You won’t surprise anyone for a long time now with the presence of things from all over the world in the supermarket. If you wish, you can all year round buy bananas from South America, tea from Sri Lanka and coffee from Brazil. So every day we experience the impact of international trade. This is exactly how foreigners buy our products at home. Balance foreign trade represents the difference between the value of what is exported from the country and what is imported into it. The larger it is, the better for the state. Although there are exceptions to this rule. Today we will talk about the foreign trade balance, its features and role in assessing economic development.
Definition of the concept
International trade allows you to expand markets for goods and services. It enables consumers to purchase products that would otherwise not be available to them. Globalization has connected almost all countries together. Foreign trade has come to the fore in terms of its significance. Only for closed economies, for example, the DPRK, is exclusively the internal exchange of goods and services important.
On practice
The largest exporters, when compared to their gross domestic product, are Singapore (188%), Ireland (114%), United Arab Emirates (98%), Malaysia (74%) and Switzerland (64%). ). However, this information does not say anything about the foreign trade balance. The country can export a lot and import on an extraordinary scale. And its trade balance will be negative. The balance is the difference between the volume of exports and imports. If we take these indicators into consideration, it turns out that Singapore, Ireland, the United Arab Emirates, Malaysia and Switzerland do have a positive trade balance. And negative - Brazil, Ethiopia, USA and Japan. The so-called neutral balance is characteristic of Argentina. Its exports in value terms are approximately equal to imports into the country.
Positive balance
Foreign trade succeeds in Lately grow at a much faster rate than production and gross domestic product. This means that the international component, due to globalization changes, has become fundamental for the development national economies. A positive balance of foreign trade occurs when exports in value terms exceed imports. There is an influx of national currency into the country from foreign markets. This situation is a favorable situation, so governments that regulate foreign trade strive for exactly this outcome. In the United States, trade balance data is published monthly by the Bureau economic analysis. This indicator is a fundamental factor in determining the exchange rate on global markets. With a positive balance, the state has control over for the most part its monetary unit. A situation where exports exceed imports contributes to the strengthening of the country's national currency. Although other market factors are also important here. Foreign investment also plays a major role in the exchange rate of the national currency. If we talk only about trade effects, then a positive balance means a high demand for goods produced in the country. It promotes higher prices, strengthening the national currency. Further increase in exports only improves the situation.
Negative foreign trade balance
The opposite situation is a negative balance. A negative foreign trade balance means that the value of goods imported from abroad is greater than those exported from the country. This situation has the opposite effect on the exchange rate of the national currency. A negative trade balance means little demand for it on global markets. This reduces its exchange rate relative to other currencies. To regulate its volatility, countries can use a portfolio of investments in foreign accounts. Governments also sometimes peg their national currency to the more stable currency of another country. In this case, we are talking about a fixed exchange rate, which is not the difference between exports and imports.
Sometimes the relative balance of foreign trade is also calculated. It is the result of dividing the balance sheet value by the number of inhabitants or gross domestic product. The second option is more often used.
Impact of trade balance
Many economists believe that a country's long-term negative balance has a negative impact on the national economy. This situation leads to the fact that manufacturers begin to locate their enterprises abroad. This further depresses the national currency and leads to a fall in interest rates. However, the country with the largest trade deficit is the United States of America. Therefore, if properly regulated, it may not have any effect on the economy.
The impact of a positive or negative balance often depends on the stage of the business cycle. During an expansion, trade deficits can have a positive effect. This is due to the fact that many goods are imported into the country, which keeps prices low. It is better to have a positive trade balance during a recession. It helps create jobs by increasing demand for national goods.
Theoretical explanation
There are several concepts that explain the desire of states to enter the international market for goods and services. This issue was studied by such famous scientists as Adam Smith and David Ricardo. Historically, the first theory that tried to explain the importance of a trade surplus was marcantilism. They believed that exports should always exceed imports. Mercantilists welcomed protectionist measures. Gold and other luxury goods were not subject to export at all. national boundaries. Smith and Ricardo no longer viewed trading as a zero-sum game. They developed the theory of absolute and comparative advantage. Among other concepts explaining international trade, developments by Heckscher and Ohlin, Lenotyev, Vernon, Porter, Stolper and Samuelson.
The balance of trade in goods is one of the key indicators of the success of countries. So much money flows into the country paying for industry and jobs, there is capital for the development of technology and so on. These indicators, however, do not include such an important product as government credit or the country’s money; their emission is the production of goods, the receipt of money. Interesting leaders and outsiders and the dynamics of their indicators.
Rice. 1: “Top 10 countries by trade surplus”
China is by far the world's factory, exporting $600 billion in electronics or 26% of exports. But Germany is walking as if Hitler were in favor? (just kidding, but how can they do that). In addition to Germany, the European pool includes the Netherlands, together this is an ancient European industrial zone. They are joined by Belgium, the Czech Republic and Switzerland - within the Holy Roman Empire (proto-Germany) since the 1000s.
