exports are the goods and services produced in one country and purchased by residents of another country.1 It doesn’t matter what the good or service is. It doesn’t matter how it is sent. It can be shipped, sent by email, or carried in personal luggage on a plane. If it is produced domestically and sold to someone in a foreign country, it is an export.

Exports are one component of international trade. The other component is imports. They are the goods and services bought by a country’s residents that are produced in a foreign country. Combined, they make up a country’s trade balance. When the country exports more than it imports, it has a trade surplus. When it imports more than it exports, it has a trade deficit.

Objectives of Export Trade

  1. Sale of Surplus Production
  • A country may produce more than it requires.
  • Then, in that case, the surplus may be sold to foreign countries.
  1. Optimum Utilization of Domestic Resources
  • Every country has some natural resources in plenty.
  • These resources can be utilized to increase the production and sell to those countries where these are in shortage.
  1. Employment Opportunities

International business helps the business enterprises to focus on more production which requires more manpower that means more employment opportunities.

  1. Earning of Foreign Exchange

A country with surplus production may earn foreign exchange by selling goods and services to other countries.

  1. Increase the National Income
  • Earning of foreign exchange due to exports add to the national income of a country.
  • This help in improving the standard of living of people.

Exports Affect on Economy

Most countries want to increase their exports. Their companies want to sell more. If they’ve sold all they can to their own country’s population, then they want to sell overseas as well. The more they export, the greater their competitive advantage. They gain expertise in producing the goods and services. They also gain knowledge about how to sell to foreign markets.

Governments encourage exports. Exports increase jobs, bring in higher wages, and raise the standard of living for residents.

As such, people become happier and more likely to support their national leaders.

Exports also increase the foreign exchange reserves held in the nation’s central bank. Foreigners pay for exports either in their own currency or the U.S. dollar. A country with large reserves can use it to manage their own currency’s value. They have enough foreign currency to flood the market with their own currency. That lowers the cost of their exports in other countries.

Countries also use currency reserves to manage liquidity. That means they can better control inflation, which is too much money chasing too few goods. To control inflation, they use the foreign currency to purchase their own currency. That decreases the money supply, making the local currency worth more.