International trade can rightly be called a powerful stimulator of the economic and social development of countries. It helps to focus the specialization of states on the most profitable sectors of industry and agriculture for them, based on their technologies, investment, human and natural resources. Its theoretical basis is the theory of comparative advantages, developed back in the 18th century by the English economist David Riccardo in his study "The Study of the Nature and Causes of the Wealth of Nations."
The global economy allows us to develop the specialization of states in the production of cost-effective and subsequently exported goods and services. In this case, we are talking about the relative advantages of countries that allow to produce certain types of marketable products in larger quantities and better quality.
Having foreign exchange earnings from exports, such countries are able to replace their most costly production with imports from other countries. As a result, the total costs of production in the world economy are reduced. This is precisely the positive constructive role of international trade for dynamic development world economy. Export and import of the country, thus, serve more harmonious and faster development of the country.
Theoretically, the state can have either a closed economy, where the entire national economic complex serves exclusively the domestic market, while there is no import or export, or open. As you understand, such an economy in the modern world can exist purely in theory. The real economy of states is open in nature, there is an active international trade. This enables the global economy to take full advantage of the international division of labor, contributing to its effectiveness. Foreign economic activity is regulated by the state and determines such export and import volumes that stimulate the growth of national income and accelerate scientific and technological progress.
The economy is closed and open
Among the largest exporting countries, three stand out: the USA, Germany and China. Their share in international trade is impressive. It is, respectively, 14.2%, 7.5%, 6.7%.
Speaking about the prospects for the development of international trade, it should be noted the prospect of its slowdown in developed countries. But at the same time, there will be an increase in the activity of developing countries. So far, their share in world trade is 34%, but their share is expected to grow by 10%. Moreover, in the revitalization of developing countries in the field of international trade, the role of the CIS countries will be tangible.
How are export and import related?
Export refers to the sale of goods and services to foreign counterparties for use abroad. Accordingly, import is called the delivery of goods and services from abroad from foreign counterparties. Foreign economic activity, namely, import and export, is carried out both by the state itself and by its business entities.
The export and import quota. Export quotas are the ratio of the export of goods and services to GDP as indicators of the degree of government participation in foreign trade. Its economic meaning is obvious: how much of the GDP is exported. Similarly, the import quota is defined as the ratio of imports of goods and services to GDP. Its meaning is to show the share of imported goods in domestic consumption.
Thus, the aforementioned quotas demonstrate the specific weight of the country's export and import in its economic activities.
In addition to their absolute value, the prevailing donor or recipient nature of state foreign economic activity is characterized by another indicator - the balance of foreign trade. This is the difference between the total volume of exports and imports of the country. The country's import structure indicates a shortage of advantages in the production of goods and services. Export, however, indicates the opposite situation, when the production of goods and services included in it is cost-effective and promising.
If the difference between exports and imports is positive, then they speak of a positive balance of foreign trade, in the opposite case, a negative one. The dynamic production potential of the state reflects the positive balance of foreign trade turnover. As we see, the balance of import and export of the country is an important indicator of the direction of its economic development.
State export promotion
Often, the state assumes the costs of promoting its exports. Many countries practice tax incentives for exporting enterprises, such as VAT refunds. Traditionally, the most significant export subsidies for agricultural products. Developed countries not only help their farmers by providing guaranteed purchase of all agricultural products. Its further export is already a state problem.
Moreover, the stimulation of exports invariably also leads to increased imports. An intermediate tool here is the exchange rate. Export subsidies increase the exchange rate of the national currency, respectively, it becomes more profitable to buy imported.
What does export and import not include?
It is worth noting that the flow of goods and services sent abroad or because of is calculated not “in full”, but with the exception of certain categories:
- transit goods;
- temporary export and import;
- bought by non-residents located in the country or sold to residents located abroad;
- sale or purchase of land by residents with non-residents;
- property of tourists.
Protectionism and World Trade
Is the principle of free trade paramount for states: is it necessary to produce this or that product where production costs are minimal? On the one hand, this approach really ensures optimal allocation of resources. In addition, competition is forcing manufacturers to dynamically improve their technology.
However, on the other hand, free trade does not always form a balanced national economic complex of each individual country. Any state is trying to harmoniously develop its industry, overcoming the "disadvantage" of the production of certain goods. The relevance of our own industrial support of the defense complex, the development of new industries, and employment is obvious. Therefore, we can say that the state always regulates the structure of exports and imports.
There is a protectionist mechanism of “imputed costs” in the form of artificially introducing quotas and duties that contribute to the cost of cheaper and more profitable imports. In view of the fact that quotas and increased protectionist duties impede the harmonious development of the world economy, one should not be overly carried away by them.
