Balance of trade essay sample

The balance of trade is a difference between national export and import. It is essential for every economy to transport some part of the supply to other countries as well as compensate losses of domestic production by importing goods from abroad. This figure helps economists to determine the current state of the economy. If the balance of trade is unhealthy, governments can impose regulations to prevent extensive import of goods or issue more policies to boost businesses.

The trade balance can be affected in two ways. It can be either trade deficit in which the country’s import exceeds its export, otherwise, it will be a trade surplus. To properly calculate the trade balance, economists compare surplus or deficit with the national GDP. Due to the specifics of the production, some developed countries have trade surplus and deficit. Countries of European Union as well as China export a greater part of their production while the US, Canada, Australia, and the United Kingdom import a lot of products. Some experts admit that economies in recession pay bigger attention to export to create more jobs, while expanding economies use import to enhance competition.

Both internal and external factors affect the balance of trade. The cost of production can be a decisive factor for countries with expensive domestic production. They prefer to import goods from the countries with cheaper labor or outsource their domestic production overseas. Here also belong the availability of raw materials – some countries possess rich natural resources which makes the rest of the world depend on their import. Trade barriers can disturb the nation’s potential to export excessive goods because of the limits imposed by other economies.