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Glossary of terms

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Trade

Trade
  • Exports of goods and services and imports of goods and services.
  • From an analytical view it is arbitrary to distinguish goods from services. For example, a unit of foreign exchange earned by a freight company strengthens the balance of payments to the same extent as the foreign exchange earned by a goods exporter. Even so, the trade balance is useful because it is often the most timely indicator of trends in the current account balance. Customs authorities are typically able to provide data on trade in goods long before data on trade in services are available.
 
Trade balance or Balance of trade (BOT)
  • The trade balance is the difference between exports and imports of goods and services:

    [ Exports - Imports = trade balance ]

  • The trade balance is the largest component of a country's balance of payments. The trade balance shows a deficit if the country imports more than it exports; the opposite scenario is a trade surplus.
 
Terms of Trade
  • The terms of trade (TOT) index is a ratio obtained by dividing the value of exports by the value of imports, then multiplying the result by 100.
  • Terms of trade are sometimes used to determine the health of a country's economy. A TOT index greater than 100% means the country is accumulating capital (more money is coming in from exports), whereas a below 100% index indicates that more capital is going out (to buy imports) than there is coming in. However, such rough conclusions do not necessarily take into account the impact of changes in prices, or of the exchange rates and may be misleading.
 
Merchandise trade
  • Goods which add or subtract from the stock of material resources of a country by entering (imports) or leaving (exports) its economic territory. Goods in transit simply being transported through a country or temporarily admitted or withdrawn (except for goods for inward or outward processing) do not add to or subtract from the stock of material resources of a country and are not included in the international merchandise trade statistics.
 
Trade systems
  • Two trade systems by which international merchandise trade statistics are commonly compiled:
    • General trade system: the statistical territory of a country coincides with its economic territory.
    • Special trade systems: the statistical territory comprises only a particular part of the economic territory, for example where there are free circulation areas or "free zones".
 
 
[Definitions from System of National Accounts, United Nations, http://esa.un.org/unsd/sna1993/]