Net Exports

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What are 'Net Exports'?

Net exports are the value of a country's total exports minus the value of its total imports. It is a measure used to calculate aggregate expenditures or the gross domestic product (GDP) of a country with an open economy. In other words, net exports equal the amount by which foreign spending on a home country's goods and services exceeds the home country's spending on foreign goods and services.

BREAKING DOWN 'Net Exports'

For example, if foreigners buy $200 billion worth of U.S. exports and Americans buy $150 billion worth of imports in a given year, net exports are a positive $50 billion. Factors affecting net exports include prosperity abroad, tariffs and exchange rates.

Another term for net exports is the balance of trade; positive net exports represent a trade surplus, and negative net exports imply a trade deficit. Exports consist of all the goods and other market services a country provides to the rest of the world including merchandise, freight, transportation, tourism, communication and financial services.

Effect of Currency Value on Trade

If a country has a weak currency, its exports are more competitive, or cheaper, in international markets encouraging positive net exports. Conversely, if a country has a strong currency, its exports are more expensive, domestic consumers can buy foreign exports at a lower price and this can lead to negative net exports.

Net Exporters and Net Importers

The most prolific exporters in the world included Luxembourg at 221% of GDP in 2016, Hong Kong at 187%, Singapore at 172%, Malta at 141% and Ireland at 120%. The countries that exported the least as a share of GDP in 2016 included Yemen at 3%; Burundi at 6%; Afghanistan at 7%, Ethiopia at 8% and Pakistan at 9%. 

This information alone does not reveal whether any of these countries had a positive or negative trade balance. To calculate this, information regarding imports is also needed. In 2016, Nigeria imported the least at 10% of GDP, followed by Brazil at 12%; Sudan and Argentina at 13%; Cuba at 14% and the United States and Japan at 15%. 

The export and import data for Luxembourg and Singapore show that both countries were net exporters. Luxembourg's exports were 221% of GDP and its exports were 186% of GDP giving a positive value for net exports.  Singapore's exports were 172% of GDP and its imports were 146% of GDP also giving a positive value for net exports. Yemen, on the other hand, had exports at just 3% of GDP and imports at 25% of GDP giving a negative value for net exports and making Yemen a net importer. Similarly, Burundi had exports at 6% of GDP and imports at 32% of GDP making it a net importer.

Many economists state that running a consistent trade deficit has a negative effect on an economy because domestic producers have an incentive to relocate overseas, there is pressure to devalue a nation's currency and for interest rates to fall. However, the United States boasts both the world's largest GDP and deficit, so it appears that neither positive nor negative net exports are inherently detrimental. Exchange rate adjustment is the instrument the free market uses to ensure that trade balances are kept in check.