Importing and exporting are two sides of the same coin in international trade. Both terms refer to the trading of goods and services between countries.
Imports
An import occurs when a good or service comes into a country from another country. For example, if the United States buys wine from France, the wine is an import from the U.S. perspective.
Imports allow countries to obtain products they can’t produce themselves or can’t make efficiently. Imports give consumers more choice and can promote economic growth. However, imports also expose domestic companies to competition.
Types of Imports
There are two main types of imports:
- Consumer goods – Products bought by individuals, like clothes, electronics, and food items
- Capital goods – Machinery, tools, and buildings used by companies to produce their own products
Most countries import a mix of both consumer and capital goods. The level and make-up of imports depends on factors like consumer tastes, availability of raw materials, and production costs.
Why Countries Import
There are several key reasons countries import goods and services:
- Comparative advantage – When another country can produce something more efficiently
- Resource scarcity – Importing products a country can’t produce domestically due to lack of raw materials, technology, or expertise
- Consumer demand – Importing products meet domestic consumer demand for foreign goods and services
- Re-export – Importing products to repackage and resell to another country
| Reason for Importing | Example |
|---|---|
| Comparative Advantage | Japan imports oil because other nations have a comparative advantage in oil production |
| Resource Scarcity | Switzerland imports timber because of lack of domestic forests |
| Consumer Demand | The U.S. imports Swiss chocolate due to consumer demand |
| Re-Export | Singapore imports microchips to put in computers it then re-exports |
Table 1: Reasons Countries Import
As you can see, countries import for economic and commercial reasons. Globalized free trade has also made many foreign goods available to consumers worldwide.
Exports
An export occurs when a product or service is sold by a domestic company to a buyer in another country. From the perspective of the exporting country, it is an outbound good or service.
For example, when America sells corn to Japan, that’s considered a U.S. export and a Japanese import.
Exports fuel economic growth by generating jobs and incomes for companies in an export-driven industry. Countries also export to address oversupply in domestic markets and decrease surpluses.
Types of Exports
Much like imports, exports generally fall under two buckets:
- Manufactured goods – Things produced by industries like aerospace, automobiles, machinery, medical devices, etc.
- Raw materials – Unprocessed resource exports like minerals,produce, lumber, crude oil, etc.
The mix of a country’s exports provides insight into its economic foundations. Developed countries tend to export more manufactured goods while emerging markets are rich in raw materials to fuel industrialization abroad.
Why Countries Export
Some of the motivations behind exporting include:
- Comparative advantage – Selling products a country can produce efficiently at a competitive global price
- Reduce oversupply – Selling excess domestic production abroad to prevent surpluses
- Generate foreign currency – Selling exports to accumulate foreign currencies to pay for imports
- Support employment – Boosting jobs in export-oriented sectors of the economy
| Reason for Exporting | Example |
|---|---|
| Comparative Advantage | Chile utilizes a comparative advantage in copper and exports it globally |
| Reduce Oversupply | Canada exports lumber domestically sourced in abundance |
| Generate Foreign Currency | Russia exports oil to secure U.S. dollars and euros to purchase imports |
| Support Employment | Agricultural exports support employment on American farms |
Table 2: Reasons Countries Export
And those are the how and why of exports in a nutshell! In short, exports help fuel economic engines across the planet.
Now that you understand imports and exports at a conceptual level, let’s look at some real-world trade flow numbers.
Global Trade Facts and Figures
Global trade has grown substantially in the 21st century as supply chains cross borders and emerging markets join the worldwide trading network. Here are some key figures about international trade:
- World merchandise exports were valued at $19 trillion in 2019 prior to the Covid-19 pandemic
- World exports contracted by ~7.6% in 2020 during pandemic disruptions
- The WTO expects growth will recover back towards pre-Covid rates as economies reopen
- The largest global exporter is China, commanding 13.8% market share
- The largest global importer is the United States, with 13.4% market share
- Industrial machinery, fuels and mining products constitute the largest export segment
- Fuels and mining exports have grown from 15% in 2000 to 22% share in 2019
So in summary, global import and export flows move nearly $20 trillion per year and support business activity across the planet.
And now let me switch gears to address some common questions about international trade…
Frequently Asked Questions
Let’s explore some common FAQs:
What’s the difference between an import and export?
The difference between imports and exports lies in directionality relative to a single country. Imports come into a country while exports go out of a country. The same product could be an import or export depending on perspective.
What countries have the largest trade surpluses?
The countries running the biggest trade surpluses include:
- China – $426 billion trade surplus
- Germany – $261 billion trade surplus
- Russia – $189 billion trade surplus
These countries export substantially more than they currently import, generating large net trade surpluses.
What countries run the largest trade deficits?
On the flip side, countries with the biggest trade deficits:
- United States – $857 billion trade deficit
- India – $184 billion trade deficit
- United Kingdom – $163 billion trade deficit
The outsized U.S. trade deficit is driven by immense consumer demand for imported products. India and the UK also run perpetually negative trade balances.
What is the most traded product globally?
The most traded products worldwide based on annual export value are:
- Crude oil – $555 billion in annual exports
- Cars – $439 billion in exports
- Gold – $318 billion in exports
So energy, vehicles and precious commodities like gold lead the global export charge.
I hope this overview gives you a better grasp of import and export drivers plus current trade patterns. International trade knits our planet together into an economic patchwork!
Now I invite you to drop additional questions in the comments section below. What other import-export topics would you like to learn about? I’ll be monitoring questions and can write follow-up posts to address reader interests.
