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International Terms

"A"

Above the line	In balance of payments accounting, this refers to those transactions that are included in calculating the balance of payments surplus or deficit. Transactions below the line, typically official reserve transactions and sometimes short term capital flows, are not included.
Absoluteadvantage	The ability to produce a good at lower cost, in terms of real resources, than another country. In a Ricardian model, cost is in terms of only labor. Absolute advantage is neither necessary nor sufficient for a country to export a good. See comparative advantage.
Absoluteadvantage trade policy	The idea, advocated by opponents of globalization, that a country should import only goods in which other countries have an absolute advantage, particularly goods that the importing country cannot (or cannot "reasonably") produce itself.
Absolute Purchasing Power Parity	See purchasing power parity.
Absorption	Total demand for final goods and services by all residents (consumers, producers, and government) of a country (as opposed to total demand for that country's output). The term was introduced as part of the Absorption Approach.
Absorption approach	A way of understanding the determinants of the balance of trade, noting that it is equal to income minus absorption. Due to Alexander (1952)
Abundant	Available in large supply. Usually meaningful only in relative terms, compared to demand and/or to supply at another place or time. See factor abundance.
Abundant factor	The factor in a country's endowment with which it is best endowed, relative to other factors, compared to other countries. May be defined by quantity or byprice.
Academic Consortium on International Trade	A group of academic economists and lawyers who are specialized in international trade policy and international economic law. ACIT's purpose is to prepare and circulate policy statements and papers that deal with important, current issues of international trade policy.
Accession	The process of adding a country to an international agreement, such as theGATT, WTO, EU, or NAFTA.
Accession country	A country that is waiting to become a member of the EU.
Accommodating transaction	In the balance of payments, a transaction that is a result of actions taken officially to manage international payments; in contrast with autonomous transaction. Thus official reserve transactions are accommodating, as may beshort-term capital flows that respond to expectations of intervention.
Accumulation	The acquisition of an increasing quantity of something. The accumulation offactors, especially capital, is a primary mechanism for economic growth.
ACIT	Academic Consortium on International Trade
ACP Countries	A group of African, Caribbean, and Pacific less developed countries that were included in the Lomé Convention and now the Cotonou Agreement. As of June 2007, the group included 79 countries.
Actionable subsidy	A subsidy that is not prohibited by the WTO but that member countries are permitted to levy countervailing duties against.
Actual protection rate	Implicit tariff.
AD	Anti-dumping
Ad valorem	Per unit of value (i.e., divided by the price).
Ad valorem equivalent	The ad valorem tariff that would be equivalent, in terms of its effects on trade, price, or some other measure, to a nontariff barrier.
Ad valorem tariff	Tariff defined as a percentage of the value of an imported good.
ADB	1. African Development Bank Group 2. Asian Development Bank
Adjustable peg	An exchange rate that is pegged, but for which it is understood that the par value will be changed occasionally. This system can be subject to extremespeculative attack and financial crisis, since speculators may easily anticipate these changes.
Adjusted for inflation	Corrected for price changes to yield an equivalent in terms of goods and services. The adjustment divides nominal amounts for different years by price indices for those years -- e.g. the CPI or the implicit price deflator -- and multiplies by 100. This converts to real values, i.e. valued at the prices of thebase year for the price index.
Adjustment assistance	Government program to assist those workers and/or firms whose industry has declined, either due to competition from imports (trade adjustment assistance) or from other causes. Such programs usually have two (conflicting) goals: to lessen hardship for those affected, and to help them change their behavior -- what, how, or where they produce.
Adjustment mechanism	The theoretical process by which a market changes in disequilibrium, moving toward equilibrium if the process is stable. See Walrasian and Marshallianadjustment.
Administered price	A price for a good or service that is set and maintained by government, usually requiring accompanying restrictions on trade if the administered price differs from the world price.
Administered protection	Protection (tariff or NTB) resulting from the application of any one of several statutes that respond to specified market circumstances or events, usually as determined by an administrative agency. Several such statutes are permitted under the GATT, including anti-dumping duties, countervailing duties, andsafeguards protection.
Administrative agency	A unit of government charged with the administration of particular laws. In the United States, those most important for administering laws related tointernational trade are the ITC and ITA.
Advance deposit requirement	A requirement that some proportion of the value of imports, or of import duties, be deposited prior to payment, without competitive interest being paid.
