What is Balanced Trade?

In a balanced trade, a country does not account for trade surplus or trade deficits. This model mandates countries to equal their imports with exports. This ensures that a zero balance of trade is achieved which could also include the introduction of other means. Balanced trade is provided as a relative option to free trade.

How Does Balanced Trade Work?

A balanced trade tries to maintain equal imports with exports. This is different to free trade. Free trade requires country trading as much as possible and striving towards a balance by involving tariffs or other barriers. This balance will either be on a bilateral basis (country by country basis) or o the overall trade balance (this is when there is a surplus in a country and deficit in another). However, In order to reduce these tariffs needed to maintain balanced trade, the country can deploy the system of import certificates. Warren Buffet supports this method rather than tariffs. This provides that exporters would receive this certificate for exports and importers would need them to be able to import, thus limiting the value of imports to that of exports. This certificate is said to be equivalent to tariffs. Lastly, being a member of International trade organizations, such as the World Trade Organisation(WTO), limits tariffs and trade barriers. In other words, member countries are not permitted to enforce tariffs or other barriers to ensure balanced trade.

Arguments Against Balanced Trade

The supporters of the balanced trades have specifically front this argument stating that there is a need to safeguard jobs, wages and growth of an economy where the economy operates on trade deficits only. Since imports are synonymous with sending jobs abroad. Likewise, for an economy that runs on trade surplus moving to balance is also impossible since this will result in a lack of jobs and stunted economic growth. Criticisms of this model include:

• Balance of trade disrupts the free market, this reduces efficiency in the economy.
• Capital flows will be needed to make a balance of trade work.
• In an attempt to limit trade, there will be improper records of imports or under-invoicing of imports.
• Limiting trades will result to hike in pieces of goods
• Since this will result in imposing tariffs which in turn can result in a trade war.

Related Topics

• Trade Balance: Surplus and Deficit
• Mercantilism
• J Curve
• National Trade Data Bank
• Capital Account (Economics)
• Merchandise Trade Balance
• Current Account 
• Income Payments
• Unilateral Transfer
• Is it better to have a trade surplus or a trade deficit? 
• Export of Goods and Services and Percentage of GDP
• Heckscher-Ohlin Model 
• Linder Hypothesis
• The Balance of Trade as a Balance of Payments
• National Savings and Investment Identity
• Circular Flow of Money
• Financial Capital
• Supply and Demand Sides for Financial Capital? 
• Flow of Capital
• Domestic Saving and Investment Determine the Trade Balance
• National Savings Identity and Trade Deficits
• How the Business Cycle Affects Trade Balances
• Trade Balance or Trade Surplus
• Level of Trade
• Comparative Advantage
• Absolute Advantage
• Specialization and Gain from Trade
• Absolute Advantage in All Goods
• Production Possibilities Frontier and Comparative Advantage
• Comparative Advantage and Mutually Beneficial Trade
• Gain from Trade
• Opportunity Costs and International Trade
• Intra-Industry Trade
• Splitting Up the Value Chain
• How Economies of Scale Lead to Trading Advantages
• Protectionism
• Closed Economy
• Tariffs 
• Double Column Tariff
• Import Quotas
• Double Column Tariff
• Infant Industry Theory
• National Interest Argument
• Race to the Bottom
• Anti-Dumping Laws
• Dumping
• Trade War
• Race to the Bottom
• Non-Tariff Barriers
• Effects of Trade Barriers
• Who Is Benefited and Who is Harmed by Protectionism?
• Infant Industry Theory for Restricting Imports
• What is the Anti-Dumping Argument for Restricting Imports?

• Anti-Dumping Laws
• Dumping

• What is the Environmental Protection Argument for Restricting Imports?
• Race to the Bottom
• Unsafe Consumer Products Argument for Restricting Imports?
• National Interest Argument for Restricting Imports
• What is the WTO?
• What is the GATT?
• What are Free Trade Agreements?
• North American Free Trade Agreement
• Central European Free Trade Agreement
• General Agreement on Free Tariff and Trade (GATT)
• Common Market
• Common Market for Eastern and Southern Africa
• Central American Common Market
• Caribbean Community and Common Market
• What are Economic Unions?
• WTO
• International Monetary Fund
• World Economic Forum
• Inter-American Development Bank
• Davos World Economic Forum 
• Chamber of Commerce
• Jackson Hole Economic Symposium