Export

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An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an exporter; the foreign buyers is an importer . [1] Services that figure in international trade include financial, accounting and other professional services, tourism, education as well as intellectual property rights.

Contents

Exportation of goods often requires the involvement of customs authorities.

Firms

For any firm, Global expansion strategies may include:

Exporting is mostly a strategy used by product based companies. Many manufacturing firms begin their global expansion as exporters and only later switch to another mode for serving a foreign market. [2]

Barriers

There are four main types of export barriers: motivational, informational, operational/resource-based, and knowledge. [3] [4]

Trade barriers are laws, regulations, policy, or practices that protect domestically made products from foreign competition. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services. [5]

Strategic

International agreements limit trade-in and the transfer of certain types of goods and information, e.g., goods associated with weapons of mass destruction, advanced telecommunications, arms and torture and also some art and archaeological artifacts. For example:

Although the outbreak of COVID-19 sufficiently changed the world economy, people started doing business, so international trade is a key for economic growth. Armenia's economy is dependent on international flows, tourism, and inner production. Competitive export Industries were established which helped the growth of Gross Domestic Product (GDP) to generate financial resources. The market shifted to more efficient exporters, which is the effect of trade liberalization on aggregate productivity. Due to the increase of the number of international business activities through a multilateral trading system, RA Government Program, which was approved in February 2019, the government policy became the objective of economic growth. The period established for the program was 2019-2024. Export quality is developed by developing the export volumes and services. [6]

Tariffs

Tariffs, a tax on a specific good or category of goods exported from or imported to a country, is an economic barrier to trade. [7] A tariff increases the cost of imported or exported goods, and may be used when domestic producers are having difficulty competing with imports. Tariffs may also be used to protect an industry viewed as being of national security concern. Some industries receive protection that has a similar effect to subsidies; tariffs reduce the industry's incentives to produce goods quicker, cheaper, and more efficiently, becoming ever less competitive.

The third basis for a tariff involves dumping. When a producer exports at a loss, its competitors may term this dumping. Another case is when the exporter prices a good lower in the export market than in its domestic market. [8] The purpose and expected outcome of a tariff is to encourage spending on domestic goods and services rather than their imported equivalents.

Tariffs may create tension between countries, such as the United States steel tariff in 2002, and when China placed a 14% tariff on imported auto parts. Such tariffs may lead to a complaint with the World Trade Organization (WTO) which sets rules and attempts to resolve trade disputes. [9] If that is unsatisfactory, the exporting country may choose to put a tariff of its own on imports from the other country.

Vessel at Altenwerder Container Terminal (Hamburg) Hamburg.CTA.Altenwerder.BungaRaya.wmt.jpg
Vessel at Altenwerder Container Terminal (Hamburg)

Advantages

Exporting avoids the cost of establishing manufacturing operations in the target country. [10]

Exporting may help a company achieve experience curve effects and location economies in their home country. [10] Ownership advantages include the firm's assets, international experience, and the ability to develop either low-cost or differentiated products. The locational advantages of a particular market are a combination of costs, market potential and investment risk. Internationalization advantages are the benefits of retaining a core competence within the company and threading it though the value chain rather than to license, outsource, or sell it.

In relation to the eclectic paradigm, companies with meager ownership advantages do not enter foreign markets. If the company and its products are equipped with ownership advantage and internalization advantage, they enter through low-risk modes such as exporting. Exporting requires significantly less investment than other modes, such as direct investment. Export's lower risk typically reduces the rate of return on sales versus other modes. Exporting allows managers to exercise production control, but does not provide them the option to exercise as much marketing control. An exporter enlists various intermediaries to manage marketing management and marketing activities. Exports also has effect on the Economy. Businesses export goods and services where they have a competitive advantage. This means they are better than any other country at providing that product or have a natural ability to produce either due to their climate or geographical location etc. [11]

Disadvantages

Exporting may not be viable unless appropriate locations can be found abroad. [2]

High transport costs can make exporting uneconomical, particularly for bulk products. [2]

Another drawback is that trade barriers can make exporting uneconomical and risky. [2]

For small and medium-sized enterprises (SMEs) with fewer than 250 employees, export is generally more difficult than serving the domestic market. The lack of knowledge of trade regulations, cultural differences, different languages and foreign-exchange situations, as well as the strain of resources and staff, complicate the process. Two-thirds of SME exporters pursue only one foreign market. [12]

