Impact of Import & Export On A Country’s Economic Growth

Import & export are two of the leading factors in a country’s economic growth and rising GDPs. However, is there any harm if the scales tip towards one side?

Ever since the dawn of mankind, people have thrived on trading. From the era of the stone age to the modern stock marketers, humankind flourishes when they work together, exchanging their best traits with each other. That is the case with import and export. Import, in most cases, is when a country requires a product or service that they cannot locally produce. Moreover, the need for import also rises when a country is unable to produce as much or as efficiently. That is what produces the need to import.

Whereas export is simply when a country trades their best product, services and product to another country for the adequate sum. For example, Crude oil is the leading import purchase with cars and other processed oils not too far behind. However, to understand the impact of it on any economy, we have to dive in a bit further, so let us do that.

Effects Of High Import

List of countries with the highest import. Chart source: IndexMundi.

High import of products is not always a bad thing. While in cases of some countries, it can be implied that the domestic supply and demand are uneven. For which, the country’s local businesses have to import said products or goods in order to meet the high demand. The negative impact of this could only be if the country’s currency is in a downward spin and the local businesses do not have expenses to produce, manufacture or grow the required products locally.

However, the effect of high import could also be the country’s growing demand in certain areas. For instance, if local businesses are requiring a higher quantity of machinery and equipment, that means the local economy is growing. Which is why the requirement for certain products is high. Though, the high import of fertile products such as fruits, vegetables and various other kinds also implies a lack of local growth or too much export.

Effects Of High Export

A list showing the leading export countries. Image Source: IndexMundi

Now, let us talk about the effects of high export. A few of the major indications of a country’s large export rates could be one of the following reasons:

• The country produces unmatched goods
• Local businesses provide affordable prices
• High produce and manufacture but low local demand
• Growing local industry and high foreign demand

Now, those are the positives of some of the major exporting countries. But, for smaller countries with high local demand and low supply, too much export can be a problem.  However, for major countries, the upside is that higher export means better profile for newer businesses. And where small and new businesses thrive, the economy grows.

Negatives Of Unbalanced Import & Export

One of the major concerns for smaller countries, in this case, should be supply and demand. Where there is high demand, the supply needs to match it. If in this case, a country or local businesses commit towards too much export, then some of the problems they might face are:

• Lack of good products in the local market
• High prices for local & imported products
• Slower growth of minor businesses
• The increased requirement to import products

These can be caused by a lack of balance between import and export. So, where a country requires to import products that can be locally produced, that is a sign of an unstable economy. One of the major drawbacks of such instances is a lack of faith from investors. Which can cause harm for new and existing businesses, further drawing back the local economy. To ensure the growth of both the businesses and the local economy, what must be done is:

• A balance between import & export
• Local demands should be met first
• Price controls on government levels
• Product categories and classes to distinguish prices
• Exporting the exceeding amount to meet local consumption

Is It Necessary To Keep Them Balanced?

As we talked about the problems with the balance tipping towards one side more than the other, it could cause serious harm to a country’s economical growth. So, yes, it is imperative that local government and stake-holders take all the necessary precautions and steps to ensure a thorough balance between the two. That is not to say that import and export should be divided into 50\50. Because if a country produces a large amount of its signature product, then they need to export it before it becomes unusable or expired. However, it is important for smaller economies to meet local demands first, then focus on exporting outside.

Benefits Of High Import Or Export For The Economy

As mentioned previously, the high import demand of a country does not necessarily mean its failure to produce. Because growing economies demand the provision of material, machinery and other productivity measures. On the other hand, if a country is exporting such machinery and provisions at higher levels, then that is also a good sign. Because it would improve local industries that create or develop said measures. Which is an indication of growing and thriving economies. So, some of the major benefits of high import and export are:

• High import increases sales
• High export ensures productivity
• Growing export numbers means regional or foreign dominance of the market
• Import allows countries to expand businesses locally

Can a country run out of food if it exports too much?

That is not always the case, as most major exporting countries have a back-up plan to tackle the shortage of food supply. However, most exporting countries have counter-measures to target their supply and demand and cater to it properly.

Is a higher level of an export sign of a growing economy?

In most cases, yes, it is. However, exporting to a point where your local supply runs out is a bad idea.

Should smaller economies avoid importing too much?

Considering they are most in need of local businesses and growth, their focus should be on local produce. However, some technology, machinery, material, mineral and resources require countries to import. So, they should import adequate amount at all times.