It is hard to understand the value of global trade and exports in particular. Exports can determine the level of imports that a country can sustain, affect currency values as well as the fiscal and monetary policies of countries, and shape public perception of a nation’s ability to compete. In 2008, the U.S. was importing 1.5 times as much as it was exporting, creating a trade deficit of $680 billion. Large trade deficits are not sustainable in the long run. They are a strong indicator that a country is consuming more than it is producing, which reduces independence by making it increasingly reliant on the products and services of other nations.
Increasing export volume helps reduce the trade deficit. This is a wise course of action for many reasons, but one of the most important is that exporting creates jobs. In fact, the International Trade Administration of the U.S. Department of Commerce reports that, in 2006, exports of manufactured goods supported 6 million U.S. jobs. Just as importantly for companies, however, is how exporting can help them achieve economies of scale. By broadening reach and serving customers abroad, it is possible to produce more and to do more efficiently in industries affected by economies of scale. This often leads to lower costs and higher profits both at home and abroad
This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.
Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg. 14 -15.