Structure of Balance of Payment Free Essay Example

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Structure of Balance of Payment

Introduction

As noted in the introduction section of this paper, imports, exports and balance of payments bear direct and significant impact to a country’s GDP. It is noteworthy that France international trade and balance of payments are dependent on it EU membership where all member country’s enjoy preferential trade treatments. However, The United States, Canada, Russia, India, China and Brazil also stand out as major trading partners of France.

The ongoing global financial crisis

However, the ongoing global financial crisis has seen France’s GDP fall by 0. 7 % in 2008, with the government’s deficits of balance of payments set to exceed Eurozone’s recommended maximum of 3 % of the country’s GDP (World Bank Website, 2008).

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Taxation burden in France ranks amongst the highest in the European region with 2005 statistics showing taxes accounted for about 50 % of the foreign exchange income (World Fact Book, 2009). As with any form of voluntary exchange between independent value-maximizing agents, international trade takes place when value is created for the participants in the transaction above the values they can receive through alternative utilization of the resources (Ball & McCulloch, 1999).

This assumption is the motivation behind the increased pursuits for international trade among countries in different parts of the world.

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Deficits or balance of trade and payments form the basis through which countries measure the outcome of their international trading activities as dictated by competitive market forces and the rewards of preferential treatment offered by international trade agreements (Ball & McCulloch, 1999). France’s current balance of payments stands at US$ -58 billion with the country balance of trade in the Eurozone standing at -45.1 billions (World Fact Book, 2009).

According to the CIA World Fact Book (2008) France registered international trade deficits of exports of UD$ 72 billions in 2008, having registered exports worth US$ 762 billions and imports worth US$ 833 billions respectively.

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Further, France’s external debt was US Dollars 5. 37 trillion, with US Dollars 1. 234 trillion domestic foreign direct investments and US Dollars 1. 889 international trillion foreign direct investments as of September 2008 (World Fact Book, 2009).

The meaning of statistic

These statistics simply mean that France is facing deficits in its balance payments because the country is paying more for imports that it is earning from exports. The negative variance in international trade means that France is not self-sufficient in internal natural and capital resource endowments, a situation that leads to the country importing more goods than it exports. This trend creates gaps in the industrial sector of France as the country supports the growth of foreign companies at the expense of local economic development, consequently loosing out on thousands of job opportunities for its citizens.

Conclusion It is evident that economic growth in France corresponds to processes of rapid replacement and reorganization of trading activities as well as natural resources, all in the spirit of investment and maximization of returns (Lucas, 2002; Helpman, 2004. However, environmental threats posed by economic growth not withstanding, economic growth remains an important transition that this world must undergo (Lucas, 2002; Mokyr, 2005).

Therefore, the challenges posed by economic growth can best be tackled through creation of a balance between the conflicting concepts of economic growth and mitigation of risks posed by economic growth. In its pursuit for increased international trade, balance of payment and balance of trade, France should also be at the forefront of lobbying for the adoption of the Kyoto Protocol of Climate Change by all industrialized countries in the world.

References

Aghion, P. & Durlauf S. N. , (Ed), (2005). Handbook of economic growth, 1(b),

Elsevier B. V. Bourguignon, F. (2006). Handbook of economic growth. World Bank. France. (2009).

CIA – The World Fact Book, Retrieved April 18, 2009, from: https://www. cia. gov/library/publications/the-world-factbook/geos/fr. html Helpman, E. (2004).

The mystery of economic growth. Cambridge: Harvard University. Impact of climate change on growth and development. (2006). Stern Review Report on Economics of Change, retrieved April 18, 2009, from < http://www. hmtreasury. gov. uk/media/3/2/Chapter_7_Projecting_the_Growth_of_Greenhouse-Gas_Emissions. pdf Key development data and statistics. (2008).

The World Bank, Retrieved April 18, 2009, from: http://web. worldbank. org/WBSITE/EXTERNAL/ DATASTATISTICS/0,,contentMDK:20421402~pagePK:64133150~piPK:64133175~theSitePK:239419,00. html

Key global indicators. (2009). United Nations Statistics Division, Retrieved April 18, 2009, from: http://data. un. org/Data. aspx? q=France&d=CDB&f=srID%3a5890%3bcrID%3a250

Larry E. J. (2005). Neoclassical models of endogenous growth: The effects of physical policy, innovations and fluctuations. Elsevier B. V. , 9-32.

Lucas, R. (2002). Lectures on economic growth.Cambridge, Harvard University Press.

Mokyr, J. (2005). Long-term economic growth and history of technology, Department of Economics and History. Northwestern University, 32-43.

Romer, P. (1990). Endogenous technological change. Journal of Political Economy 98(5), 71-102.

Solow, R. M. (1957), Review of economics and statistics: Technical change and the aggregate production function. 2007-2008 Human development report: France HDI 10. (2008). UNDP, Retrieved April 18, 2009, from: <http://hdrstats. undp. org/countries/data_sheets/cty_ds_FRA. html>