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What is an 'Export'?

An export is a function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's gross output. 

BREAKING DOWN 'Export'

Exports are one of the oldest forms of economic transfer and occur on a large scale between nations that have fewer restrictions on trade, such as tariffs or subsidies. Most of the largest companies operating in advanced economies derive a substantial portion of their annual revenues from exports to other countries. The ability to export goods helps an economy to grow. One of the core functions of diplomacy and foreign policy within governments is to foster economic trade for the benefit of all trading parties.

Exports are a crucial component of a country’s economy. Exports facilitate international trade and stimulate domestic economic activity by creating employment, production, and revenues. As of 2016, the world’s largest exporting countries in terms of dollars are China, the United States, Germany, Japan and the Netherlands. China has exports of approximately $2.1 trillion, primarily electronic equipment and machinery. The United States exports approximately $1.5 trillion, primarily capital goods. Germany has exports of approximately $1.3 trillion, primarily motor vehicles. Japan has exports of approximately $645 billion, also primarily motor vehicles. Finally, the Netherlands has exports of approximately $570 billion, primarily machinery and chemicals.

Advantages of Exporting for Companies

Companies export products and services for a variety of reasons. Exporting can increase sales and profits if they reach new markets and may even present an opportunity to capture significant global market share. Companies that export spread business risk by diversifying into multiple markets. Exporting into foreign markets can often reduce per-unit costs by expanding operations to meet increased demand. Finally, companies that export into foreign markets gain new knowledge and experience that may allow the discovery of new technologies, marketing practices and insights into foreign competitors.

Challenges of Exporting

Companies that export are presented with a unique set of challenges. Extra costs are likely to be realized because companies must allocate considerable resources to researching foreign markets and modifying products to meet local demand and regulations. Companies that export are typically exposed to a higher degree of financial risk. Payment collection methods such as open-account, letter of credit, prepayment and consignment are inherently more complex and take longer to process than payments from domestic customers.

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