What are Net Exports?
Net exports are the difference between a country's total value of exports and total value of imports. Depending on whether a country imports more goods or exports more goods, net exports can be a positive or negative value.
How Do Net Exports Work?
Net exports are measured by comparing the value of the goods imported over a specific time period to the value of similar goods exported during that period. The formula for net exports is:
Net Exports = Value of Exports - Value of Imports
For example, let's suppose Canada purchased $3 billion of gasoline from other countries last year, but it also sold $7 billion of gasoline to other countries last year. Using the formula above, Canada's net gasoline exports are:
Net Exports = $7 billion - $3 billion = $4 billion
Why Do Net Exports Matter?
Net exports is an important variable used in the calculation of a country's GDP. When the value of goods exported is higher than the value of goods imported, the country is said to have a positive balance of trade for the period. When taken as a whole, this in turn can be an indicator of a country's savings rate, future exchange rates, and to some degree its self-sufficiency (though economists constantly debate the idea).