A country's Balance of Trade is the difference (over a period of time) between the value of that country's imports and its exports of merchandise. When a country's exports are greater than their imports, a Trade Surplus exists. Similarly, when imports are greater than exports, a Trade Deficit exists. Countries with a severe imbalance are not self-sufficient, either because they rely heavily on foreign markets to purchase their goods (in the case of a Surplus) or because they don't produce enough goods internally to meet demand (in the case of a Deficit). Nations try to balance their trade by using import barriers and export subsidies, which can be contentious areas of trade negotiation. Unfortunately, international trade causes a 'race to the bottom' whereby countries compete with one another to create the cheapest conditions for multinational production by lowering minimum wage and environmental regulations. The sustainability movement tries to create international standards so that trade differences do not arise from one nation destroying its environment and exploiting its workers for a price advantage, while its trading competitor suffers from practicing more environmentally friendly and better labor-related practices. NGOs and green companies may try to establish parallel trading systems and use ecolabeling to alert buyers of working and environmental conditions.
Keywords
reciprocal trade agreement, trade barrier, nontariff barriers, rules of origin, anti-dumping measures, local content requirement, import quotas, import duties, protective tariffs, exchange control, sanitary and health regulations, trade bloc, trade deficit, balance of trade, balance of payments, current account deficit, fair trade, free trade, export processing zones, free trade zones, export credits, export guarantees, embargo, boycotts, GATT, WTO, ILO, NAFTA, ANCOM, AFTA (ASEAN), CARICOM, EFTA, EU, MERCOSUR, Trade Expansion Act
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