Advanced country	Developed country.
Advantage	Usually refers to a cost advantage, though it could refer to a strategic advantage(such as first mover advantage) or to a superiority of technology or quality.
Adverse selection	The tendency for insurance to be purchased only by those who are most likely to need it, thus raising its cost and reducing its benefits.
Adverse terms of trade	A terms of trade that is considered unfavorable relative to some benchmark or to past experience. Developing countries specialized in primary products are sometimes said to suffer from adverse or declining terms of trade.
AEC	African Economic Community
African Development Bank Group	A multinational development bank for Africa.
African Economic Community	An organization of African countries that aims to promote economic, cultural and social development among the African economies. Among other things, it intends to promote the formation of FTAs and customs unions among regional groups within Africa that will eventually merge into an African Common Market.
African Growth and Opportunity Act	U.S. legislation enacted May 2000 providing tariff preferences to Africancountries that qualify. As of May 2007, 38 countries had qualified.
AFTA	ASEAN Free Trade Area
Agenda 21	A plan of action adopted at the Rio Summit to promote sustainable development.
Agent	1. One who acts on behalf of someone else. 2. In Principal-Agent Theory, the person whose job it is to act to the benefit of someone else (the principal), but who may require some incentive to do so.
Agglomeration	The phenomenon of economic activity congregating in or close to a single location, rather than being spread out uniformly over space.
Agglomeration economy	Any benefit that accrues to economic agents as a result of having large numbers of other agents geographically close to them, thus tending to lead toagglomeration. This is a basic feature of the New Economic Geography.
Aggregate	As an adjective or noun (with stress on the first syllable), this refers to the sum or total of multiple items. As a verb (with stress on the last syllable), this means to combine such items or add them up.
Aggregate demand	The total demand for a country's output, including demands for consumption, investment, government purchases, and net exports.
Aggregate measure of support	Variation of aggregate measurement of support.
Aggregate measurement of support	The measurement of subsidy to agriculture used by the WTO as the basis for commitments to reduce the subsidization of agricultural products. It includes the value of price supports and direct subsidies to specific products, as well as payments that are not product specific.
Aggregate production possibility frontier	The production possibility frontier, or curve obtained by adding the production possibilities of two or more countries or regions.
Aggregate supply	The total supply of a country's output, usually assumed to be an increasing function of its price level in the short run but independent of the price level in the long run.
Aggregate transformation curve	Aggregate production possibility frontier
Aggregation	The combining of two or more kinds of an economic entity into a single category. Data on international trade necessarily aggregate goods and servicesinto manageable groups. For macroeconomic purposes, all goods and servicesare usually aggregated into just one.
AGOA	African Growth and Opportunity Act
Agreement on Agriculture	See Agriculture Agreement.
Agreement on Textiles and Clothing	The 10-year transitional program of the WTO to phase out the quotas on textiles and apparel of the MFA.
Agricultural good	A good that is produced by agriculture. Contrasts with manufactured good.
Agriculture	Production that relies essentially on the growth and nurturing of plants and animals,especially for food, usually with land as an important input; farming. Contrasts with manufacturing.
Agriculture Agreement	The agreement within the WTO that commits member governments to improvemarket access and reduce trade-distorting subsidies in agriculture, starting with the process of tariffication.
Aid	Assistance provided by countries and by international institutions such as theWorld Bank to developing countries in the form of monetary grants, loans at low interest rates, in kind, or a combination of these.
ALADI	Asociación Latinoamericana de Integración (Spanish for Latin-American Integration Association)
ALCA	Acuerdo de Libre Comercio de las Américas (Spanish for Free Trade Area of the Americas )
ALCAN	Acuerdo de Libre Comercio de América del Norte (Spanish for North American Free Trade Agreement)
Allocation	An assignment of economic resources to uses. Thus, in general equilibrium, an assignment of factors to industries producing goods and services, together with the assignment of resulting final goods and services to consumers, within a country or throughout the world economy.
Allocativeefficiency	Refers to whether or not an allocation is efficient. A change from an allocation that is not efficient, to one that is, may be termed an "increase" in allocative efficiency.
Alternative Trade Adjustment Assistance	An addition to the US program of trade adjustment assistance, enacted in 2002, that provides wage insurance for a limited group of older workers.
Amber box	The category of subsidies in the WTO Agriculture Agreement the total value of which is to be reduced. It includes most domestic support measures that distort production and trade.
