Why Imports Are Important
There are a variety of reasons for importing goods, one of which is the benefit for the global economy. Medical equipment, smartphones, and many different types of food are just a few products that we rely on every day that wouldn’t be possible without imports. The modern world also relies on imports to build sustainable products. Some items like microchips, wires, and oil are imported and used to build or operate local products.
In today’s climate, words like “import” and “export” trigger adverse reactions. International trade influences the strength of local economies, the unemployment rate, and opportunities in business. While the stability of the local economy is essential, one of the ways it maintains its balance is through international trade. Developing economies rely on international exports to stay afloat.
The importance of imports to countries in Africa and other developing nations cannot be understated. Countries rich in raw materials and resources bolster their local economy and level the playing field by exporting sought-after goods and materials to countries around the world where these materials aren’t available. One could say that imports and exports level the economic playing field for developing nations.
The Difference Between Import and Export
Maintaining a good relationship between import and export refers to the balance of trade. Importing goods brings new and exciting products to the local economy and makes it possible to build new products locally. Exporting products boosts the local economy and helps local businesses increase their revenue. Both import and export bring jobs to the local economy.
The benefits of import include giving developing nations a chance to boost their economy, producing higher quality products, and increasing revenue by introducing a new product to a locale. Imports allow greater diversity in the market for shoppers and residents of specific countries, as they can obtain foreign products without traveling or paying additional fees. Import benefits extend beyond individuals to businesses. Local businesses that engage in importing goods can create a valuable niche in their local market as the primary local supplier of a particular product.
Food is among the most common imports. The advantages of imported food include better quality, better-tasting food when it is sourced from a nation where it is locally grown. Though modern techniques like hydroponics make it possible to grow food anywhere, growing food outside of its native environment will likely produce a subpar product. The advantages of imported food are also economical. Importing food from its native country may mean prices are more affordable as the supply is higher than growing it locally.
In this economy, excessive imports can weaken the local economy of any nation, resulting in high unemployment and a trade deficit. Some critics worry that imports undercut the job market by reducing the need for factories and products made locally. In the 20th and 21st century, companies have fired thousands of employees that build or assemble a product in favor of acquiring the product at a much cheaper cost. Many times this product can be acquired without sacrificing quality.
The advantages of export include job creation, additional opportunity for business growth in international markets, and distributed risk. In many African countries, goods are rarely consumed locally, and foreign exports represent the primary use of the products, such as cacao. Exporting also introduces diversity in the local market. Consumers can enjoy a greater variety of food, entertainment, and clothing due to exports.
Businesses that export can enjoy greater revenue and less risk because they are selling their products to a variety of consumers outside the local economy. If the local economy suffers, countries that engage in international trade can still enjoy a profit from their international customers. Also, trading with countries that have a stronger currency than your local currency can further elevate the benefits of international trade.
Though exporting goods generally increases revenue and boosts the local economy, exporting is not without its disadvantages. Excessive exports can deplete natural resources and goods in a particular country resulting in higher prices and limited availability of necessary products for countries that rely on these exports. Each summer when gas prices rise, it’s due to limited exports. Relying on exports exclusively can result in being at the mercy of a foreign economy.
International trade also introduces business risks, such as fraudulent sales, information security, and lack of control over environmental conditions. It requires trust of a supplier and their counterparts to deliver a product as promised with little ability to enforce their guarantee. It’s imperative that both importers and exporters take precautions to avoid becoming another scary import story.
The Benefits Of Importing
Extend your profit margins
A key reason that companies all over the world choose to import goods is to extend their profit margin. High taxes, wage minimums, and material costs in certain countries make it more useful to import products from a country where fees, wages, and material costs are considerably lower. Certain products can cost upwards of 50% less to grow, manufacture or produce abroad. This situation is particularly common when importing goods where natural resources are abundant. For example, imported cacao from Ghana is considerably cheaper than imported cacao from the United States.
Sometimes you’d like to sell an item or good that is not native to your region. In this case, it’s better to go the source, as you’re likely to get a higher quality product. Each country has particulars strengths when it comes to exports. Consider, the Moroccan sardine industry, for example. Sardines from Morocco are not only plentiful but considered much better quality due to the soil and natural habit that make the country an ideal home for the fish. When possible, it’s best to get your product from the highest quality source, even if that means importing out of the country.
In many countries, such as Ghana and Ivory Coast, the government plays some part in managing trade between local farmers and importers. Not only does this minimize risk, but in some cases, the government provides added support and benefits to importers including reduced taxes and assistance with customs. In these cases, it is very advantageous for companies to develop relationships with foreign exporters.
