Export

What Is an Export?

Exports are goods and services that are produced in one country and sold to buyers in another. Exports, along with imports, make up international trade.

Understanding Exports

Exports are incredibly important to modern economies because they offer people and firms many more markets for their goods. One of the core functions of diplomacy and foreign policy between governments is to foster economic trade, encouraging exports and imports for the benefit of all trading parties.

According to research firm Statista, in 2019, the world’s largest exporting countries (in terms of dollars) were China, the United States, Germany, The Netherlands, and Japan. China posted exports of approximately $2.5 trillion in goods, primarily electronic equipment, and machinery. The United States exported approximately $1.6 trillion, primarily capital goods. Germany's exports, which come to approximately $1.5 trillion, were dominated by motor vehicles — as were Japan's, which totaled approximately $705 billion. Finally, The Netherlands had exports of approximately $709 billion.

Advantages of Exporting for Companies

Special Consideration: Trade Barriers and Other Limitations

A trade barrier is any government law, regulation, policy, or practice that is designed to protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.

Companies that export are presented with a unique set of challenges. Extra costs are likely to be realized because companies must allocate considerable resources to researching foreign markets and modifying products to meet local demand and regulations.

Exports facilitate international trade and stimulate domestic economic activity by creating employment, production, and revenues.

Companies that export are typically exposed to a higher degree of financial risk. Payment collection methods, such as open accounts, letters of credit, prepayment and consignment, are inherently more complex and take longer to process than payments from domestic customers.

Real World Example of Exports

One example of an American export that makes its way all over the world is bourbon, a type of whiskey native to the U.S. (in fact, it is defined as a "distinctive product of the United States" by a U.S. Congressional resolution). Furthermore, if the liquor is labeled Kentucky bourbon, it must be produced in the state of Kentucky, similar to the way a sparkling wine must hail from the Champagne region of France to call itself "champagne."

The global market has developed quite a thirst for American bourbon in general and Kentucky bourbon, in particular, in the 21st century. However, in 2018, trade wars between the U.S. and the European Union and China led to 25% tariffs being slapped on the corn-based spirit, leaving a sour taste in the mouths of many distillers, exporters, and distributors.