Introduction to Export
The exchange of goods and services across national borders is called export. In simple terms, export refers to the sale of goods and services from one country to another. Export trade involves an outflow of goods and an inflow of foreign exchange. The goods involved may be tangible (physical products) or intangible (services).
Export trade arises because countries differ in their demand for goods and services, as well as in their capacity to supply them. Each country’s resources—such as land, minerals, skills, and machinery—enable it to produce certain goods and services more efficiently than others. Differences in the relative supplies of productive resources lead to variations in their prices, resulting in different costs of production for various goods and services. These differences in commodity prices are the fundamental cause of export trade between nations. A country will thus specialize and export those products which it can produce comparatively more cheaply.
International trade fosters a country’s economic growth in two main ways:
- By providing opportunities for international specialization, and
- By spreading the benefits of modern industrial technology across countries.
Specialization goes hand in hand with trade; it cannot occur without it. In fact, specialization and the division of labor are major drivers of increased productivity and rising real per capita incomes.
Export, like any other business activity, is directly influenced by the prevailing policy framework. Therefore, entrepreneurs must thoroughly understand export policies before deciding to enter the export business. This understanding is a prerequisite for effective export planning.
