| De minimis | A legal term for an amount that is small enough to be ignored, too small to be taken seriously. Used to restrict legal provisions, including laws regarding international trade, to amounts of activity or trade that are not trivially small. |
| Deadweight loss | The net loss in economic welfare that is caused by a tariff or other source of distortion, defined as the total losses to those who lose, minus the total gains to those who gain. Usually identified in a supply-and-demand diagram in terms of change in consumer and producer surplus together with government revenue. The net of these appears as one or two welfare triangles. |
| Debase | To reduce the value of. Classically, a currency is debased if its value in terms of gold or other precious metal is reduced. |
| Debenture | 1. A debt that is not backed by collateral, but only by the credit and good faith of the borrower.
2. A certificate issued by customs authorities entitling an exporter of imported goods to be paid back duties that have been paid when they were imported. Such a refund is called a drawback. |
| Debit | Recorded as negative (-) in the balance of payments, any transaction that gives rise to a payment out of the country, such as an import, the purchase of an asset (including official reserves), or lending to foreigners. Opposite of credit. |
| Debt | The amount that is owed, as a result of previous borrowing. A country's debt may refer to the debt of its government or to that of the country as a whole. |
| Debt burden | The debt of a country, when large enough that servicing it has become difficult. |
| Debt cancellation | The most extreme form of debt relief, in which a country's debts are completely forgiven, so that no repayment of interest or principal is required. |
| Debt crisis | A situation in which a country, usually a developing country, finds itself unable to service its debts. |
| Debt/equity swap | An exchange of debt for equity, in which a lender is given a share of ownership to replace a loan. Used as a method of resolving debt crises. |
| Debt overhang | A situation in which the external debt of a country is larger than it will be able to repay. Often due to having borrowed in foreign currency and then had its own currency depreciate. |
| Debt relief | Any arrangement intended to reduce the burden of debt on a country, usually including forgiveness of part or all of what is owed to creditors who may include private banks and other entities, government, or international financial institutions. |
| Debt service | The payments made by a borrower on its debt, usually including both interest payments and partial repayment of principal. |
| Debt sustainability | The ability of a debtor country to service its debt on a continuing basis and not go into default. After a debt crisis, sustainability may be restored through debt rescheduling. |
| Debtor nation | A country whose assets owned abroad are worth less than the assets within the country that are owned by foreigners. Contrasts with creditor nation. |
| Decile | One of ten segments of a distribution that has been divided into tenths. For example, the second-from-the-bottom decile of an income distribution is those whose income exceeds the incomes of from 10% to 20% of the population. |
| Decouple | Refers to the provision of government support to an enterprise, usually a farm, in a manner that does not provide an incentive to increase production. Farm subsidies that are decoupled are included in the green box and are therefore permitted by the WTO. |
| Decreasing cost | Average cost that declines as output increases, due to increasing returns to scale. |
| Decreasing returns to scale | A property of a production function such that changing all inputs by the same proportion changes output less than in proportion. Example: a function homogeneous of degree less than one. Also called simply decreasing returns. Not to be confused with diminishing returns, which refers to increasing some inputs while holding other inputs fixed. Contrasts with increasing returns and constant returns. |
| Deep integration | Refers to economic integration that goes well beyond removal of formal barriers to trade and includes various ways of reducing the international burden of differing national regulations, such as mutual recognition and harmonization. Contrasts with shallow integration. |
| Default | Failure to repay a loan. International loans by governments and private agents lack mechanisms to deal with default, comparable to the legal mechanisms that exist within countries. |
| Deficiency Payment | Payment to a producer of an amount equal to the difference between a guaranteed price and the market price, with the latter often determined on the world market. Thus a form of subsidy to production. |
| Deficit | 1. In the balance of payments, or in any category of international transactions within it, the deficit is the sum of debits minus the sum of credits, or the negative of the surplus.
2. In the government budget, the deficit is the excess of government expenditures over receipts from taxes. |
| Deficit financing | 1. The method used by a government to finance its budget deficit, that is, to cover the difference between its tax receipts and its expenditures. The main choices are to issue bonds or to print money.