Another disadvantage is the dependency on almost unpredictable exchange rates. The depreciation of foreign currency badly affects exporters. For example, Armenia exports different things - from foodstuff to software. In 2022, the country had an enormous number of Russian visitors and tourists because of the military situation in Russia. This resulted in a change in exchange rates and the appreciation of the Armenian dram. At first, it may seem that Armenia’s economy is growing. In fact, the GDP growth is expected to hit 7% by the IMF. However, exporters, who export products and get paid mostly in dollars, suffer because of the depreciation of the dollar against the Armenian dram. Moreover, Armenia’s other exporting bright spot is the IT industry, since a lot of companies and individuals work for US-based companies and get paid in US dollars. Because of the drastic change in the exchange rates, these people and companies who export their service to the US or other countries and get paid in US dollars, make around 25% less revenue. [13]

Exports could also devalue a local currency to lower export prices. It could also lead to imposition of tariffs on imported goods. [11]

Motivations

The variety of export motivators can lead to selection bias. Size, knowledge of foreign markets, and unsolicited orders motivate firms to along specific dimensions (research, external, reactive). [3] [4]

Macroeconomics

In macroeconomics, net exports (exports minus imports) are a component of gross domestic product, along with domestic consumption, physical investment, and government spending. Foreign demand for a country's exports depends positively on income in foreign countries and negatively on the strength of the producing country's currency (i.e., on how expensive it is for foreign customers to buy the producing country's currency in the foreign exchange market).

See also

Related Research Articles

<span class="mw-page-title-main">Balance of trade</span> Difference between the monetary value of exports and imports

The balance of trade, commercial balance, or net exports, is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance of trade for goods versus one for services. The balance of trade measures a flow of exports and imports over a given period of time. The notion of the balance of trade does not mean that exports and imports are "in balance" with each other.

<span class="mw-page-title-main">International trade</span> Exchange across international borders

International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services.

A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade.

<span class="mw-page-title-main">Protectionism</span> Economic policy of restraining trade between states through government regulations

Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents argue that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors. Opponents argue that protectionist policies reduce trade and adversely affect consumers in general as well as the producers and workers in export sectors, both in the country implementing protectionist policies and, in the countries, protected against.

Dumping, in economics, is a kind of injuring pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price below the normal price with an injuring effect. The objective of dumping is to increase market share in a foreign market by driving out competition and thereby create a monopoly situation where the exporter will be able to unilaterally dictate price and quality of the product. Trade treaties might include mechanisms to alleviate problems related to dumping, such as countervailing duty penalties and anti-dumping statutes.

<span class="mw-page-title-main">Trade barrier</span> Restrictions limiting international trade

Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency.

<span class="mw-page-title-main">Non-tariff barriers to trade</span> Type of trade barriers

Non-tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. Such barriers are subject to controversy and debate, as they may comply with international rules on trade yet serve protectionist purposes.

Trade can be a key factor in economic development. The prudent use of trade can boost a country's development and create absolute gains for the trading partners involved. Trade has been touted as an important tool in the path to development by prominent economists. However trade may not be a panacea for development as important questions surrounding how free trade really is and the harm trade can cause domestic infant industries to come into play.

International economics is concerned with the effects upon economic activity from international differences in productive resources and consumer preferences and the international institutions that affect them. It seeks to explain the patterns and consequences of transactions and interactions between the inhabitants of different countries, including trade, investment and transaction.

<span class="mw-page-title-main">Export-oriented industrialization</span> Development strategy based on global trade

Export-oriented industrialization (EOI), sometimes called export substitution industrialization (ESI), export-led industrialization (ELI), or export-led growth, is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries.

<span class="mw-page-title-main">Export subsidy</span> Government policy to encourage export

Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export subsidy reduces the price paid by foreign importers, which means domestic consumers pay more than foreign consumers. The World Trade Organization (WTO) prohibits most subsidies directly linked to the volume of exports, except for LDCs. Incentives are given by the government of a country to exporters to encourage export of goods.

<span class="mw-page-title-main">Trade policy of Japan</span> Overview of the trade policy of Japan

The trade policy of Japan related to Japan's approach to import and export with other countries.

International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale.

