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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 a country's expenditures or gross domestic product in 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, while 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 generally more competitive in international markets, which encourages positive net exports. Conversely, if a country has a strong currency, its exports are more expensive and domestic consumers can buy foreign exports at a lower price, which can lead to negative net exports.

Net Exporters and Net Importers

As of 2016, the most prolific exporters by percentage of GDP included Luxembourg at 221.3 percent of GDP in 2016, Hong Kong at 187.4 percent, Singapore at 172.1 percent, Malta at 139.6 percent and Ireland at 121.6 percent. The countries that exported the least as a share of GDP in 2016 included Yemen at 3.3 percent; Burundi at 6.6 percent; Afghanistan at 6.9 percent, Ethiopia at 8 percent and Pakistan at 9.1 percent. 

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, Brazil imported the least at 12.1 percent of GDP, followed by Sudan at 12.5 percent, Argentina at 13.5 percent, the United States at 14.7 percent, Japan at 15.1 percent and Pakistan at 16 percent. 

The export and import data for Luxembourg and Singapore show that both countries were net exporters. Luxembourg's exports were 221.3 percent of GDP and its imports were 186.2 percent of GDP, giving a positive value for net exports.  Singapore's exports were 172.1 percent of GDP and its imports were 146.3 percent of GDP, also giving a positive value for net exports. Yemen, on the other hand, had exports at just 3.3 percent of GDP and imports at 25.1 percent of GDP, giving a negative value for net exports and making Yemen a net importer. Similarly, Burundi had exports at 6.2 percent of GDP and imports at 31.9 percent 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, and there is pressure to devalue a nation's currency and lower interest rates. However, the United States has 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 trade balances are kept in check.

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