Historically, foreign trade is the initial form of economic international relations. With its help, all national economies are linked into a single world economy. Foreign trade determines the division of labor between countries, which, with the development of economic relations, is increasingly improved and deepened.
An important place is occupied by foreign trade indicators in the balance of payments, which includes the trade balance, receipts and payments for services, income from foreign investments, non-commercial payments, foreign exchange reserves, the movement of short-term and long-term capital.
The trade balance is determined by the ratio of exports and imports of goods. Due to the fact that the bulk of foreign trade is carried out on credit, there are some differences between the indicators of trade made for the corresponding period and actual receipts and payments.
The economic significance of the deficit or asset of the trade balance of a particular country depends on its place in the world economy, on economic policy and on the nature of its ties with partner countries. For countries that are lagging behind leaders in terms of economic development, an active trade balance becomes a source of foreign exchange earnings to pay obligations to other countries and for other items in the balance of payments.
Some developed industrial countries use surpluses to create a second economy abroad. A passive trade balance is considered an undesirable phenomenon, this characteristic is a sign of a weak foreign economic position of the state. A passive balance is inherent in developing or backward countries that lack foreign exchange earnings. This is important for the industrial development of the country.
Of course, a bad sign is a decline in exports as a result of a decrease in demand for goods and services of one country in other states. However, if a negative trade balance occurs, for example, with an increase in imports of investment products, resulting in an increase in domestic production, then in this case a negative balance is not a reason for a negative assessment of the economic condition of the country.
Thus, the deficit or surplus of the trade balance is estimated only on the basis of the analysis of the circumstances leading to such a result. For example, a positive balance in the trade balance of the Russian Federation is not a basis for an optimistic assessment of this situation. Due to the fact that the main export article of Russia is natural resources, raw materials, not goods, are mainly exported from the country, we can talk about the low level of state production and the poor state of the economy.
If the negative balance increases, then the trade balance is deteriorating. This indicates that a country abroad spends more money than it receives, resulting in an increase in the supply of national currency on the part of trade participants in the foreign exchange market, and the demand for foreign money is growing. In this case, conditions are created for the emergence of tendencies for the depreciation of its own currency. And, in the opposite case, with a positive trade balance, tendencies for an increase in the national currency rate appear.
It is obvious that as a result of devaluation, depreciation of its own currency, the activities of exporters are stimulated, and imports become less profitable. Thanks to this change in the exchange rate, prerequisites are created for increasing export operations and reducing imports. As a result, there is a decrease in negative and the emergence of a positive trade balance.