Question

disadvantages of exports?

(please write short and simply)

Answer 1

There is a saying “Produce more to export, export more to produce”. This indirectly means export normally always plays lesser important role than selling in domestic market. There are situations when one is compelled to export, and they are:

1. Overcapacity in production resulting in domestic market not able to absorb full production. This triggers the need for export for a company in order not to keep its production capacity idle.
2. When there is capacity which is not fully utilized, the firm normally goes ahead and export creating the extra production volume which fulfils the capacity utilization. Fulfilment of capacity utilization results in economies of scale which in turn reduces cost of production and benefits the company as a whole

However following are the usual pitfalls / disadvantages of export :

1. Lower price realisation in export market vis a vis domestic market
2. Potential threat of antidumping duty from importing countries creating disruption in exporting activities
3. Exports can create shortage in domestic market which may turn out to be socially unacceptable outcome. For example , exports of essential agricultural products from developing / underdeveloped nation may create food scarcity in domestic market including price escalation of such agricultural commodities.