What Is a Net Importer?
A net importer is a country that buys more from other countries in terms of global trade than it sells to them over a given period of time. Countries produce goods based on the resources available in their region. Whenever a country cannot produce a particular good but still wants it, that country can buy it as an import from other countries who produce and sell that good.
A net importer can be contrasted with a net exporter, which is a country that sells abroad more than they purchase.
- A net importer is a country, which in aggregate, purchases more goods from foreign countries through trade than it sells abroad.
- A net importer, by definition, runs a current account deficit in the aggregate.
- The United States, a consumer colossus, has been a net importer for decades with an import deficit of $678.7 billion in 2020
Understanding Net Importer
A net importer is a country or territory whose value of imported goods and services is higher than its exported goods and services over a given period of time. A net importer, by definition, runs a current account deficit in the aggregate. However, it may also run individual deficits or surpluses with particular countries or territories depending on the types of goods and services traded, the competitiveness of these goods and services, exchange rates, levels of government spending, trade barriers, etc.
In the U.S., the Commerce Department keeps monthly tallies on exports and imports in numerous table displays. According to their aggregate tally, some of the largest categories of goods that the U.S. currently imports are foods and beverages, oil, passenger cars, vehicle parts and accessories, pharmaceuticals, cell phones, and computers. It is important to note that a country can be a net importer in a certain area while being a net exporter in other areas. For example, Japan is a net exporter of electronic devices, but it must import oil from other countries to meet its needs.
Example: The United States as a Net Importer
The United States, a consumer colossus, has been a net importer for decades. Even though this country excels in a number of leading export goods and services—passenger planes, factory equipment, luxury automobiles, soybeans, movies (Hollywood), and banking services, to name a few—Americans love to buy things, and countries around the world are happy to feed the beast. Being a net importer is not necessarily a bad thing, but running a chronic and growing trade deficit over time creates a host of issues.
In 2020, the imports exceeded exports by $678.7 billion. Exports totaled $2,131.9 billion while imports totaled $2,810.6 billion. The major problem with these substantial trade deficits is that they must be financed to maintain the balance of payments account. The principal means of financing the current account deficit is borrowing from other countries. Continuous sales of Treasury bonds to major trading partners from which the U.S. is a net importer has created a measure of dependency on these creditors, which, some say, has the potential to lead to political or economic danger down the road.
In contrast, Saudi Arabia and Canada are examples of net exporting countries because they have an abundance of oil which they then sell to other countries that are unable to meet the demand for energy domestically.
Pros and Cons of Being a Net Importer
Being a net importer implies that a country has a trade deficit. A benefit of a trade deficit is that it allows a country to consume more than it produces. In the short run, trade deficits can help nations to avoid shortages of goods and other economic problems. Trade deficits can also occur because a country is a highly-desirable destination for foreign investment. For example, the U.S. dollar's status as the world's reserve currency creates a strong demand for U.S. dollars. Foreigners must sell goods to Americans to obtain dollars.
Trade deficits can create substantial problems in the long run. The worst and most obvious problem is that trade deficits can facilitate a sort of economic colonization. If a country continually runs trade deficits, citizens of other countries acquire funds to buy up capital in that nation. That can mean making new investments that increase productivity and create jobs. However, it may also involve merely buying up existing businesses, natural resources, and other assets. If this buying continues, foreign investors will eventually own nearly everything in the country.