Russia is in an excellent place - thanks to gas (it is more important), oil and petroleum products (the percentage of refining is quite high), and other natural resources. It is unlikely that the European economy would be possible without supplies from Russia. South Korea and Taiwan - Asian tigers back in the 80s, but Japan has minus $130 billion - they are being saved by issuing yen.
Italy is not as bad as they constantly trumpet it. Ireland thanks to the export of English goods through this offshore? Qatar through gas exports, a tiny state where ruling dynasty That's what he calls himself - corporate management.
Rice. 2: “Top 10 growth in trade surplus”
Turkmenistan has laid gas to China. Thailand showed an incredible 2.5 thousand percent growth. The European “German” pool is showing growth. There is a certain rating of bank reliability, and here the banks of Germany and the Netherlands are in the top.
Rice. 3: "Rating of the top 50 bank reliability from Global Finance"
Rice. 4: “Top 10 countries with a negative trade balance”
The United States also issues money, the indicator should be different - it seems much better to me, in addition, there is a powerful American export of services. European outsiders also take a lot of services, including tourism and real estate sales (France, Spain + Egypt, Turkey). Everyone in the top 10 has a decent amount of deficit; so many industrial goods are in short supply in the country and are imported from outside.
Rice. 5: “Top 10 countries for decreasing profits from international trade”
Poland falls after Ukraine? Hungary, Slovenia are all neighbors. Poland earns from outside not much more than Ukraine. Following the largest Polish emigration in Europe, the “Polish economic miracle” is not particularly noticeable.
Can be easily determined by its trade balance. Trade balance indicators should be called a litmus test that changes color in unfavorable conditions. To monitor economic development For a particular country or group of states, it is the method of studying the trade balance that is used.
Balance of foreign trade
Each country sells its products and services to other countries and buys from them what it does not produce at home. If you sum up all the funds received from exports and count all those paid for, over a certain period of time, then the net balance will result in a reliable indicator of foreign trade, which is usually called the foreign trade balance. Transactions paid for with own or borrowed funds are taken into account here. For economic analysis, data from an individual country or a group of states can be taken, depending on what goals are being pursued.
and its indicators
In economic terminology, the most commonly used word is “balance”. A positive trade balance means that a country has sold more of its goods than it bought. Conversely, a negative balance indicates the dominance of the import component in the overall balance of the country.
What’s wrong is that the country buys a lot of foreign products, industrial products, medicines, innovative technologies etc.? The fact is that the state purchases all this for the currency received from the sale of its goods. It turns out that the foreign exchange flows received through exports are not equivalent to the amounts spent on imports. That is, there is not enough currency to purchase imported goods in the required volume. To cover the deficit, the country needs to open the bins in which the strategic one is located and begin to sell it on the international foreign exchange market, and with the received currency to cover the missing funds for imports. Therefore, a negative trade balance is a serious economic signal that the economy is not developing as expected. In this case, the governments of the countries are taking emergency measures to correct the situation, which include:
- in the analysis of the current situation;
- in improving the quality of the entire export product;
- in updating outdated technologies to innovative systems;
- in search of new markets and their active monitoring.
Prompt government intervention in the economic situation almost always produces positive results.
Is a negative balance also a good thing?
The highly developed countries of Europe, America, and Asia know how to turn negative balances in their balance sheets to their advantage. This approach to business can be seen in the USA, England and Germany. A negative balance in the economy helps reduce inflation by moving some dominant industries beyond the country's external borders. But for not developed countries This situation is economically more dangerous. A negative balance systematically washes away the currency available in the country, building a corridor for the depreciation of national money. There comes a time when the state cannot repay the loans taken with interest. Illustrative examples demonstrated by Greece, Ukraine and other countries that were on the verge of default.
Throughout the year, special institutes scrupulously collect and systematize the necessary data, publishing them in specialized printed publications and forms. Having studied the annual balance, economists can with a high degree of probability predict the development of national economies, taking into account all the negative factors affecting it.
Adjusting the balance of foreign trade
A complex process is the regulation of the balance of payments or trade. Both of them are characterized by extreme instability. The instability factor is caused difficult situation with a lack of finance in some states and a surplus in others. The difference in financial potential disrupts the global balance of capital, which affects the economic state of the country. Today, regulation of the balance of payments is included in the list of main functions of financiers who are developing strategies and tactics to combat inflation and ever-growing unemployment.
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The basis of the balance of payments is the trade balance. The trade (foreign trade) balance characterizes the export and import of goods. The trade balance is positive if a country exports more goods and services than it imports from abroad. In this case, the trade balance has a surplus. If imports are greater than exports, then the trade balance is negative or in deficit. Therefore, changes in the current account balance are associated with changes in domestic output and employment.
The balance of trade is built on the basis of customs statistics, which takes into account the volume of goods actually crossing the border, while the balance of payments takes into account payments and receipts during foreign trade turnover, which may not coincide in time with the movement of goods.
