Exports are of two main kinds, goods and services, the former being known as visible items and the s

econd as invisible. Over a period of time the total value of exports should balance with the total value of imports. To the extent that exports exceed imports we are said to have a favorable balance of payments. To the extent that importers exceed exports the balance of payments is said to be unfavorable or adverse.

Napoleon once called the British " a nation of shopkeepers" . That was intended as an insult , but had he called us a nation of traders it could not have been disputed. In Britain we buy and sell more per head of population than the people of any other country. Our island is too small to grow enough food for our people and so we need to eam enough from our exports to sustain our population.

One complication of export trade is that each country has its own independent currency system; and another is that many countries impose custom duties or other restrictions on imports.

The would-be exporter is faced with a number of problems. First there is the need to find a customer for his goods. The actual operation of selling is made more difficult because of language barriers and cultural differences. There are also additional transport problems because of the greater distances involved and often unfamiliar territories. When the manufacturer turns from selling at home to selling overseas, his problems are magnified. This is particularly true in terms of finance.

The first financial problem facing the exporter is the time taken to deliver his goods. There could be a long delay while his merchandise is in transit between London and, say, Karachi. He has incurred the costs of production, but when is he going to be paid？ The second problem is even more serious. How sure can he be that he is going to be paid at all？ And even when he receives payment his troubles may not be over. If he is paid for his goods in other currency other than sterling, and what if the other currency has fallen in value since the contract is made？ These are the perennial problems for the exporter.

Fortunately for our exporters and for our economy generally, help is available both from the government and the banks. From the government side, the Export Credits Guarantee Department offers British exporters, in return for a fee, insurance against bad debts incurred as a result of sales to foreign buyers. The Export Intelligence Department also helps by providing them with useful advice and information. The most straightforward method of financing the operations for the exporter is to borrow the necessary funds from his bank. This way he can ship his goods abroad and draw on his bank for the funds needed to carry on production while he is awaiting the proceeds. But of course the borrowings from the bank will lower his p rofit margins.

Another method of financing international trade is by documentary credit. A document known as a bill of exchange is drawn by the importer in favor of the exporter and, although the bill of exchange is a very convenient method of payment for oversea trade, once again it serves to reduce the profit margin for the exporter.

Questions for reading :