What Are Exports? Definition, Benefits, and Examples

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has edited and fact-checked for leading finance publications, including The Motley Fool and Passport to Wall Street.

What Is an Export?

Exports are goods and services produced in one country and sold to buyers in another. Exports, along with imports, make up international trade. Countries often seek external markets for commerce, allowing greater revenue and opportunities.

Key Takeaways

• An export refers to a product or service produced in one country but sold abroad.
• Exports are one of the oldest forms of economic transfer between nations.
• Exporting can increase sales and profits by reaching new markets and capturing global market share.
• Companies that heavily export are exposed to higher financial risk.
• In 2021, the world exported nearly $28 trillion of goods and services, with China leading at $3.5 trillion.

Understanding Exports

Exports are important for modern economies as they provide more markets for goods. Diplomacy and foreign policy encourage exports and imports for economic trade.

Export agreements are strategic, with countries exchanging agreements to ensure access to goods and revenue via imports. Governments may also use exports to influence political situations.

Companies measure their net exports, which contribute to a country’s gross domestic product (GDP) and financial well-being.

Goods can be sent through direct exporting or indirect exporting. Direct exporting involves working directly with importers, while indirect exporting involves using middle parties.

In 2021, the world exported almost $28 trillion worth of goods, with China as the largest exporter.

The Export Process

Countries often partner to understand demand needs before manufacturing goods. The export process starts with receiving an order and obtaining clearance and proper documentation.

The process involves settling financial matters, obtaining a letter of credit, fixing exchange rates, issuing and paying for an invoice.

Documents such as permits, bills of lading, and shipping information are prepared and sent to the seller.

Trade Barriers and Limitations

Trade barriers are government measures that protect domestic products or stimulate exports. They restrict international exchange.

Exporting presents challenges, including research and product modification costs for foreign markets.

Exports stimulate domestic economic activity but expose companies to higher financial risk.

Payment collection methods for exports are more complex and time-consuming than those for domestic customers.

Advantages and Disadvantages of Exports

Pros of Exports

Exports increase sales and profits, open new markets, and capture global market share. They spread business risk and lead to production efficiencies, innovation, and new insights.

Cons of Exports

Exports may incur high transportation costs and risks. Small businesses may struggle due to limited resources and knowledge. Currency exchange rates can also pose risks.

Exporting

• Allows for greater economic activity and revenue
• Can result in production efficiencies
• Can lead to greater innovation and R&D
• May reduce operational risk through diversified revenue streams
• May result in high transportation charges
• May not be achievable for smaller entities
• May result in currency exchange risk
• May increase operational risk due to unknown factors

Real-World Example of Exports

The United States is a top exporter of automotive vehicles. In 2020, it distributed $47.6 billion worth of cars globally.

BMW Manufacturing led in exports, exporting nearly 260,000 vehicles to over 120 countries in 2021.

What Is Export Policy?

Export policy is government legislation that dictates a country’s export rules, tariffs, and limitations.

Is It Better to Export Goods Than Import Goods?

It depends on each country’s circumstances. Importing and exporting both have advantages. Countries should focus on manufacturing goods more efficiently and import what is economically challenging to produce.

What Are the Largest U.S. Exports?

The largest U.S. exports include mineral fuels, machinery, vehicles, medical apparatus, and aircraft.

Who Is The World’s Largest Exporter?

China is the world’s largest exporter, followed by the United States, Germany, France, and the United Kingdom.

The Bottom Line

An export is a domestically produced good sold to a consumer overseas. Exports generate revenue and provide economic benefits.