What Is an Import?
An import is a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. If the value of a country's imports exceeds the value of its exports, the country hasa negativebalance of trade, also known as a trade deficit.
The United States has run a trade deficit since 1975. The deficit stood at $576.86 billion in 2019, according to the U.S. Census Bureau.
Key Takeaways
- 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 tariff schedules often dictate whichgoods and materials are less expensive to import.
- Economists and policy analysts disagree on the positive and negative impacts of imports.
The Basics of an Import
Countries are most likely to import goods or services that their domestic industries cannot produce as efficiently or cheaply as the exporting country. Countriesmay also import raw materials or commodities that are not available within their borders. For example, many countries import oil because they cannot produce it domestically or cannot produce enough to meet demand.
Free trade agreements and tariff schedules often dictate whichgoods and materials are less expensive to import. With globalization and the increasing prevalence of free-trade agreements between the United States,other countries and trading blocks, U.S. imports of goods and services increased from $580.14 billion in 1989 to $3.1 trillion as of 2019.
Free-trade agreements and areliance on imports from countries with cheaper labor often seem responsible for a large portion of the decline in manufacturing jobs in the importing nation. Free trade opensthe ability to import goods and materials from cheaper production zones and reducesreliance 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 afterward.
Disagreement About Imports
Economists and policy analysts disagree on the positive and negative impacts of imports. Some critics argue that continued reliance on imports means reduced demand for products manufactured domestically, and thus can hobble entrepreneurship and the development of business ventures. Proponents sayimportsenhancethe quality of life by providing consumers with greater choice and cheaper goods; the availability of these cheaper goods also help to prevent rampant inflation.
Real-Life Example of Imports
The United States' top trading partners, as of November 2020, included China, Canada, Mexico, Japan, and Germany. Two of these countries were involved in the North American Free Trade Agreement(NAFTA) that was implemented in 1994 and, at the time, created one of the largest free-trade zonesin the world. With very few exceptions,this allowed the free movement of goods and materials between the United States, Canada, and Mexico.
The United States has experienced a continuous trade deficit since 1975.
It is widely believed NAFTA has reduced automotive parts and vehicle manufacturing in the United States and Canada, with Mexico being the main beneficiary of the agreement within this sector. The cost of labor in Mexico is much cheaper than in the United States or Canada, pushing automakers to relocate theirfactories "south of the border."
$16
The minimum hourly wage paid to autoworkers for certain cars under a trade agreement signed between the U.S., Canada and Mexico.
In 2018, the U.S., Canada, and Mexico agreed to replace NAFTA with the United States–Mexico–Canada Agreement (USMCA). Its highlights include:
- Requiring automobiles to have 75% of their components made in one of the three member nations
- Setting a minimum wage for autoworkers and extending union protections and sanctions for labor violations
- Extending intellectual property copyrights and prohibiting duties on digital music and literature
- Giving the U.S. farmers access to Canada's dairy market
TheUSMCAtook effect on July 1, 2020.