Foreign trade balance of the country- the ratio of the value of goods exported and imported during a certain period of time (for example, for one calendar year). The foreign trade balance includes goods transactions actually paid for and carried out on credit. The foreign trade balance is compiled for individual countries and groups of states.
The trade balance has its own balance. Trade balance - this is an annual (quarterly or monthly) indicator of the consolidation of foreign trade transactions of the country. If the trade balance has a positive balance, this means that in monetary terms (commodity volume is converted into money) more goods were sent abroad (exports) than received from other countries (imports). If the balance is negative, then the import of goods prevails over the export. A positive trade balance indicates the demand for a given country's goods on the international market, as well as the fact that the country does not consume everything it produces. A negative trade balance indicates that the country, in addition to its goods, also consumes foreign goods. A negative trade balance in countries such as the USA and Great Britain helps contain inflation and maintain high level life due to the transfer of labor-intensive production outside the state.
In the United States, the trade deficit, according to the Bureau of Economic Analysis, will amount to $836 billion in 2006 (due to the consumption of cheap Asian and Mexican goods, as well as raw materials). In Russia, the positive trade balance in 2006 (according to the Central Bank) will amount to more than $120 billion (mainly due to the sale of energy resources and metals abroad). In underdeveloped countries, a negative trade balance indicates the uncompetitiveness of export sectors of the economy, which often leads to devaluation (depreciation) Money such countries due to the fact that they cannot pay for import purchases. Countries such as the US and UK have capital-intensive and high-tech sectors of the economy, which attract significant amounts of capital from around the world in the form of portfolio or direct investment. However, due to the lack of competitiveness of export industries, these countries are forced to cover the bulk of the trade deficit by issuing private and government debt instruments.
The country's foreign trade balance is an important economic indicator that determines the level of inflation in the country and the stability of the state currency. It is determined by the monetary equivalent of goods exported outside the country and those imported for import.
In order to determine this indicator, a specific reporting period is selected (month, quarter, year). The balance is compiled for individual countries and for states selected in one group. This indicator has its own balance. It is determined by information from all foreign trade transactions for the reporting period. Essentially, it is the difference (or margin) between government revenues and government expenditures.
Balance with plus and minus signs
The trade balance can be positive or negative. Accordingly, it affects the economic indicators in the country.
Positive trade difference
It means that in monetary terms the number of goods sent for sale abroad exceeded the volume of imports. The Russian Federation has had a positive trade balance for several years. As practice shows, this indicator is a fairly good sign for the country.
This means that the state produces more products than it consumes, earning money from it. The higher this indicator, the more money comes into the state from other countries. However, a positive indicator also has a downside: if this figure is too high and practically does not change over a long period of time, in this case, a useful product may leave the country, while the population accumulates free finances and grows.
Negative trade difference
This is an inverse indicator, meaning that more goods are imported into the country than are sold. A negative trade balance is observed in developed countries such as the USA and Great Britain. Due to the negative foreign trade balance, they manage to maintain inflation at the proper level, while simultaneously transferring labor-intensive production outside the country.
Instead, states focus on developing high-tech and capital-intensive industries, thereby increasing and maintaining the standard of living of the state's citizens. This phenomenon can also be observed in the growth of economic indicators in Japan and China.
However, a negative trade balance is only acceptable for developed countries. For underdeveloped countries, this indicator means a lack of competitiveness in export industries, which leads to the depreciation of the national currency.
Trade balance in Russia
The sensational reduction in the balance “with a plus sign” in the country for the period from January to August 2016 compared to last year’s indicators may have a number of negative consequences for the economy.
The reason for the reduction in the positive foreign trade rate is the sharp increase in imports from countries producing cheap goods. The indicator fell almost three times, which raises serious concerns among Russian economists. The situation on this moment maintained only due to a sharp decrease in the export of monetary resources from the private sector.
However, the situation remains unstable as investor sentiment may change, leading to a weakening of the country's balance of payments. In order to balance the economic situation and prevent the difference between income and expenses from going into the negative zone, it is necessary to devalue the ruble once again. Here are the indicators for the first half of 2016:
- reduction in foreign trade turnover – 21.2%;
- reduction in imports – 8.6%;
- reduction in exports – 27.8%.
As these figures show, the decrease in positive trade balance in the country is quite significant. The reduction in the number of imported goods did not save the situation, since the country’s production capabilities and the ability to sell goods abroad significantly decreased.
In addition, a serious problem is the reduction in the cost of goods of primary origin produced in Russia. The fall in export prices led to a violation of foreign trade norms between countries.
The rise in inflation in the country, in turn, leads to the outflow of money abroad, as a result - the restoration of the trend towards importing foreign goods. There can be many reasons for this situation. First of all, this is an economic crisis in the country, which is declining, but has long-term Negative consequences affecting the international position of the country.
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