What is an Export?

//What is an Export?
What is an Export? 2017-10-04T08:11:53+00:00

Definition: An export is the shipping of domestic goods or services to a foreign country, where the products will be processed, used, sold or re-exported.

What Does Export Mean?

What is the definition of export? Exports, along with imports, are a key element in a country’s trade balance as the sale of exported goods increases a nation’s gross output. Many countries encourage exports as a way to increase employment, disposable income, and consumer spending. Furthermore, the more products a country exports, the greater the competitive advantage as it gains expertise in producing goods and services that foreign countries want to use.

On the upside, exports increase a nation’s foreign exchange reserves, allowing the central bank to defend the domestic currency and stabilize its value while lowering the cost of exports to foreign countries. On the other hand, exporting countries use trade protectionism measures such as tariffs, quotas, and subsidies, to protect their industries and give them a competitive advantage. In this context, the government policy, and the exchange rates are very important factors that affect a country’s exports.

Let’s look at an example.

Example

Businesses that seek to expand internationally should pay attention to currency fluctuations. Currency risk is one of the reasons that an expansion strategy may fail, especially when a firm is mostly dealing with foreign partners.

For example, company A is a U.S. car manufacturer, and it exports auto parts to Mexico. If the dollar is strong against the Mexican peso, it takes fewer dollars to export the auto parts to Mexico. Conversely, if the dollar is weak against the Mexican pesos, it strengthens the power of the Mexican exporter. To deal with currency risk, the U.S. car manufacturer should insist that all deals with Mexican partners are made in US dollars. On the downside, this may deter Mexican exporters of partnering with the US exporter, preferring to do business in their local currency.

Summary Definition

Define Exports: Export means a good that is shipped from its country of origin to another country to be sold or traded.