Import and export are terms that are often used when referring to international trade. Before going into what is meant by import and export, however, it is important to define what each term means.
- An import is a good or service that is brought into the country from another country. The word import is actually derived from the word ‘port’, i.e. goods shipped into the country from foreign countries enter the country through the port.
- Imported goods are usually those that are not manufactured in a country. For example, a country that does not have a raw material like oil may choose to import oil from another country to meet its domestic needs.
- In addition, a country may choose to import items that are produced locally but are not in sufficient supply to meet domestic needs.
- Export refers to shipping goods that are produced locally to other countries for sale or trade. The word export is also derived from the word ‘port’, as goods are shipped to foreign counties through the port.
- Exported goods are usually those that are produced in surplus, or are in high demand in other countries.
- Most countries export goods in which they have a comparative advantage, e.g. Kenya has a comparative advantage when it comes to coffee production.
When considering what is meant by import and export, it is important to examine the reasons why countries choose to import goods.
- Most countries choose to import goods that their domestic industries are not able to produce as efficiently or cheaply as the industries in the exporting countries
- Countries also choose to import essential goods that are not available locally.
- Note that any foreign product brought into a country by its residents is considered an import, including souvenirs from foreign countries, personal items, and currency.
Effects of Excessive Imports
- First, the importing country becomes dependent on the exporting country’s political and economic power. For example, if an oil-producing country becomes politically unstable, all the countries to which it exports its oil will be forced to wait for the situation to stabilize or source the oil from elsewhere.
- Second, countries with high import levels must increase their foreign exchange reserves to cover the cost of the imports.
- Third, domestic companies that produce the same items that are being imported will be forced into a situation of unfair competition. Most of them may end up shutting down completely.
Next, when thinking about what is meant by import and export, look at the benefits that exporting countries enjoy.
Benefits of Exports in Kenya
- Exports increase jobs, bring in higher wages and eventually raise the standard of living for residents of the exporting country.
- Exports lead to an increase in forex reserves, and local currency reserves, making it easy for the country to manage liquidity.
- Over time, exporters gain a competitive advantage, i.e. expertise in producing goods and services for export, and knowledge on how to sell in foreign markets.
Lastly, consider the following terms in relation to imports and exports.
Trade Deficit – when the value of a country’s imports exceeds the value of its exports.
Trade Surplus – when the value of a country’s exports exceeds that of its imports.
Once you understand what is meant by import and export, it is easy to decide which of the two businesses you would want to venture into.