Amicus brief	A document filed in a legal proceeding by an interested party who is not directly part of the case. In the WTO an issue has been whether to permit dispute settlement panels to accept such submissions, especially from NGOs.
Amortization	The deduction of an expense in installments over a period of time, rather than all at once.
Amplitude	The extent of the up and down movements of a fluctuating economic variable; that is, the difference between the highest and lowest values of the variable. See destabilizing speculation.
AMS	Aggregate measure of support.
Analytical technique	See technique of analysis.
ANCERTA	Australia-New Zealand Closer Economic Relations Trade Agreement. AlsoANZCERTA and just CER.
Andean Community	An organization of five Andean countries -- Bolivia, Colombia, Ecuador, Peru, and Venezuela -- formed in 1997 out of the Andean Pact. It provides for economic and social integration, including regional trade liberalization and a common external tariff, as well as harmonization of other policies.
Andean Pact	The Cartagena Agreement of 1969, which provided for economic cooperation among a group of five Andean countries; predecessor to the Andean Community.
Andean Trade Promotion and Drug Eradication Act	US legislation enacted in 2002 authorizing the U.S. president to provide tariff preferences to countries in the Andean region in connection with the effort to curtail production of illegal drugs.
Anti-dumping duty	Tariff levied on dumped imports. The threat of an anti-dumping duty can deter imports, even when it has not been used, and anti-dumping law is therefore a form of nontariff barrier.
Anti-dumping suit	A complaint by a domestic producer that imports are being dumped, and the resulting investigation and, if dumping and injury are found, anti-dumping duty.
Anti-trust policy	U.S. term for competition policy.
AOA	Agreement on Agriculture
APC	Average propensity to consume
APEC	Asia-Pacific Economic Cooperation
apparel	Clothing. The apparel sector is important for trade because, as a very labor intensive sector, it is a likely source of comparative advantage for developing countries. See textiles and apparel.
Apparent consumption	Production plus imports minus exports, sometimes also adjusted for changes in inventories. The intention here is not to distinguish different uses for a good within the country, but only to infer the total that is used there for any purpose.
Appellate Body	The standing committee of the WTO that reviews decisions of dispute settlementpanels.
Applied tariff rate	The actual tariff rate in effect at a country's border.
Appreciate	See appreciation.
Appreciation	A rise in the value of a country's currency on the exchange market, relative either to a particular other currency or to a weighted average of other currencies. The currency is said to appreciate. Opposite of "depreciation."
Arbitrage	A combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage.
Arc elasticity	See elasticity
Argument for protection	A reason given (not necessarily a good one) for restricting imports by tariffsand/or NTBs.
Armingtonassumption	The assumption that internationally traded products are differentiated by country of origin. Due to Armington (1969) in an international macroeconomic context, but now a standard assumption of international CGE models, used to generate smaller and more realistic responses of trade to price changes than implied byhomogeneous products.
Armingtonelasticity	The elasticity of substitution between products of different countries.
Article XIX	The Safeguards Clause of the GATT.
Article XXIV	The article of the GATT that permits countries to form free trade areas andcustoms unions as exceptions to the MFN principle.
AS-AD	The model and/or diagram that determines the level of aggregate economic activity through the interaction of aggregate supply and aggregate demand.
ASEAN	Association of Southeast Asian Nations
ASEAN Free Trade Area	A free trade area announced in 1992 among the ASEAN countries that is in the process of being implemented.
Asia-Pacific Economic Cooperation	An organization of countries in the Asia-Pacific region, launched in 1989 and devoted to promoting open trade and practical economic cooperation. As of June 2007, APEC had 21 member countries.
Asian Crisis	A major financial crisis that began in Thailand in July 1997 and quickly spread to other East Asian countries.
Asian Development Bank	A multilateral institution based in Manila, Philippines, that provides financing for development needs in countries of the Asia-Pacific region. As of June 2007, ADB had 44 developing member countries.
Asian Tigers	The Four Tigers.
Asset	An item of property, such as land, capital, money, a share in ownership, or a claim on others for future payment, such as a bond or a bank deposit.
Asset approach	A theory of determination of the exchange rate that focuses on its role as the price of an asset. With high capital mobility, equilibrium requires that expectedreturns on comparable domestic and foreign assets be the same.
Asset bubble	See bubble.