2. The assumption that a change in government spending or taxes will be financed by a change in the government budget deficit, rather than by an accommodating additional change in spending or taxes to keep the budget balanced. Example: a "deficit-financed increase in government purchases." |
| Deflation | A fall in the general level of prices. Unlikely unless the rate of inflation is already low, it may then be due either to a surge in productivity or, less favorably, to a recession. |
| Deflator | The ratio of a nominal magnitude to its real counterpart. Usually refers, as with the GDP deflator, when the real magnitude has been constructed from underlying data and not by simply deflating the nominal magnitude by a corresponding price index, in which case the deflator itself may be used as though it were a price index. |
| Deflection | See trade deflection. |
| Degressive | Declining with income or over time. A degressive income tax takes a smaller fraction of higher incomes. Degressivity in trade policy might be a tariff the ad valoren size of which is scheduled to decline over time, or a quota that is scheduled to expand faster than demand for imports. |
| De-industrialization | A decline over time in the share of manufacturing in an economy, usually accompanied by growth in the share of services. Typically accompanied by an increase in manufactured imports, it may raise concern that the country is losing valuable economic activity to others. |
| Delocalization | Another term for fragmentation. Used by Leamer (1996). |
| Demand | 1. The act of offering to buy a product.
2. The quantity offered to buy.
3. The quantities offered to buy at various prices; the demand curve. |
| Demand curve | The graph of quantity demanded as a function of price, normally downward sloping, straight or curved, and drawn with quantity on the horizontal axis and price on the vertical axis. Demand curves for imports and for foreign exchange usually have the same qualitative properties as demand curves for goods, but for somewhat different reasons. |
| Demand deposit | A bank deposit that can be withdrawn "on demand." The term usually refers only to checking accounts, even though depositors in many other kinds of accounts may be able to write checks and thus regard their deposits as readily available. |
| Demand elasticity | Normally the price elasticity of demand. References to other elasticities of demand, such as the income elasticity are normally explicit. See import demand elasticity. |
| Demand function | The mathematical function explaining the quantity demanded in terms of its various determinants, including income and price; thus the algebraic representation of the demand curve. |
| Demand price | The price at which a given quantity is demanded; thus the demand curve viewed from the perspective of price as a function of quantity. |
| Demand schedule | A list of prices and corresponding quantities demanded, or the graph of that information. Thus a demand curve. |
| Demographic transition | The change that typically takes place, as a country develops, in the birth and death rates of its population, both of which tend eventually to fall as per capita income rises. |
| Dependency Theory | The theory that less developed countries are poor because they allow themselves to be exploited by the developed countries through international trade and investment. |
| Deposit | An amount of money placed with a bank for safekeeping, convenience, and/or to earn interest. |
| Depreciate | See depreciation. |
| Depreciation | 1. A fall 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 depreciate. Opposite of "appreciation."
2. The decline in value or usefulness of a piece of capital over time, and/or with use. |
| Deregulation | The lessening or complete removal of government regulations on an industry, especially concerning the price that firms are allowed to charge and leaving price to be determined by market forces. |
| Derived demand | Demand that arises or is defined indirectly from some other demand or underlying behavior; e.g., demand for foreign currency is derived from demand for foreign goods, bonds, etc., while demand for import of a homogeneous good is derived from domestic demand and supply. |
| Derogation | As used in the trade literature, this seems to mean a departure from the established rules, as when a country's policies are said to constitute a derogation from the GATT. |
| Destabilizing speculation | Speculation that increases the movements of the price in the market where the speculation occurs. Movement may be defined by amplitude, frequency, or some other measure. See stabilizing speculation. |
| Destination principle | The principle in international taxation that value added taxes be kept only by the country where the taxed product is being sold. Under the destination principle, value added taxes are collected on imports and rebated on exports. Contrasts with the origin principle. |
| Devaluation | 1. Depreciation.
2. A fall in the value of a currency that has been pegged, either because of an announced reduction in the par value of the currency with the peg continuing, or because the pegged rate is abandoned and the floating rate declines.
