 DEFINITION |
The balance of trade is a statement
of a country’s trade in goods (merchandise) and services. It covers
trade in products such as manufactured goods, raw materials and agricultural
goods, as well as travel and transportation. The balance of trade is the
difference between the value of the goods and services that a country
exports and the value of the goods and services that it imports. If a
country’s exports exceed its imports, it has a trade surplus and
the trade balance is said to be positive. If imports exceed exports, the
country has a trade deficit and its trade balance is said to be negative.
The balance of trade sometimes refers to trade in goods only. The term
should not be confused with the balance of payments, which is a much broader
statement of international monetary flows, including not only trade in
goods and services, but also investment income flows and transfer payments.
| HOW
DOES IT AFFECT CANADIANS? |
If a country exports more goods than it imports, the balance
of trade is said to be positive. However, this number alone tells us little
about whether a country is doing well or not. A positive or negative balance
may simply reflect a change in the relative cost of domestic products
compared with international prices. For industries that rely heavily on
exports, like the auto sector, a positive balance of trade may reflect
a higher international demand, which can mean more jobs in that industry.
| EXAMPLES |
Typically, Canada has had a positive balance of trade, meaning
that it tends to export more than it imports when it comes to goods such
as auto parts, electronics and aircraft components. Canada usually carries
a large positive balance of trade with the United States, but a negative
balance with Japan, the European Union and other OECD countries.
| LINKS |
Canada's balance of international payments
Source: Statistics Canada
http://www.statcan.ca/english/Pgdb/econ01a.htm
Exchange rate statistics
Source: Bank of Canada
http://www.bankofcanada.ca/en/exchange.htm
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