Asset position	See net foreign asset position.
Assignment problem	How to use macroeconomic policies to achieve both internal balance andexternal balance; specifically, with only monetary and fiscal policies available under fixed exchange rates, which instrument should be "assigned" to which goal? Mundell (1962) showed that monetary policy should be assigned to external balance.
Assimilative capacity	The extent to which the environment can accommodate or tolerate pollutants.
Association Agreement	Early predecessor to the Europe Agreements but excluding provision for political dialogue.
Association of Natural Rubber Producing Countries	An inter-governmental organization, formed by natural rubber producing countries to promote the overall interests of the commodity. See international commodity agreement.
Association of Southeast Asian Nations	An organization of countries in southeast Asia, the purpose of which is to promote economic, social, and cultural development as well as peace and stability in the region. Starting with five member countries in 1967, it had expanded to ten members as of June 2007.
Asymmetric information	The failure of two parties to a transaction to have the same relevant information. Examples are buyers who know less about product quality than sellers, and lenders who know less about likely default than borrowers. Both are common in international markets.
Asymmetric shock	An exogenous change in macroeconomic conditions affecting differently the different parts of a country, or different countries of a region. Often mentioned as a source of difficulty for countries sharing a common currency, such as theEuro Zone.
At par	At equality. Two currencies are said to be "at par" if they are trading one-for-one. The significance is more psychological then economic, but the long decline of the Canadian dollar "below par" with the U.S. dollar, and the more recent variation of the euro between above and below par, also with the U.S. dollar, has been cause for concern.
At sight	See payment at sight.
ATAA	Alternative Trade Adjustment Assistance
ATC	Agreement on Textiles and Clothing
ATPDEA	Andean Trade Promotion and Drug Eradication Act
Australia-New Zealand Closer Economic Relations Trade Agreement	A free trade agreement formed in 1983 between Australia and New Zealand. Said to be one of the most comprehensive bilateral free trade agreements in the world, it was also the first to include trade in services. Identified as ANCERTA, ANZCERTA, and CER.
Autarkic	Associated with the situation of autarky.
Autarky	The situation of not engaging in international trade; self-sufficiency. (Not to be confused with "autarchy," which in at least some dictionaries is a political term rather than an economic one, and means absolute rule or power.)
Autarky price	Price in autarky; that is, the price of something within a country when it is not traded by that country. Relative autarky prices turn out to be the most theoretically robust (but empirically elusive) measures of comparative advantage.
Auto Pact	See Canada-US Auto Pact.
Automatic licensing	The licensing of imports or exports for which licenses are assured, for gathering information, or as a holdover from when licenses were not automatic. Depending on how the licensing is administered, automatic licensing can add to the bureaucratic and/or time cost of trade.
Automatic stabilizer	An institutional feature of an economy that dampens its macroeconomic fluctuations, e.g., an income tax, which acts like a tax increase in a boom and a tax cut in a recession.
Autonomous	Refers to an economic variable, magnitude, or entity that is caused independently of other variables that it may in turn influence; exogenous.
Autonomous consumption	That portion of consumption that is autonomous. For example, if theconsumption function has the form C=C0+cY, where C0 and c are parameters and Y is income, then C0 may be called autonomous consumption. An increase in autonomous consumption then represents an upward shift in the consumption function.
Autonomous transaction	In the balance of payments, a transaction that is not itself a result of actions taken officially to manage international payments; in contrast withaccommodating transaction.
Availability theory	A theory of the determinants of international trade, due to Kravis (1956), that says that countries import what they do not have available domestically and export what they do. The theory can be said to encompass explanations of trade that stress factor endowments, technological differences, and product differentiation.
Average cost	Total cost divided by output.
Average product	The average product of a factor in a firm or industry is its output divided by the amount of the factor employed.
Average propensity	The fraction of total income spent on an activity, such as consumption or imports. See propensity.
Average propensity to consume	The fraction of total (or perhaps disposable) income spent on consumption. Contrasts with marginal propensity to consume.
Average propensity to import	The fraction of total income spent on imports; thus the ratio of imports to GDP. Contrasts with marginal propensity to import.
Average tariff	An average of a country's tariff rates. This can be calculated in several ways, none of which are ideal for representing how protective the country's tariffs are. Most common is the trade-weighted average tariff, which under-representsprohibitive tariffs, since they get zero weight.