3. A fall in the value of a currency in terms of gold or silver, meaningful only under some form of gold standard or silver standard. |
| Develop | To experience a sustained and substantial increase in per capita income; thus to undergo economic development. |
| Developed country | A country whose per capita income is high by world standards. |
| Developing country | A country whose per capita income is low by world standards. Same as less developed country. As usually used, it does not necessarily connote that the country's income is rising. |
| Development | Economic development |
| Development bank | A multilateral institution that provides financing for development needs of a regional group of countries. Examples include the African, Asian, and Inter-American Development Banks. |
| Development finance | Provision of credit to a developing country to permit it to undertake development projects that it could not otherwise afford. |
| Development project | A project intended to increase a developing country's ability to produce in the future. Such projects are most commonly additions to the country's capital stock, but they may involve improvements in infrastructure, educational facilities, discovery or development of natural resources, etc. |
| DFI | Direct Foreign Investment |
| DFS Model | One of the continuum-of-goods models of Dornbusch, Fischer, and Samuelson (1977, 1980). |
| Differential treatment | See special and differential treatment. |
| Differentiated product | 1. A firm's product that is not identical to products of other firms in the same industry. Contrasts with homogeneous product.
2. Sometimes applied to products produced by a country, even though there are many firms within the country whose products are the same, if buyers distinguish products based on country of origin. This is called the Armington assumption. |
| Dillon Round | The fifth round of multilateral trade negotiations that was held under GATT auspices, commencing 1960 and completed 1961. It was the first to be given a name, after C. Douglas Dillon, U.S. Undersecretary of State under Eisenhower and Treasury Secretary under Kennedy. |
| Diminishing returns | The fall in the marginal product of a factor or factors that eventually occurs as input of that factor rises, holding the input of at least one other factor fixed, according to the Law of Diminishing Returns. |
| Direct factor content | A measure of factor content that includes only the factors used in the last stage of production, ignoring factors used in producing intermediate inputs. Contrasts with direct-plus-indirect factor content. |
| Direct foreign investment | Foreign direct investment |
| Direction of trade | Refers to the particular countries and kinds of countries toward which a country's exports are sent, and from which its imports are brought, in contrast to the commodity composition of its exports and imports. Thus the pattern of its bilateral trade. |
| Direct-plus-indirect factor content | A measure of factor content that includes factors used in producing intermediate inputs, factors used in producing intermediate inputs to the intermediate inputs, and so forth. That is, it includes all primary factors that contributed however indirectly to production of the good. Contrasts with direct factor content. |
| Directly Unproductive Profit-Seeking Activities | Activities that have no direct productive purpose (neither increasing consumer utility nor contributing to production of a good or service that would increase utility) and are motivated by the desire to make profit, typically from market distortions created by government policies. Examples are rent seeking and revenue seeking. Term coined by Bhagwati (1982). |
| Director General | Title given to the persons who head certain international organizations, including the WTO. |
| Dirigiste | Centrally planned; that is, under the direction of a central authority, normally the government. Contrasts with decentralized, or a system in which economic decisions are determined by market forces in a market economy. |
| Dirty float | Same as managed float. |
| Disarticulation | The absence of linkage among sectors of an economy, so that growth in some does not spill over into improved productivity and well being in others. |
| DISC | Domestic International Sales Corporation |
| Discount | 1. Any reduction in price or value, especially when below a stated or normal price.
2. To buy or sell commercial paper at a price below face value to account for interest to accrue before maturity. |
| Discount rate | 1. The rate, per year, at which future values are diminished to make them comparable to values in the present. Can be either subjective (reflecting personal time preference) or objective (a market interest rate).
2. The interest rate that the Fed charges commercial banks for very short-term loans of reserves. One of the tools of monetary policy. |
| Discrete time | The division of time into indivisible units. In economic models, these units represent periods, such as days, quarters, or years. |
| Discretionary licensing | See licensing. |
| Discriminatory tariff | A higher tariff against one source of imports than against another. Except in special circumstances, such as anti-dumping duties, this is a violation of MFN and is prohibited by the WTO against other members. |
| Diseconomies of scale | Decreasing returns to scale. |
| Disequilibrium | 1. Inequality of supply and demand.
