The opening of an economy is reflected in a sharp increase in its foreign trade and its interdependence with the rest of the world. The degree of openness of an economy is measured by the ratio of the value of foreign trade to GDP.
Not all countries are open to the outside equally. Generally, countries with a developed domestic market (United States, Japan) have a low degree of openness. On the other hand, some countries like China are very open to the outside. Its industry produces mainly for export.
Not all sectors of an economy are equally open to the rest of the world. In each country, there are sheltered sectors and sectors exposed to global competition. If you read the avatrade review then getting a proper idea regarding the proper idea for the same will be better now.
What are the main currents of exchange?
After the Second World War, the growth of trade is unprecedented. Goods represent 80% of current transactions against 20% for services.
World trade is mainly intra-industry (exchange of similar products) and intrazone (more than 50% of world trade is carried out within economic zones).
Developed market economy countries (PDEMs) account for 70% of world trade. Today, however, we are witnessing a globalization of economies, a phenomenon that reinforces the interdependence of countries.
What are the strengths of France’s foreign trade?
At the geographical level, France’s market shares in Asia and Latin America are very insufficient. On the other hand, its market shares are much higher in Europe and Africa.
The most successful export sectors are: aeronautics, the pharmaceutical industry, the agro – food sector, the automotive industry and tourism. The major French industrial groups perform quite well on export.
What are the weak points of France’s foreign trade?
Three weaknesses of foreign trade: The specialization is not very advanced in the field of services and new technologies, SMEs are not sufficiently present on the external markets and France is highly dependent on energy.
What are the instruments for measuring trade?
Three instruments are used to measure external trade: the degree of openness, the degree of coverage and the account of current transactions.
The degree of openness of an economy: this rate measures a country’s participation rate in international trade in goods and services. In France, it went from 11% in 1960 to 25% today.
Degree of openness = [(Imports + Exports) / 2] / GDP x 100
The rate of coverage: this rate makes it possible to compare, for an economy or a sector, exports with imports. A coverage rate of 100% means that a country exports as much as it imports.
Coverage rate = (Value of exports / value of imports) x 100
The current account: it is a document that records the exchange of goods and services between a country and the rest of the world. It breaks down into 4 positions:
Goods transactions: this sub-account is used to establish the balance of trade and its balance.
Trade Balance = Merchandise Exports – Merchandise Imports
Operations on services: tourism, transport, banking services, insurance etc.
Revenues: this sub-account traces the income of factors of production established abroad. Examples: dividends, interest earned on investments abroad, wages etc.
Current transfers: are transfers of funds for no consideration. Examples: contribution to the European budget, donations to other states.
The current account balance called the current account balance is the difference between exports and imports.