Imports and exports are the components of international trade. If the value of a country's imports exceeds the value of its exports, the country has a negative balance of trade , also known as a trade deficit.
The United States has run a trade deficit since Census Bureau. Countries are most likely to import goods or services that their domestic industries cannot produce as efficiently or cheaply as the exporting country.
Countries may also import raw materials or commodities that are not available within their borders. For example, many countries import oil because they cannot produce it domestically or cannot produce enough to meet demand. Free trade agreements and tariff schedules often dictate which goods and materials are less expensive to import. With globalization and the increasing prevalence of free-trade agreements between the United States, other countries and trading blocks, U.
Free-trade agreements and a reliance on imports from countries with cheaper labor often seem responsible for a large portion of the decline in manufacturing jobs in the importing nation. Free trade opens the ability to import goods and materials from cheaper production zones and reduces reliance on domestic goods. The impact on manufacturing jobs was evident between and , and it was further exacerbated by the Great Recession and the slow recovery afterward.
Economists and policy analysts disagree on the positive and negative impacts of imports. Some critics argue that continued reliance on imports means reduced demand for products manufactured domestically, and thus can hobble entrepreneurship and the development of business ventures.
Proponents say imports enhance the quality of life by providing consumers with greater choice and cheaper goods; the availability of these cheaper goods also help to prevent rampant inflation. With very few exceptions, this allowed the free movement of goods and materials between the United States, Canada, and Mexico.
The United States has experienced a continuous trade deficit since It is widely believed NAFTA has reduced automotive parts and vehicle manufacturing in the United States and Canada, with Mexico being the main beneficiary of the agreement within this sector. The cost of labor in Mexico is much cheaper than in the United States or Canada, pushing automakers to relocate their factories "south of the border.
The minimum hourly wage paid to autoworkers for certain cars under a trade agreement signed between the U. In , the U. Accessed Jan. Federal Reserve Bank of St. Whenever a business starts growing and expanding, entrepreneurs begin striving to become more competitive — either by importing or exporting goods. As these are the basics that make a business successful, here are some of the key benefits of importing and exporting that are worth considering.
As soon as a business starts operating internationally, there are many additional factors which can have a huge impact on its success. Exporting and importing goods is not just the core of any large, successful business; it also helps national economies grow and expand. Each country is endowed with some specific resources. At the same time, a country may lack other resources in order to develop and improve its overall economy.
For example, while some countries are rich in minerals and precious metals or fossil fuels, others are experiencing a shortage of these resources. Some countries have highly developed educational systems or infrastructures, while others do not. Once countries start exporting whatever they are rich in, as well as importing goods they lack, their economies begin developing. Importing and exporting goods is not only important for businesses; it is important for individual consumers, too.
Consumers can benefit from certain products or components that are not produced locally, but are available to purchase online from a business abroad.
When people talk about importing in terms of trade, they refer to purchasing products or services from another country. These products or services are then offered to customers by the importing business or individual, broadening their choice of purchase. However, this is not the only benefit of importing; there are many more to consider. Here are some of them.
Many businesses in India and China tend to produce goods for the European and American market. Excessive exports can deplete natural resources and goods in a particular country resulting in higher prices and limited availability of necessary products for countries that rely on these exports.
Relying on exports exclusively can result in being at the mercy of a foreign economy. International trade also introduces business risks, such as fraudulent sales, information security, and lack of control over environmental conditions. It requires trust of a supplier and their counterparts to deliver a product as promised with little ability to enforce their guarantee. A key reason that companies all over the world choose to import goods is to extend their profit margin.
High taxes, wage minimums, and material costs in certain countries make it more useful to import products from a country where fees, wages, and material costs are considerably lower. This situation is particularly common when importing goods where natural resources are abundant.
For example, imported cacao from Ghana is considerably cheaper than imported cacao from the United States. Each country has particulars strengths when it comes to exports. Consider, the Moroccan sardine industry , for example.
Sardines from Morocco are not only plentiful but considered much better quality due to the soil and natural habit that make the country an ideal home for the fish.
In many countries, such as Ghana and Ivory Coast, the government plays some part in managing trade between local farmers and importers. Not only does this minimize risk, but in some cases, the government provides added support and benefits to importers including reduced taxes and assistance with customs.
In these cases, it is very advantageous for companies to develop relationships with foreign exporters. Ghana, Ivory Coast, and many other countries have strict regulations that include regulating trade between African farmers and exporters in their country and the outside world.
While such programs may seem restrictive or overbearing, they have many benefits for foreign importers including reduced risk when trading with a government-approved firm. To increase security, when at all possible, participate in government-sanctioned trade programs.
In fact, in some cases, it may be illegal to trade outside of these programs. Dedicate some time periodically to discussing new and favorable trade agreements that may reduce or eliminate taxes, new trade agreements between your country and countries where your target product is manufactured or grown. Also look for ways to cut costs in your operation through efficient ordering and transport practices.
While it may also be beneficial to have an in-house staff member dedicated to compliance, familiarity with the operation over time makes it easy to miss potential threats. Hiring an experienced, outside adviser will doubtless prove beneficial. At best alert you to potential risks before they arise, and at least provide you with alternative points of view to tighten your logistics and secure your import operations.
Joining a local trade organization either in the country where you operate, or the country where you import can significantly increase your import benefits by providing news, security tips, and general information about foreign trade. Joining a local trade organization can be a great way to secure new business and also gain and trusted suppliers and referrals from other contacts.
When participating in international trade, working with different cultures, currencies, laws, and languages can make staying on top of payments, customs regulations and guidelines, and other deadlines very taxing. One of the best ways to improve your business and achieve success is to set a goal.
You may set a goal to reduce your import costs by a certain percentage or to increase the amount you import without increasing your budget. Bulk ordering reduces costs associated with repeated transactions including payment, shipping, and customs charges. After developing trust and rapport with a buyer, consider renegotiating to import more products at a reduced cost per product. To make the deal equally beneficial for the buyer, offering advance payment or other favorable terms may increase your likelihood of securing a better deal.
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