2. An untenable state of an economic system, from which it may be expected to change. |
| Disintegration | Another term for fragmentation. Used by Feenstra (1998). |
| Disinvest | 1. To allow a stock of capital to become smaller over time, either by selling parts of it or by allowing it to depreciate without replacing it.
2. To reduce inventories, either absolutely or by more than any increase in plant and equipment.
3. To sell all or a portion of a portfolio of financial assets. |
| Disparity | Inequality, usually income disparity. |
| Disposable income | Income minus taxes. More accurately, income minus direct taxes plus transfer payments; that is, the income available to be spent (including on imports) and saved. |
| Dispute settlement | In the GATT, the adjudication of disputes among parties. In the WTO this is done by the dispute settlement mechanism. |
| Dispute Settlement Body | The entity within the WTO that formally deals with disputes between members. It consists of all WTO members meeting together to consider reports of panels and the Appellate Body. |
| Dispute settlement mechanism | The procedure by which the WTO settles disputes among members, primarily by means of a three-person panel that hears the case and issues a report, subject to review by the Appellate Body. |
| Dissipate rent | To use up, in real resources, the full value of the economic rents that are being sought by rent seeking. |
| Distortion | Any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own. Includes taxes and subsidies, tariffs and NTBs, externalities, incomplete information, and imperfect competition. |
| Distribution | 1. The productive activity of getting produced goods from the factory into the hands of consumers.
2. The amounts of income or wealth in the hands of different portions of a population. |
| Diversification cone | For given prices in the Heckscher-Ohlin Model, a set of factor endowment combinations that are consistent with producing the same set of goods and having the same factor prices. Such a set has the form of a cone. Concept first used by McKenzie (1955). |
| Diversified portfolio | A portfolio that includes a variety of assets whose prices are not likely all to change together. In international economics, this usually means holding assets denominated in different currencies. |
| Diversify | To produce more than one thing. In the Heckscher-Ohlin Model with two goods, it means to produce both of them. With more than two goods, it may mean to produce two, or it may mean to produce all of the goods that are possible. |
| Diversion | See trade diversion. |
| Dividend | The amount paid each quarter by a corporation to its stockholders for each share of stock. |
| Division of labor | Splitting a production process across multiple workers, each performing a different task repeatedly rather than having a single worker perform all tasks. Adam Smith (1776) pointed out the increased productivity that can result, as well as the potential for gains from trade when division of labor takes place across countries. |
| Dixit-Stiglitz function | Really just a symmetric CES function, the innovation of Dixit and Stiglitz (1977) was to allow the number of arguments to be variable. Used originally as a utility function, with elasticity of substitution greater than one the function displays a preference for variety. Used as a component of a production function, the same property implies that costs fall with variety. |
| Dixit-Stiglitz utility | The Dixit-Stiglitz function used as a utility function. |
| Doha Declaration | The document agreed upon by the trade ministers of the member countries of the WTO at the Doha Ministerial meeting. It initiates negotiations on a range of some 21 subjects. A distinctive feature is the emphasis placed on the interests of developing countries. |
| Doha Ministerial | The WTO ministerial meeting held in Doha, Qatar, in November 2001, at which it was agreed to begin a new round of multilateral trade negotiations, the Doha Round. |
| Doha Round | The round of multilateral trade negotiations begun January 2002 as a result of agreement at the Doha Ministerial. Also called the Doha Development Round or the Doha Development Agenda. |
| Dollar standard | An international financial system in which the U.S. dollar is used by most countries as the primary reserve asset, in contrast to the gold standard in which gold played this role. |
| Dollarization | The official adoption by a country other than the United States of the U.S. dollar as its local currency. |
| Domestic | From or in one's own country. A domestic producer is one that produces inside the home country. A domestic price is the price inside the home country. Opposite of "foreign" or "world." |
| Domestic content protection | Use of trade policies such as domestic content requirements to increase the portion of a product's value that is provided by domestic factors of production, either in direct production or through produced inputs. |
