Balance Of Trade

Summary of Balance Of Trade

The sum total, in monetary terms, of a nation’s merchandise (i.e., “visible”) exports less the value of merchandise imports during a given time period, usually one year. Merchandise imports and exports are contrasted with trade in “invisibles,”which are services such as shipping, banking, insurance, and tourism. If, during the reporting period, the nation exports more than it imports, it is said that the nation enjoys a balance of trade “surplus,”or a “positive” balance of trade; if, however, more is imported than exported, the nation suffers from a “negative”balance of trade, or a trade “deficit”. A trade surplus provides savings to a nation, which may be used to satisfy foreign debt, enhance domestic consumption by increasing imports of foreign merchandise, provide wealth for investment abroad, or create credits in the nation’s international reserves. Conversely, a trade deficit, especially if it is chronic, may involve a reduction of the nation’s reserves, borrowing to cover the shortfall, or economic controls to reduce imports.

For most countries, the balance of trade is the largest single component of the BALANCE OF PAYMENTS (read this and related legal terms for further details).

(Main Author: William J. Miller)

Balance of Trade in International Trade

Meaning of Balance of Trade, according to the Dictionary of International Trade (Global Negotiator): The difference between a country’s total merchandise exports and imports for a specific time period. If exports exceeds imports, a country is said to have a favourable balance of trade (trade superavit); if not, the trade balance is unfavourable (trade deficit). This concept is perhaps more useful when applied to trade between two countries, rather than one country and the rest of the world.

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See Also

• International Trade
• Trade Regulation
• International Economic Law
• Export License
• International Trade Law
• Foreign Trade
• Safeguard