Importing & exporting are two of the major traits of any ascending country. So, how do they affect the business within?
In the year 2020, a lot of countries faced problems because of the pandemic. Many of which have their economy and business inside relying on the seamless continuation of import and export. Many of the businesses around the globe, whether they manufacture internally or import the goods from the outside, count on the turning wheels of export. While the import and export business has the power of breaking or making an economy, there is one important thing to understand here.
What is the impact of both of these on the business of a country? If a country is importing a lot but exporting less, does it mean it is not working properly? Or if a country is exporting a lot and not importing frequently, does it harm or help their business? To answer these question, it is imperative to understand the difference between the two. So, let us dive in.
Table of Contents
What Is Import?
When a country or the business of that country buys a product, service, commodity or product from another country, it is what we call import. The core element of this international trade is the ability of one country and the demand for another. The country that many others import the most out of is China. Whereas since 1975, the United States has lost that label with its trade deficit of 55.2 Billion back in 2019. But, the question remains, what is import for you?
In simple terms, the reason behind import is the inability of a country or the businesses inside it to produce the required goods. For instance, if a country does not have fertile land, it would have to import goods, particularly raw material from another country. Moreover, the primary reason behind this import is not only the inability but also the lack of producing required goods in high-amounts or as efficiently or cheaply as the exporting country. Which is why import becomes one of the signature traits of the country that is able to export it, in this case, it is China. Some of the major industries that China caters to are:
- Technology & Gadgets
- Cars & Automobiles
- Food & Nourishment
- Agriculture and farm produce
What Is Export?
A chart depicting the head-to-head between China & US over world economy. Image Source: CNBC
Export is the exact opposite of import. So, when a buyer is looking for affordable produce in high quantity, that is when the country and its business with the ability to cater to those requirements step in. When a country or its businesses are more than capable and sufficient to cater to the demands within, the nature of this business is to grow outside. Some of the major names in this industry are China, United States, Japan & Germany. With each one of them relying on one or more particular industries.
In the case of the Netherlands, the country produces vegetables and fruits more than 8x the demand of its citizens. Which is why it is one of the largest fruit and vegetable exporting countries in Europe. Whereas China & Japan make technology more than their required quota, so they lead in exports in tech and gadgets.
So, What Are The Effects On Businesses?
In the case of a country importing goods from the outside, their requirement of said product or service gets fulfilled. However, if it exceeds the balance and the limit, then it can harm businesses locally. For instance, if a local business is producing grain and the country’s major markets import it from outside, then it can negatively impact the economy. Some of the negative effects on local businesses would be:
- Lesser export of local produce
- Hike in prices
- Less demand for locally made products
Just like that, in the case of an exporting country, if they do it too much, their own supply can run short. Which is why many major exporting countries have a limit that local businesses cannot exceed. In other words, a certain percentage of their produce has to stay in their local markets. The negative impact of exporting too much are as follow:
- The country might end up needing to import to fill the requirement
- Absence of quality products from the consumer market
- Raise at prices of local produce
The Importance Of Keeping The Balance
Now that we understand the negative effects of tipping the scales too much on one side, let us talk about the importance of keeping the balance. One of the primary reasons that exporting countries like China and the United States have a designated limit on export is to ensure fulfilling local demands. However, they also keep a fair balance of import in order to keep the world economy on a balance. Since each country has its own signature product, they also have requirements that they cannot produce. So, some of the things that exporting countries need to export are:
- Fruits & vegetables that farmers locally cannot produce
- Technology and gadget that is not locally made
- Niche products that have a specific target audience
- Automobile, cars, and vehicles of all sorts from other countries
Major Benefit Of Balanced Import And Export
Aside from the negative effects, let us talk about a few positive ones. One of the reasons why countries prefer to keep the balance is that it keeps both import and export going. There are certain businesses that need to keep going in order to keep the wheel of the economy turning. Now, some of those rely on import and others rely on export.
What happens if a country fails to export yearly produce?
One of the major problems that a country might face is in the case of food products. If certain exportable products are not exported in a year, then they might go to waste, causing millions and maybe billions of dollars in loss.
Is it important for a major exporting country to import just as much?
If local businesses do not require foreign export, then it is not necessarily the case. However, consumer marketers have specific requirements and some of them cannot be locally produced. To keep up with that standard, some countries do, in fact, need to import a lot, if not as much as they export.
