March 28, 2024
Every day, millions of goods are transported across the world in hopes of finding a consumer. At times, the process is simple and requires nothing more than moving a product from a factory to a store. Other times, however, logistics get complex and need to arrange transportation across various regions and even countries. The latter cases have increasingly become the norm as the world grows ever more connected and trade becomes the foundation to modern economics—in less than a century, the WTO estimates that overall trade went from less than $10 bn to close to $2.5 trillion. If anyone hopes to understand such a process, they must also, in turn, look at the building block to globalization. And, in such a process, there is no concept as essential as that “imports” which we now look to in depth.
Evolution of World Trade (in billions USD), 1950-2022
(Data from the WTO)
What is the definition of import?
An import is defined as a product that is brought from one country to be used in another. Such products, quite crucially, must be manufactured in one country but ultimately consumed in different one to be considered “imports”. The process through which these products enter a market is known as “importing” and makes up the essential element of international trade.
While we speak of “countries” in these definitions, it is important to note that imports ultimately impact everyday people. Countries with large amounts of imports are able to offer citizens a meaningful array of goods and services to its population. This, in turn, will create a more dynamic market with high quality products meeting the expectations of customers.
“An import is defined as a product that is brought from one country to be used in another”
What is the difference between import and export?
The crucial difference between an import and an export has to do with the direction in which a process takes place. Both terms effectively refer to the exchange of goods between countries but do so in opposite directions. Imports, on the one hand, refer to the process through which one country receives a product from a foreign country. Exports, on the other hand, refer to the process through which one country sends its products to another. Simply put, imports are about receiving, and exports about sending.
Depending on the perspective, a good can be an import and an export alike. Think, for example, of the US and China. It is the case that China sells a large amount of computers to the US (roughly accounting for 10.8% of all exports to the country). From China’s perspective, those computers are being exported to the US since they are providing them to a different country. From the perspective of US, however, those same computers would be considered imports as they are being acquired from a different country to meet internal demand. Thus, depending on whose side you take, a good can be an import or an export.
“Simply put, imports are about receiving, and exports about sending”.
Why do countries import goods?
Broadly speaking, countries engage in imports because they receive a meaningful benefit from doing so. Namely, they are able to obtain large amounts of foreign goods without having to produce them themselves. Instead, all they have to do is produce similar goods that are desirable on the international market and trade them with other countries.
This pattern is a core principle of macroeconomic theory known as competitive advantage. This principle states that countries will focus on manufacturing the goods which they are best suited to produce, and later trade to acquire other products as needed. This means that, in a world where free trade is the norm, countries should focus their resources on a small amount of goods instead of trying to produce every product imaginable. The exchange of goods in the form of imports will then allow a country to meet its needs accordingly. This process is, in the end, an efficient allocation of goods, allowing countries with a given set of skills to produce larger amounts of goods in less time to supply the global market.
So, in the abstract, we can say that countries participate in trade and, by extension, in importing goods, because they benefit from it. Effectively, they are able to spend resources in making the goods they are best suited to produce and, in turn, import the rest.
“Countries engage in imports because they receive a meaningful benefit: they obtain foreign goods without having to produce them themselves”
What is an example of imports?
Perhaps the best way to understand imports is to look at the relationship between two countries and the goods they exchange. Across modern economics, few hold as close and meaningful of a trade relationship as Mexico and the US. In 2022 alone, total trade between the two countries accounted for some $855.1 bn. In contrast, the entire Mexican economy is valued at some $1.47 T in GDP.
With such a large trade relationship, it is simple to find a plethora of examples of imports both from Mexico in the US economy and the US in the Mexican economy. Looking at data from the Observatory of Economic Complexity, for instance, we see that Mexico is prone to import fossil files such as refined petroleum and petroleum gas from the US. In contrast, the US , on the other hand, is more likely to import computers and vehicles from Mexico.
(Data from OEC)
As such, looking at the US, we see that computers and vehicles are clear examples of imports. Meanwhile, looking at Mexico, we can also conclude that refined petroleum, and petroleum gas are further examples of the same concept.
So, what is an import?
If we look at their most technical form, imports are foreign goods a country brings in to meet internal demand. More broadly, however, they could be any potential product that is made efficiently abroad and can be brought into a country to satisfy the needs of its people. Above all, imports should be seen as a crucial element of modern trade. Without imports, there simply can’t be any commerce.
