What are exports? Definition and meaning
An export is a product or service that we sell to a customer in another country. The word can be either a verb or a noun. Put simply; to export means to sell abroad.
Exports are the opposite of imports – goods and services that come into a nation from outside.
It does not matter how either trade comes in or leaves, it can be sent by post, truck, car, ship, air, email, in an airplane passenger’s suitcase, or even across a border on the back of a camel, donkey, mule or horse.
An export is anything that is produced domestically and sent or sold to foreigners, regardless of what it might be and how it gets there.
The person, company or entity that sells the good or service that is sold abroad is referred to as an exporter and is based in the country of export. The foreign buyer is known as an importer.
When a country imports more than it exports it has a trade deficit. When exports exceed imports it has a trade surplus.
Exporters need to complete a Certificate of Origin. The documents says where the product is from, who made it, and its destination.
Exports – International Trade
Both the exports and imports of products and services form part of international trade.
The export of goods in commercial quantities generally requires the involvement of customs authorities in both the exporting and importing countries.
Since the birth of the Internet and cross-border online shopping, customs authorities have been involved in fewer and fewer imported goods. Goods bought in one country through eBay or Amazon, because of their low individual values, have largely bypassed customs involvement.
Even so, these small exports continue being subject to the legal restrictions applied by the country of export.
Export pros and cons
Selling to consumers outside your national borders comes with great rewards as well as some risks. Before deciding on whether to venture out into foreign markets, you should weigh up the pros and cons.
- Markets can be expanded significantly.
- Less dependence on the home market.
- If you sell more you produce more, which leads to greater economies of scale and superior margins.
- Your R&D (research and development) budget could work more extensively and harder as you can change existing goods to suit new markets.
- There is a risk that you might lose focus on your existing customers, i.e. your home market. You need to be careful.
- Administration costs could increase due to having to deal with export regulations.
- Your relationships may extend to faraway lands where customs, languages, etc. are quite different from yours.
- You will have much less control over what happens in foreign markets, compared to your home market.
- Foreign consumers may have different tastes compared to your domestic ones.
Tourism is an export
One of the mistakes that business experts and economic developers make is ignoring tourism as an important export industry.
Actually, tourism is frequently a renewable export, and if used properly, may also be a significant economic development tool. There is more to economic development than GDP growth.
The fact that tourism is classed as exports is noted in a Jamaican study quoted by destinationworld.info – Jamaica WI Gleaner, June 21, 2008 – which states:
“An export industry is one that sells a significant share of its goods or services outside of the country, thus bringing new money into the local economy.”
“Tourism appears to meet these two tenets as the Jamaica Tourist Board reports that over 90 percent of our tourists are international and the Bank of Jamaica reports that the industry contributed some USD 1,975,519,000 to foreign exchange earnings in 2008.”
Domestic provider to foreign consumers
If we assume that the word exports refers to money going from a domestic provider to a foreign consumer, tourism meets this standard easily. The tourists’ providers are all in your home country (the exception might be the airline or cruising company), while the consumer – the tourist – is a foreigner.
Traders have been exporting and importing for literally thousands of years. Before the existence of nation states with properly defined borders, the term ‘international trade’ in economic history refers more to doing business over long distances.
There is evidence that Assyrian international traders existed at Kanesh in Cappadocia during the 19th century BC. The Ancient Egyptians traded with people in other nations across the Red Sea, mainly importing spices from Arabia and the ‘Land of Punt’.
Before and up to the Middle Ages, international trade existed between China, the Roman Empire, India and Persia.
In the second half of the 15th century, the traditional Spice Route shifted from the Persian Gulf to the Red Sea due to the Turkish hold on the Levant.
Christopher Columbus undertook trade missions to the new world in the fifteenth century. Vasco da Gama, and other Portuguese and Spanish navigators also undertook similar missions.
In 1602, the Dutch East India company emerged. It was a huge trading enterprise. The British established their first outpost in the East Indies in Sumatra in 1685.
In the 18th century the Portuguese exported and imported with Japan extensively from Macao. In the Caribbean, Grenada became involved in the Spice Trade in the 18th century.
During the early half of the 19th century, merchants from Salem, Massachusetts, USA traded profitably with Sumatra. In 1833, the Siamese-American Treaty called for free trade, except for rice exports and munitions of war imports.
In 1846, Britain unilaterally adopted a policy of free trade and abolished the Corn Laws. in 1860, Britain and France signed the first international free trade agreement in Europe – the Cobden-Chevalier Treaty. This sparked off other agreements across the continent.
In 1946, nations agreed to the Bretton Woods system, and it subsequently went into effect. A year later, twenty-three nationals agreed to the General Agreement on Tariffs and Trade (GATT) to rationalize trade across the globe.
In 1951, six nations from the European Coal and Steel Community (ECSC). Six nations established the European Economic Community in 1958. This was the birth of what we call today the European Union.
In 1960, the UK established the European Free Trade Association (EFTA). It joined along with other nations that had not joined the EEC.
The largest trading blocs in the world today are the EU and NAFTA. EU stands for European Union and NAFTA for the North American Free Trade Agreement. China is the largest trading nation.