Balance of trade
Balance of trade: in standard usage, this is the balance between exports and imports in an economy. The concept conveys few analytical insights. The term also refers, however, to the occasional attempt or unstated longer-term aim of governments, rooted deeply in mercantilism, to ensure that the value of imports does not exceed that of exports. Usually, the concern is much greater about merchandise trade than about services trade. Where countries have applied import restrictions to balance their trade, they have usually only succeeded in reducing the overall amount of trade and thus in reducing welfare. Whether a country imports more goods than it exports depends on many factors, including its stage of economic development and the structure of its economy. Balanced merchandise trade is not in itself an indicator of successful economic policies. As Schumpeter noted in his History of Economic Analysis, "an 'unfavorable' balance may be the symptom of increasing wealth, but also of a process of impoverishment, a 'favorable' one may mean prosperity and employment, but just as well the reverse". See also beggar-thy-neighbour policies, mercantilism, trade deficit and trade surplus.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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