The Measurement of the Balance of Trade

THIS article is concerned with the methods of measuring what is called the Balance of Trade. Stated more accurately, though less concisely, the object in view is to consider how we can estimate to what extent during any given year, persons normally residing in the United Kingdom have on balance become indebted to persons normally residing elsewhere, or to what extent the latter have become indebted to us. I shall illustrate the discussion with figures relating to the year I9I3-the last normal year before the war. It is hardly possible to make a satisfactory analysis by the usual methods with regard to the war period, and the flow of statistical information is likely to be deficient for some time to come. We are, however, able to make a rough analysis of the position in I920, and I shall refer to this in the latter part of this article. The material upon which an analysis of the trade balance must necessarily be based is the official-returns of the value of imports and which cover nearly all the material goods which we buy from abroad, as well as nearly all those which we sell. The principal gap in the import figures seems to relate to diamonds, imports of which are known from the South African export returns to be understated to the extent of f12,ooo,ooo in I9I3. The export accounts are also incomplete in this respect, exports of diamonds in I9I3 being returned as nil. Another class of material goods not covered by the export statistics is second-hand ships, amounting in value to some millions of pounds. While the official accounts of imports and exports can be tinkered by making allowances for these points and others, it is scarcely worth while spending much time and labour on the process, because any modification made in the excess of imports shown in the returns will be small, and the margin to be allowed for error in estimating other items in the international account is inevitably large. These other items are the so-called exports, and the smaller, though not wholly negligible, invisible imports. Invisible exports and imports are so called not because they can in all cases be regarded as being in any sense exports or imports, but because they are items to be added to the exports and imports respectively when drawing up a full international trading account

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