However, the practice of “trade wars” points to another, non-tariff way to reduce imports: bureaucratic bans, the presentation of biased quality standards and, finally, an administratively regulated licensing system.
Trade policy of the country
Depending on the average level of import duties and quantitative restrictions, there are four types of trade policy.
Open trade policy is characterized by the level of trade duties not exceeding 10% in the absence of obvious restrictions on the number of imported products. A moderate trade policy corresponds to a level of trade duties of 10–25%, as well as non-tariff restrictions regarding 10–25% of imported commodity mass. Restrictive policies are distinguished by more substantial non-tariff frameworks and trade duties - at the level of 25-40%. If the state basically seeks to ban the import of a product, then in this case the rates exceed 40%.
The generic sign of the trade policy of most developed countries is the growing in its specific gravity and state-stimulated export and import of services.
What international trade does Russia demonstrate?
The Russian economy is specialized in nature, focused on the production and export of oil and gas. This is due to the demand of Western countries mainly for mining products. The current structure of export and import of Russia, of course, is not final for the country, it is forced - in the era of the international economic crisis. Each country in such conditions is in search of increasing its international competitiveness.
At this stage, Russia’s “trump card” is precisely oil and gas. It should be recognized that this is due to the discriminatory barriers “built” by Western countries for the export of engineering products. Thus, it turns out that the export structure is as if it were a backward country.
Moreover, Russia possesses significant land resources, minerals, forestry, and conditions for the development of agriculture. The military-industrial complex creates weapons and military equipment competitive in the international market. At present, Russia is using the protectionism mechanism to diversify its industry and reduce its dependence on world trade conditions. Export and import of the Russian Federation, therefore, will have to change its configuration.
On August 22, 2012, Russia became a member of the WTO. In the future, this will bring her additional preferences in the form of changes in customs duties and tariff quotas. Russian foreign trade turnover amounted to 404.6 billion dollars in January-June 2013 (over the same period in 2012 - 406.8 billion dollars). Imports amounted to $ 150.5 billion, and exports - $ 253.9 billion.
If we take into account the information for the whole of 2013, then the second half of the year turned out to be significantly less effective for the Russian foreign trade than the first. The latter fact was reflected in a decrease in the balance of foreign trade by as much as 10.5%.
Export of Russia
In the total mass of Russian exports, fuel and energy resources account for about 74.9%. The reason for the decline in exports last year is due to several factors. Russia is a major exporter of oil and gas. As you know, 75% of the extracted oil is exported, and only 25% provide the national economic complex. Oil and gas - goods for which the price is subject to market fluctuations. Not only did Urals oil exported by Russia in 2013 reduced its price by 2.39% compared to 2012, the total volume of exported oil decreased by 1.7%. The crisis of the Eurozone countries and the WTO restrictive mechanisms also affected. The trend of a general decrease in foreign trade turnover last year was accompanied by a decrease in the growth rate of Russian GDP from 3.4% in 2012 to 1.3% in 2013. By the way, in the structure of Russia's GDP, oil and gas produced make up 32-33%.
The share in Russian exports of machinery and equipment is only 4.5%, which does not correspond to either the potential of industry or the level of scientific base. At the same time, the share of this segment in world trade by developed countries is about 40%.
Import of Russia
At this historical stage, Russia is forced to import predominantly finished products because of a deformed economy (which was highlighted above).
The share in the Russian import of machinery and equipment to the CIS countries is 36.1%. Thus, their own production deficit is compensated (the share of machinery and equipment in Russia's GDP in 2013 is 3.5%). The share of imported metals, as well as products from them is 16.8%, food and ingredients for their production - 12.5%, fuel - 7%, textiles and footwear - 7.2%, chemical products - 7.5%.
Thus, having analyzed the import and export of Russia, we come to the conclusion that the rate of its industrial and social development is artificially slowed down. Obviously, the source of such a situation is the range of subjective interests of certain individuals.
Foreign trade of Japan
The economy of the Land of the Rising Sun is one of the most developed and dynamic in the world. Japan's exports and imports are structured and determined by a powerful economy. This state in its industrial power today occupies the third place in the world after the United States and China. A feature of the country's resource base is an exclusively organized and efficient workforce and the practical absence of minerals in the country. The relief and environmental conditions limit the ability to provide the country with agricultural products at the level of 55% of its needs.
The country is at the forefront of the development of robotics and electronics, automobile and mechanical engineering. Japan has the largest fishing fleet in the world.
Consider briefly the export and import of Japan. Imported, as we already mentioned, food, minerals, metals, fuels, chemical products. Exported electronics, electrical engineering, automobiles, various vehicles, robotics.