10 Ways To Improve Your Import Benefits
- Work With A Government-regulated Trading Program
Ghana, Ivory Coast, and many other countries have strict regulations that include regulating trade between African farmers and exporters in their country and the outside world. While such programs may seem restrictive or overbearing, they have many benefits for foreign importers including reduced risk when trading with a government-approved firm. To increase security, when at all possible, participate in government-sanctioned trade programs. In fact, in some cases, it may be illegal to trade outside of these programs.
- Analyze Supply Chain
Alliances form, trade embargoes dissolve, and countries adopt new practices—all reasons why it’s valuable to review your supply chain from time to time. Dedicate some time periodically to discussing new and favorable trade agreements that may reduce or eliminate taxes, new trade agreements between your country and countries where your target product is manufactured or grown. Also look for ways to cut costs in your operation through efficient ordering and transport practices.
- Obtain A Third-party Risk Assessment
Hire a third-party compliance consultant or firm to assess risk and evaluate your import/logistics. While it may also be beneficial to have an in-house staff member dedicated to compliance, familiarity with the operation over time makes it easy to miss potential threats. Hiring an experienced, outside adviser will doubtless prove beneficial. At best alert you to potential risks before they arise, and at least provide you with alternative points of view to tighten your logistics and secure your import operations.
- Join A Local Trade Association
Joining a local trade organization either in the country where you operate, or the country where you import can significantly increase your import benefits by providing news, security tips, and general information about foreign trade. Joining a local trade organization can be a great way to secure new business and also gain and trusted suppliers and referrals from other contacts.
- Invest In Good Software
When participating in international trade, working with different cultures, currencies, laws, and languages can make staying on top of payments, customs regulations and guidelines, and other deadlines very taxing. It’s essential to invest in a good software program or several programs to manage invoicing, accounting, and payments, as well as document deadlines and communications with customs officials and business partners to ensure that nothing falls through the cracks.
- Set A Goal
One of the best ways to improve your business and achieve success is to set a goal. You may set a goal to reduce your import costs by a certain percentage or to increase the amount you import without increasing your budget. Many companies fear to set a goal, or worse, don’t bother because outside factors may reduce or eliminate the chance of achieving your goal, especially in the import and export business. Even if you don’t quite reach your goal, setting a goal provides a great way to evaluate business practices and create strategies to reduce trade barriers in the future.
- Increase Your Order Quantity
Bulk ordering reduces costs associated with repeated transactions including payment, shipping, and customs charges. After developing trust and rapport with a buyer, consider renegotiating to import more products at a reduced cost per product. To make the deal equally beneficial for the buyer, offering advance payment or other favorable terms may increase your likelihood of securing a better deal. Bulk ordering products off-season can also reduce rates by eliminating the need to order products during times of year when demand is high, and the product is sold at a higher price. It’s more cost effective to make a few large orders than frequent small orders.
- Develop A Niche
You may import only one product, but certain forms of the product may sell better than another. Compare the costliest products to import based on cost per product, customs, and shipping fees, compared with your most profitable products based on highest demand. Look for opportunities to eliminate products that are costly and low-volume sellers. Focus in on the products that are cheapest to obtain and bring in the highest revenue. It’s important to look at data over the year, as prices fluctuate throughout the year and may also change over time as global supply and demand vary.
- Research Local Area To Understand Potential Concerns
Before engaging in trade with a local supplier, research the local area to identify concerns. In some parts of Africa, landlocked countries face long delays transporting products on unpaved roads, which can reduce the shelf life of perishable products. Research the local area to identify concerns and find ways to mitigate concerns before engaging in trade.
- Establish Clear Written Expectations
Writing details of your trade agreement clearly and openly will reduce the likelihood of a dispute, and provide a clear way to evaluate terms in the unfortunate event that you encounter conflict. Even in long-standing relationships, it will be helpful to develop an agreement in writing if you don’t have one already. Any time new procedures or processes are outlined in email communication or other conversation, consider adding a formal addendum to your written contract or agreement to be signed by both parties.
WaystoCap Can Help You Increase Import Benefits
WaystoCap is the top B2B marketplace for importing and exporting in Africa. Benefits of using WaystoCap include working with verified suppliers, precise matching to find the best suppliers for your budget, receiving multiple quotes to evaluate business opportunities, making and receiving secure payments, and procuring affordable insurance coverage to protect your goods. If you’re unsure of where to start with importing goods, you can join the platform to research products and rates before making a transaction. WaystoCap does the work for you, so you can increase your profit margin and extend your import benefits.
- List of organizations dedicated to trade in Africa: https://www.loc.gov/rr/business/african/associations.html