Exporting
Pros
Often allows for greater economic activity leading to higherrevenue
May result in production efficiencies due to scalingmanufacturing
May result in greater innovation and R&D through workingwith foreign partners
May reduce operational risk in some areas as revenue streamsbecome more diversified
Cons
May result in high transportation charges
May not be achievable by smaller entities due to lack ofknowledge and resources
May result in currency exchange risk due to devaluatingcurrencies
May increase operational risk in some areas due to unknownpolitical or geographical risks
Real-World Example of Exports
Every year, the United States is usually one of the topexporters of automotive vehicles. As domestic companiesmanufacturer cars, trucks, and other vehicles, these are shippedaround the world and used by non-U.S. entities.
In 2020, the Observatory of Economic Complexity reported thatthe United States was the world's third largest exporter of cars,distributing $47.6 billion of vehicles around the world.3 TheUnited States distributed over $10 billion worth of vehicles toCanada, with other top being countries receiving U.S.-made vehiclesbeing Germany, China, Belgium, and South Korea.
Alternatively, the United States was also the top importer ofvehicles in 2020. It imported $144 billion of cars, most of whichcame from Japan, Canada, and Mexico.3
Of the U.S. manufacturers that distribute goods around theworld. BMW Manufacturing led domestic companies by the value ofcars exported. In 2021, BMW exported nearly 260,000 vehicles toroughly 120 countries, an export total of more than $10 billion.2021 was the eighth consecutive year that BMW Manufacturing ledautomotive exports by value, and more than 24% of the company'sexports were delivered to China.4
What Is Export Policy?
Exportpolicy is the government legislation that dictates how,what, when, and with whom a country exports goods. Export policydefines the tariffs, customs re, and limitations oninternational trade for each country.
Is It Better to Export Goods Than Import Goods?
For each country, this answer will be different. In many cases,it is best to import some goods and export others. Each country isoften more proficient in manufacturing certain goods based on theirclimate, citizen skillset, or access to raw materials. Therefore,it's arguably best for a company to manufacturer and export what itis more efficient at doing so and revert to importing other goodswhere it may be economically challenging to produce on its own. Agreat example is produce where certain countries simply have betterarable lands and climate conditions to grow certain goods overothers.
What Are the Largest U.S. Exports?
The United States largest exports include mineral fuels,machinery, vehicles, medical apparatus, and aircraft.5
Who Is The World's Largest Exporter?
Based on most recent export information available for 2020 and2021, China is the world's largest exporter, followed by the UnitedStates, Germany, France, and the United Kingdom.1
The Bottom Line
An export is a good that is produced domestically but sold to aconsumer overseas. Due to resource constraints, economic policy,and manufacturing strategies of each country, it sometimes makesmore sense for countries to make goods to sell for revenue asopposed to retain for consumption.
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