China as a member of international trade
China is currently demonstrating an enviable development momentum. Today it is the second economy in the world. According to analysts, the PRC in the period from 2015 to 2020 should overtake the United States, and by 2040 become three times more powerful than its closest opponent. The resources driving the Chinese economy today are the abundance of labor (including skilled), the availability of minerals, land, etc.
China's exports and imports are determined today by the policies of a country of an industrial nature. This country is today the absolute leader in the industrial production of metals (steel, cast iron, zinc, nickel, molybdenum, vanadium), household appliances (PCs, televisions, washing and sewing machines, microwave ovens, refrigerators, cameras, watches). In addition, China has overtaken the United States and Japan combined in the production of automotive technology. Near Beijing, in the Haidian District, even built its own "Silicon Valley."
What does China import? Technologies, educational services, specialists supplied by developed countries, new materials, software, biotechnologies. An analysis of China's exports and imports convinces of the prospects and profound meaningfulness of its economic strategy. The volume of exports and imports of this country today have the most convincing dynamics of growth.
Australia Export and Import
Export and import of Australia has its own specifics. The fifth continent, which is a single unitary state, has a powerful land and agricultural resource that allows the production of meat, grain, wool. But at the same time, the market of this country is experiencing a shortage of labor and investment.
At the same time, Australia acts as an active exporter in the international market. According to statistics from recent years, about 25% of the country's GDP is sold as exports of goods and services. Australia exports agricultural products (50%) and mining products (25%).
Australia's largest exporter is Japan, and the United States is the largest importer.
Australia's economy is considered highly dependent on imports. What is being brought to the Fifth Continent? 60% - machinery and equipment, minerals, food products.
Historically, Australia has a negative trade balance, true, it is gradually decreasing. Import and export of this country is developing sequentially and in ascending order.
Export and Import of India
India has significant political and economic influence in South Asia. The country conducts active foreign trade in the global market. GDP in 2012 amounted to $ 4761 billion, and this is the 4th place in the world! The foreign trade volume of India is impressive: if in the 90s it amounted to about 16% of the country's GDP, now it is more than 40%! Import and export of India are growing dynamically. The advantages of the state in the international division of labor are significant labor resources, a vast territory. More than half of the country's able-bodied population are employed in agriculture, thirty percent in the service sector, 14% in industry.
Agriculture of India is a source of export of rice and wheat, tea (200 million tons), coffee, spices (120 thousand tons). However, if we evaluate the grain cultivation of the entire world agriculture and compare it with the harvest of India, it turns out that the productivity of the Indian agricultural sector is two times lower. It should be emphasized that it is food products that bring this country the highest export income.
India is the largest importer of cotton, silk, sugarcane, peanuts.
Interesting features of the Indian export of meat products. The influence of national mentality is felt. In India - the largest livestock in the world, but the smallest meat consumption in the world, because here the cow is considered a sacred animal.
The textile industry employs 20 million people in India. India exports, in addition to textiles, petroleum products, precious stones, iron and steel, transport, chemical products. Imports crude oil, precious stones, fertilizers, machinery.
Knowledge of English allowed educated residents of this country to find their niche in the IT field and programming. Now the export and import of services in this sector of the economy is significant and makes up more than 20% of the total GDP of India.
The largest exporters for India are the United States, United Arab Emirates, China. The United Arab Emirates, China, Saudi Arabia import goods from India.
In addition, this country has a significant military-industrial complex, having nuclear weapons since 1974. The defeat of peace-loving India in a border conflict with China in 1962 and with Pakistan in 1965 forced the country to first actively import weapons and then manufacture its own. As a result, in 1971, a landslide victory over Pakistan took place. Since the mid-90s, India has been pursuing a great-power policy.
As we see from this article, various states choose the composition of exports and imports corresponding to their resources and production potential.
It should be noted that today the harmonious scheme of free international trade imputed by Keynes is often deformed by states. Governments of various countries at the level of their economic policy are actively promoting domestic exports. And often this competition on the intensity and thought-out tactics resembles a duel. Who wins in it? A country producing large volumes of industrial products. Therefore, economists are talking today about a remake of industrial policy.
To the question: “What is the preferred strategy for the country nowadays?” The following macroeconomic situation will be relevant: saving its foreign exchange reserves, the country seeks to maximize exports by limiting its imports within export earnings. To do this, she is trying to level the factors that in the long term bear the risk of a decrease in foreign currency earnings. What are these factors? Exchange rates, oil and gas sales rates, overly elastic demand. The beginning of the 21st century left its mark on the very object of world international trade. In the total volume of export-import operations, a significant share (more than 30%) is occupied by trade in services.