If you have ever bought a product made in another country, or sold something to a foreign customer, you have participated in international trade. International trade is the exchange of goods and services across national borders. In this article, you will learn what is the difference between import and export, and why they matter for economics.
Imports are goods and services that a country buys from other countries. Exports are goods and services that a country sells to other countries. For example, if you live in the United States and buy a laptop from China, that is an import. If you live in China and sell a laptop to the United States, that is an export. Imports and exports are measured in terms of value, quantity, and composition.
When talking about imports and exports - keyword is “port”; the infrastructure built at a frontier zone to handle goods and services from a country to another one. Imports and exports only apply then when two independent countries are involved in exchange and trade of goods and services. Im-port is related to goods and services in a country sold to another one. And export is the other way around. All imports and exports involve various fees that usually charged for handling these exchanges first to maintain the “port” and to pay other public services for the country owner of the “port.
Countries trade because they can benefit from exchanging goods and services that they have a comparative advantage in producing. Comparative advantage means that a country can produce a good or service at a lower opportunity cost than another country. Opportunity cost is the value of the next best alternative that is given up when making a choice. For example, if China can produce laptops more efficiently than the United States, and the United States can produce wheat more efficiently than China, both countries can gain from trading laptops for wheat.
Starting from the very basic idea: 1. A country sells rice because it receives/knows another country needs rice. 2. The price is perceived as fair (both offer and demand sides’ perspectives) to make profit. Otherwise, there is no need to trade. The purchaser does not necessarily have something to sell to the rice provider in turn. Any international trade begins with this very basic idea. Sometimes and more often with the globalization of trade, it could be efficient to trade with countries that have long-lasting commercial ties - assuming that it would be profitable to save times for long negotiation. It doesn’t work out.
Countries trade through various channels, such as bilateral agreements, regional blocs, and multilateral organizations. Bilateral agreements are deals between two countries that specify the terms and conditions of trade. Regional blocs are groups of countries that share a common market and trade policy, such as the European Union. Multilateral organizations are institutions that facilitate trade among many countries, such as the World Trade Organization.
Trade barriers are restrictions that limit the free flow of goods and services across borders. Trade barriers can be tariff or non-tariff. Tariffs are taxes imposed on imported goods and services, which raise their price and reduce their demand. Non-tariff barriers are any other measures that hinder trade, such as quotas, subsidies, standards, regulations, and sanctions. Trade barriers can be used to protect domestic industries, promote national security, or achieve other policy goals.
Trade deficits and surpluses are the differences between the value of imports and exports of a country. A trade deficit occurs when a country imports more than it exports, while a trade surplus occurs when a country exports more than it imports. Trade deficits and surpluses can affect the balance of payments, the exchange rate, and the economic growth of a country.
Trade can bring many benefits and costs to a country, depending on its level of development, its comparative advantage, and its trade policy. Some of the benefits of trade are: increased variety and quality of goods and services, lower prices and higher incomes, more efficient allocation of resources, greater innovation and productivity, and more opportunities for cooperation and learning. Some of the costs of trade are: loss of domestic jobs and industries, environmental and social impacts, trade imbalances and dependencies, and loss of sovereignty and policy space.