What Are Exports? (2024)

Definition and Examples of Exports

Exports are a component of international trade. They're the goods and services bought by a country's residents that are produced by a foreign nation. In combination with imports, they make up a country's trade balance.

The United States imported $903.4 million in goods between January and April 2021. It exported $554.1 million in goods during that same period. This created a deficit of $349.3 million.

Businesses export goods and services when they have acompetitive advantage. They're better than any other company at providing that particular product.

They alsoexportproducts and services that reflect the country'scomparative advantage. Countries have comparative advantages in commodities that they have a natural ability to produce. For example, Kenya, Jamaica, and Colombia have the right climate to grow coffee. This gives their industries an edge in exporting coffee.

India's population is its comparative advantage. Its workers speak ​English, which gives them an edge as affordable call center workers. China has a similar advantage in manufacturingdue to its lower standard of living. Its workers can live on lesser wages.

How Exports Work

Most countries want to increase their exports. Their companies want tosell more, and they want to sell overseas when they've sold all they can to their own country's population. Theygain expertise in producing goods and services, and they gain knowledge about how to sell to foreign markets.

Governments encourage exports because they increase jobs, bring inhigher wages, and raise the standard of living forresidents. People becomehappierand more likely to support their national leaders as a result.

Exports also increase theforeign exchange reservesheld in a 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 this to manage its own currency's value. It has enough foreign currency to flood the market with its own currency. That lowers the cost of their exportsinother countries.

Countries also use currency reserves to manage liquidity. That means they can better control inflation, which isthe result of too much money chasing too few goods. They use foreign currency to purchase their own currency in an effort to control inflation. That decreases the money supply, making the local currency worth more.

How Countries Boost Exports

Countries try to increase exports in three ways.

First, they usetrade protectionismto give their industries an advantage. This usually consists oftariffs that raise the prices of imports. They also providesubsidiesontheir own industries to lower prices. But then other countries can retaliate with the same measures, lowering international commerce for everyone. The Smoot-Hawley tariff lowered trade by 65% and worsened theGreat Depression.

Second, countries also increase exports by negotiatingtrade agreements. They boost exports by reducing trade protectionism. TheWorld Trade Organizationtried to negotiate a multilateral agreement among its 149 members. This Doha agreement almost succeeded, but the European Union and the United States refused to eliminate their farm subsidies.

Most countries relied on bilateral agreementsor regional trade agreements for years as a result, but then the Obama administration negotiated the Trans-Pacific Partnership in 2015. The Trump administration dropped out in 2017, but the other countries completed the agreement without the United States.

The third way countries boost exports is to lower the value of their currencies. This makes their export prices comparatively lower in the receiving country. Central banks do this by lowering interest rates. A government can also print more currency or buy up foreign currency to make its value higher. Countries that try to compete by devaluing their currencies are said to be incurrency wars.