In general, an increase in exports is a good thing for a country because higher exports relative to imports implies a positive balance of trade. However, some problems can accompany a dramatic increase in exports, depending on the nature of the goods being exported. These problems include excessive expenses, resource depletion, logistical problems and legal problems.
Exporting comes with costs that can be avoided when selling domestically. Most of these costs are associated with transportation and taxes. For example, if the company XYZ Holdings wants to sell a bucket of chicken within its home base, a small land-locked country known as "protoland", XYZ only needs needs to spend money on making and marketing the products and moving them across short distances. If, however, XYZ wants to export its products to buyers in a far off country called "expoland," it will have to spend money shipping those products by air, and may even have to pay import taxes in expoland.
Sometimes, exporting products abroad can increase the scarcity of products at home. While it may be rational for the oil companies of a given country to send their product abroad, doing so may make it more costly for the country's residents to buy oil. This is one example of exports benefiting the shareholders of a company while harming the stakeholders in the community.
Space and Time Issues
A rapid increase in exports can cause serious logistical issues. Food exports, for example, frequently need to be cooled for a long period of time while being transported to foreign countries. If exports transported in this way are not taken care of properly, the exporting company might quickly lose its foreign business and suffer a tarnished reputation. Other logistical issues associated with increasing exports relate to transportation. If an island country needs to build a bridge to make it affordable for the country's businesses to export to another island or to the mainland, that may help the businesses. However, the costs to the taxpayers could be crippling.
Legal and Political Issues
Sometimes, increased exports can be accompanied by legal and political issues. Suppose a company from your country starts increasing exports to another country, while that country suffers from high unemployment and a collapsing export industry. If the government allows the company's exports to that country to go unchecked, you may risk having the foreign country impose tariffs on your country to protect their own industries. Other times, two countries trading with each other could cause both to fall out of favor with their allies.
- Photo Credit Thomas Northcut/Photodisc/Getty Images
Advantages & Disadvantages of Export Credit Insurance
Advantages & Disadvantages of Export Credit Insurance. Export credit insurance is a form of protection for exporting firms against nonpayment for or...
Free Trade Advantages
Free trade is the ability for countries to import and export products with each other without restrictions and paying additional costs, called...
What Are the Advantages & Disadvantages of Free Trade?
What Are the Advantages & Disadvantages of Free Trade?. "Free trade" refers to the exchange of goods and services between countries free...