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What is Export and Import ?

A short and simple explanation of the flow of goods and services in and out of a country.


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The Economics Amateur

3 years ago | 3 min read

This post would be a short one and is part of the Current Account and Balance of Payment series.

So what is an export and what is an import ?

Exports and Imports are two essential elements of a country’s Balance on Goods and Services (BOGS) or otherwise known as the Balance of Trade.

Unless you’ve been living under a rock, you must know that certain goods and services you have bought are not necessarily made in your country and not all factories in your country sell exclusively to consumers of your country.

The iPhone you are using could have used Taiwanese made chips, Australian iron for its exterior and Korean made screens and has been assembled in China. In this modern age, every product is growingly complex in its sources of individual components.

There are two types of products that can be exported and imported. They are Goods and Services. Goods are tangible items, things you can touch and feel and physically see, like potatoes, rice and cars. Services are intangible products, things you CANNOT touch and physically see, such as travel, insurance and banking, you cannot really touch the travel, insurance and banking you used, but you do still pay for and use these services.

What are Exports ?

Exports in layman terms are the sale of goods and services to other consumers in a another country. The keyword here is another country.

So, when the US sells potatoes to the UK, that is an export of the US. The US has exported potatoes to the UK.

But, when John from New York (US state) buys Idaho (US state) potatoes, it is not an export. Because the potatoes are still made in the US and sold in the US.

So that is the goods side covered. What about services ?

If Lisa from the UK travels to the US, do you think the US has imported or exported the travel services ?

The answer is the travel services is a US export. Why you might ask, since Lisa is coming in to the US like how a car is brought in and is classified as an import.

To determine whether it is an import or export, you must look closely at the flow of money. US potatoes sold to the UK, money flows to the US so the US receives money and it is an export for the US. As for Lisa’s travel, US also receives money from the UK when Lisa travels there, thus it is an export for the US.

So to identify the difference is to identify the money flows. The receiver of money is the Exporter and the payer of the money is the Importer.

Same goes to Imports

Imports are the purchase of goods and services from another country.

So when the UK buys potatoes from the US, it is importing these potatoes.

When Lisa from the UK travels to the US, the UK is importing travel services from the US when Lisa travels. Because Lisa is paying US hotels and restaurants when she travels, she can’t be eating at UK restaurants when she is in the US, see what I’m saying here ?

Remember, it is the flow of money that makes it easy for us to know which is the Importer and which is the Exporter.

Money receivers are the Exporters; Money payers are the Importers.

Quiz Time

Let me quiz you to see if you clearly understand this concept.

  1. Frank from France flies to China on a China airlines. Is China the exporter or importer ?
  2. Vicky from Canada buys a Mercedes Benz car made in Germany. Is Germany the exporter or importer ?
  3. Claire from Singapore buys insurance from AIA, Hong Kong. Is Singapore the exporter or importer ?
  4. David from Japan goes to Disneyland in the USA, he buys a ticket to have some fun there. Is Japan or the USA the exporter ?
  5. Emily from Malaysia buys an IKEA bed. IKEA is a company from Sweden. Which country is the importer here ?

Answer:

  1. Exporter
  2. Exporter
  3. Importer
  4. USA
  5. Malaysia

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