Unit 2 Macro: Trade and Balance of Payments Glossary

A short glossary of some international trade and balance of payments key terms for AS macro

Balance of Payments (BoP)
The total of all the money coming into a country from abroad less all of the money going out of the country during the same period

Beggar my Neighbour
This is an economic policy that seeks to promote a nation’s economy at the expense of another country. An obvious example is the use of import tariff barriers. A country may place tariff on imports to help promote local domestic industry. This may help local unemployment, but, be at the expense of the other country’s export sector

Capital flight
The rapid movement of large sums of money out of a country. There could be several possible reasons - lack of confidence in a country’s economy and/or its currency and political turmoil. The result can be a sharp downward movement in a currency.

Capital flows
Movements of capital between countries. Outward capital flows are movements of domestically-owned capital abroad; inward capital flows are movement of foreign-owned capital to the domestic economy

Competitive devaluation
When a country tries to devalue its currency to increase its competitiveness. However, this often encourages other countries to also devalue leading to only temporary increases in the competitiveness of exports.

Competitiveness
Cost and non-price factors that make a business successful in international markets

Creeping protectionism
A period of time where import tariff rates rise and where countries introduce quotas and barriers to the mobility of labour and capital

Countervailing tariffs
Tariffs (duties) that are imposed by a country to counteract subsidies provided to a foreign producer or to counter-act the perceived effects of export dumping

Current account
Balance of trade in goods, services, net transfers of money & net investment income

Data from Timetric.

To view this graph, please install Adobe Flash Player.

OECD Economic Outlook Database (version 88) from Timetric

Dumping
When a producer in one country exports a product to another country at a price which is below the price it charges in its home market or is below its costs of production

Export revenue
Sales from selling goods and services overseas

FDI
Foreign direct investment from overseas businesses into a specific country

Foreign exchange reserves
The reserves of gold or foreign currencies (e.g. US dollars or Euros) typically held by central banks on behalf of their national government

Free trade
Ability of people to undertake trade with people in other countries free from any restraints imposed by governments or other regulators

Data from Timetric.

To view this graph, please install Adobe Flash Player.

United Kingdom from Timetric

Globalisation
The deepening of relationships between countries of the world reflected in an increasing level of overseas trade and investment.

Import
A good or a service produced overseas but domestic in domestic markets. Imports are a leakage of demand from the circular flow

Infant industry
New industry that requires government protection from overseas competition (for instance through the setting of import tariffs) in order to develop

Investment income
Interest, profits and dividends from assets owned and located overseas

Mercantilism
The notion that the wealth of a nation was based on how much it could export in excess of its imports, and thereby accumulate precious metals. Applied in the modern context to countries accumulating huge trade surpluses in goods or services and focusing on export-led growth

NAFTA
North American Free Trade Agreement - a free trade area agreement signed by the US, Canada and Mexico

Net Trade
The balance between the value of exports and imports

Data from Timetric.

To view this graph, please install Adobe Flash Player.

United Kingdom from Timetric

Overseas assets
Assets such as businesses, shares, property which are owned in overseas countries and which can generate a flow of investment income which is a credit item on the current account of the balance of payments.

Protectionism
The use of tariff and non-tariff restrictions on imports to protect domestic producers from foreign competition

Punitive tariff
An extra tariff charged on goods going into or out of a country, that is introduced because a country has done business in an illegal or unfair way

Remittances
The sending of money to people in another country. For many lower-income nations, remittance income is now a big contribution to their Gross National Income (GNI)

Sovereign wealth fund (SWF)
A government or state run fund usually created by profits from natural resources such as oil, gas or minerals. Highly secretive, their assets grew dramatically when oil prices rose to record levels. Some of the largest SWFs are in the oil-rich Middle East

Tariff
A tax on imported products which may be ad valorem (%) or a specific tax

World Trade Organisation
The WTO oversees trade agreements, negotiations and disputes between member countries
Trade deficit
When a country imports a greater value of goods and services than it exports.

Trade surplus
When the value of exports exceeds the value of imports in a given time period

Data from Timetric.

To view this graph, please install Adobe Flash Player.

United Kingdom from Timetric