What is an import?
An import is a good or service purchased in one country that was produced in another. Imports and exports are the components of International exchange. If the value of a country’s imports exceeds the value of its exports, the country has a negative effect trade balancealso known as trade fails.
The United States has had a trade deficit since 1975. The deficit stood at $576.86 billion in 2019, according to the US Census Bureau.
Key points to remember
- An import is a product or service produced abroad and purchased in your home country.
- Imported goods or services are attractive when domestic industries cannot produce similar goods and services cheaply or efficiently.
- Free trade agreements and tariffs often dictate which goods and materials are the cheapest to import.
- Economists and policy analysts disagree on the positive and negative impacts of imports.
The basics of an import
Countries are more likely to import goods or services than their national industries cannot produce as efficiently or cheaply as the exporting country. Countries can also import raw materials or goods which are not available within their borders. For example, many countries import oil because they cannot produce it locally or cannot produce enough to meet demand. Free trade agreements and tariffs often dictate which goods and materials are the cheapest to import. With globalization and the growing prevalence of free trade agreements between the United States, other countries and trading blocs, U.S. imports of goods and services fell from $580.14 billion in 1989 to $3.1 trillion in 2019.
Free exchange agreements and reliance on imports from countries with cheaper labor often appear to be responsible for much of the decline in manufacturing jobs in the importing country. Free trade opens up the possibility of importing goods and materials from cheaper production areas and reduces dependence on domestic goods. The impact on manufacturing jobs was evident between 2000 and 2007, and it was further exacerbated by the Great Recession and the slow recovery that followed.
Disagreement on imports
Economists and policy analysts disagree on the positive and negative impacts of imports. Some critics argue that continued dependence on imports means reduced demand for domestically produced products and can therefore hamper entrepreneurship and the development of business ventures. Proponents claim that imports improve the quality of life by providing consumers with greater choice and cheaper products; the availability of these cheaper goods also helps prevent runaway inflation.
Real example of imports
The top trading partners of the United States, as of November 2020, included China, Canada, Mexico, Japan, and Germany. Two of these countries participated in the North American Free Trade Agreement (NAFTA) which was set up in 1994 and which, at the time, created one of the largest free trade areas in the world. With very few exceptions, this allowed the free flow of goods and materials between the United States, Canada, and Mexico.
The United States has had a continuous trade deficit since 1975.
It is widely believed that NAFTA has reduced manufacturing of auto parts and vehicles in the United States and Canada, with Mexico being the main beneficiary of the agreement in this sector. The labor cost in Mexico is much cheaper than in the United States or Canada, pushing car manufacturers to relocate their factories “south of the border”.
The minimum hourly wage paid to autoworkers for certain cars under a trade agreement signed between the United States, Canada and Mexico.
In 2018, the United States, Canada and Mexico agreed to replace NAFTA with the United States-Mexico-Canada Agreement (USMCA).Its strengths include:
- Require automobiles to have 75% of their components manufactured in one of the three member countries
- Set a minimum wage for autoworkers and expand union protections and penalties for labor law violations
- Extend intellectual property copyrights and ban rights to digital music and literature
- Giving American farmers access to the Canadian dairy market
The USMCA went into effect on July 1, 2020.