<span class="mw-page-title-main">Market access</span> Ability to sell goods and services across borders

In international trade, market access refers to a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or requirements, whereas under ideal free trade conditions goods and services can circulate across borders without any barriers to trade. Expanding market access is therefore often a more achievable goal of trade negotiations than achieving free trade.

<span class="mw-page-title-main">Voluntary export restraint</span>

A voluntary export restraint (VER) or voluntary export restriction is a measure by which the government or an industry in the importing country arranges with the government or the competing industry in the exporting country for a restriction on the volume of the latter's exports of one or more products.

<span class="mw-page-title-main">Competition (economics)</span> Economic scenario

In economics, competition is a scenario where different economic firms are in contention to obtain goods that are limited by varying the elements of the marketing mix: price, product, promotion and place. In classical economic thought, competition causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater the selection of a good is in the market, the lower prices for the products typically are, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).

<span class="mw-page-title-main">Foreign trade of the United States</span> Overview of foreign trade in the United States of America

Foreign trade of the United States comprises the international imports and exports of the United States. The country is among the top three global importers and exporters.

Strategic trade theory describes the policy certain countries adopt in order to affect the outcome of strategic interactions between firms in an international oligopoly, an industry dominated by a small number of firms. The term ‘strategic’ in this context refers to the strategic interaction between firms; it does not refer to military objectives or importance of a specific industry.

This article is intended to give an overview of the trade policy of South Korea. In 1945 Korea was liberated from the Empire of Japan at the end of World War II. A destructive drought in 1958 forced Korea to import large amounts of food grains. In 1950, the Korean war broke out, which destroyed more than two-thirds of the nation's production facilities and most of its infrastructure. Trade policy of South Korea has taken many shifts, from import substitution to globalization and there has been significant impact on the economy for the same.

A destination-based cash flow tax (DBCFT) is a form of border adjustment tax (BAT) that was proposed in the United States by the Republican Party in their 2016 policy paper "A Better Way — Our Vision for a Confident America", which promoted a move to the tax. It has been described by some sources as simply a form of import tariff, while others have argued that it has different consequences than those of a simple tariff.

References

  1. ↑ Joshi, Rakesh Mohan, International Marketing, Oxford University Press, New Delhi and New York. ISBN   0-19-567123-6
  2. 1 2 3 4 Washington, Charles W. L. Hill, University of (2015). International business : competing in the global. Most developing economies now focus on exportation.marketplace (Tenth ed.). McGraw-Hill Education. p. 454. ISBN   978-0-07-811277-5.{{cite book}}: CS1 maint: multiple names: authors list (link)
  3. 1 2 Seringhaus, F. R (1990). Government export promotion: A global perspective. Routledge. p. 1. ISBN   0415000645.
  4. 1 2 Stouraitis, Vassilios; Boonchoo, Pattana; Mior Harris, Mior Harun; Kyritsis, Markos (2017). "Entrepreneurial perceptions and bias of SME exporting opportunities for manufacturing exporters: A UK study". Journal of Small Business and Enterprise Development. 24 (4): 906–927. doi:10.1108/JSBED-03-2017-0095.
  5. ↑ "Targeted Trade Barriers". cftech.com. Archived from the original on 29 April 2013. Retrieved 27 July 2015.
  6. ↑ "Armenia's Export of Goods and Services". May 2020.
  7. ↑ Staff, Investopedia (24 November 2003). "Tariff". Investopedia. Archived from the original on 6 December 2017. Retrieved 7 May 2017.
  8. ↑ Mike Moffatt. "The Economic Effect of Tariffs". Archived from the original on 6 September 2015. Retrieved 27 July 2015.
  9. ↑ US/China Trade Tensions Archived 16 May 2011 at the Wayback Machine , Darren Gersh. Retrieved 21 May 2006.
  10. 1 2 Hill, Charles W.L. (2015). International Business: competing in the global marketplace (15th ed.). New York: McGraw Hill. p. 454. ISBN   978-0078112775.
  11. 1 2 Amadeo, Kimberly. "3 Ways Countries Increase Exports". The Balance. Retrieved 21 September 2020.
  12. ↑ Daniels, J., Radebaugh, L., Sullivan, D. (2007). International Business: environment and operations, 11th edition. Prentice Hall. ISBN   0-13-186942-6
  13. ↑ "Armenia's economic boom hurts tech sector | Eurasianet". eurasianet.org.
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