Exports occur when countries produce products – goods or services – and then sell them to other countries or overseas buyers. The definition, at the same time, entails how exports affect the economy of a nation since they make up international trade on a large scale, beyond geographical borders.
Are exports indeed good for the economy? Or, more particularly, how a particular country benefits from them. Also, the ways exports affect the economy are more likely related to how they help the economic growth of a certain country.
Are Exports Good for the Economy?
It is more reasonable for countries to produce goods to sell for gaining revenues rather than retaining them for mere consumption. It is because each country has its own economic policy, resource limitation, and manufacturing practices (strategies).
Generally speaking, exports accommodate international trade pursuits thus encouraging domestic economic activities in a particular country, especially through the creation of employment, production, and incomes (revenues).
More on how countries benefit from exports are as follows.
1. More Markets
Important to today’s economy, exports offer different countries – including their people and companies – more markets to sell and buy goods (or services).
2. Increase Sales and Profits
The companies export their products based on various reasons. Still, expansive, new, and potential markets lead to more sales and profits.
When they can expand the existing markets or open new ones, exports help increase sales and revenues. The activity also leads to the chance of new potential global market capture.
It is also one of the ways to spread the business risk while doing exports, namely by diversification into multiple markets.
3. Reduce Per-Unit Cost
Exports, since they are intended for foreign markets, can also mean reducing per-unit costs. It is achievable by various operation expansions to meet the increasing and more diverse demand. This implies the benefits of employment and production.
Moreover, companies that do exports are more likely to acquire new knowledge and experience that enable them to discover new insights into domestic and foreign competitors, new technologies, and new marketing strategies.
How Exports Affect the Economy?
Now, let’s see how exports affect the economy of a certain country, or how they help a country’s economic growth.
Exports can be highly profitable for a country – more particularly for its businesses of all sizes. They may trigger faster sales growth (thus profits), more job creation, and employees’ higher incomes compared to non-exporting businesses or companies.
Exports – or, trade surpluses – effectively contribute to economic growth for a particular country. More exports mean a higher level of output by companies, industrial facilities, or factories. It also means a bigger number of people employed to maintain the companies in operation.
A high level of goods exported parallels more flows of funds into the country, stimulating consumers’ spending and thus contributing to economic growth. Furthermore, a country’s exporting (and importing) activities can affect its gross domestic product (GDP), exchange rate, and inflation level, as well as interest rates.
Exports: Real-World Example
According to the World Bank, one of the largest exporters in the world today is China, followed by other countries like the United States, Germany, France, and the United Kingdom.
To name some of China’s main export products are telephones, computers, refined petroleum, integrated circuits, and office machine parts, not to mention the kaolin business. The latter is an industrial mineral used as an important component in the growing markets of ceramic, paper, cosmetics, plastic, paint, rubber, and more.
Exports take place when a country – with its all companies or businesses – produces any product domestically and sells it to a consumer abroad. More exports equate to more outputs by business sectors, more employment, and more sales and profits. That’s how exports affect the economy.
They are indeed beneficial for countries as they help accelerate their economic growth. One of them is by offering more opportunities for big and small businesses to sell their products to foreign markets – existing or new ones.
It is also true with the kaolin markets. If you are pursuing an expansion to a new market overseas for kaolin, PT. YUKAMI – a kaolin clay supplier in Indonesia – can be a good alternative worth considering. It is a leading company with over 3-decade experience in producing and supplying high-quality kaolin, domestically and globally.