| Domestic content requirement | A requirement that goods sold in a country contain a certain minimum of domestic value added. |
| Domestic credit | Credit extended by a country's central bank to domestic borrowers, including the government and commercial banks. In the United States, the largest component by far is the Fed's holdings of U.S. government bonds, but it also makes some short-term loans to banks to use as their reserves. |
| Domestic distortions argument for protection | See second best argument. |
| Domestic International Sales Corporation | A type of U.S. corporation, authorized in 1971, with income primarily from exports. Usually wholly owned U.S. subsidiaries, DISCs had special treatment in borrowing or taxation. A 1976 GATT case found against the U.S., which reached a compromise settlement with the EC in 1981. DISC was replaced in 1984 by foreign sales corporations. |
| Domestic law | The laws and legal system of a country, which may be constrained by international obligations such as WTO membership. Sometimes a domestic law is inconsistent with such obligations and must be changed. This may be seen as a threat to the country's sovereignty. |
| Domestic market | The market within a country's own borders. Dumping, for example, may be defined by comparing the price charged for export with the price charged on the domestic market, i.e., to buyers within the exporting country. |
| Domestic resource cost | A measure, in terms of real resources, of the opportunity cost of producing or saving foreign exchange. It is an ex ante measure of comparative advantage, used to evaluate projects and policies. The term was introduced to the economics literature by Bruno (1963, 1972). |
| Domestic support | A policy that assists domestic industry, including a subsidy to production, payment not to produce, price support, and other means of increasing the income of producers. |
| Domestic trade | Commerce within a country; wholesale and retail trade. |
| Downstream dumping | The export of a good whose cost is reduced by access to a domestically produced intermediate input that is sold below cost. This is not (yet) eligible under any anti-dumping statute for an anti-dumping duty. |
| Drawback | Rebate of import duties when the imported good is re-exported or used as input to the production of an exported good. |
| DRC | Domestic resource cost |
| DSM | Dispute settlement mechanism |
| DUKS | See baffling pigs. |
| Dummy | In a regression analysis, a dummy (or dummy variable) is used to capture an explanatory variable that is either on (with a value of one) or off (zero). For example, in a gravity equation, the coefficient on a common-language dummy would measure the effect on trade flow between two countries of their sharing a common language. |
| Dumping | Export price that is "unfairly low," defined as either below the home market price (normal value) (hence price discrimination) or below cost. With the rare exception of successful predatory dumping, dumping is economically beneficial to the importing country as a whole (though harmful to competing producers) and often represents normal business practice. |
| Dumping margin | In a case of dumping, the difference between the "fair price" and the price charged for export. Used as the basis for setting anti-dumping duties. |
| Duopoly | An oligopoly with two firms. |
| DUP Activities | Directly Unproductive Profit-Seeking Activities |
| Durable good | A good that can continue to be used over an extended period of time. |
| Dutch disease | The adverse effect on a country's other industries that occurs when one industry substantially expands its exports, causing a real appreciation of the country's currency. Named after the effects of natural gas discoveries in the Netherlands, and most commonly applied to effects of exports in natural resource extractive industries on manufacturing. |
| Dutiable imports | Imports on which a positive duty, or tariff, is levied. (The term seems like it ought to include imports on which the duty is zero but which a government is somehow free, or able, to levy a positive duty. That does not seem to be the way the term is used, however.) |
| Duty | Tax. That is, an import duty is a tariff. |
| Duty drawback | See drawback. |
| Duty-free | Without tariff, usually applied to imports on which normally a tariff would be charged, but that for some reason are exempt. Travelers, for example, may be permitted to import a certain amount duty-free. |
| Dynamic comparative advantage | A changing pattern of comparative advantage over time due to changes in factor endowments or technology. |
| Dynamic economies of scale | A form of increasing returns to scale in which average cost declines over time as producers accumulate experience, so that average product rises with total output of the firm or industry accumulated over time. See learning by doing, infant industry protection. |
| Dynamic effects | Refers to certain poorly understood effects of trade and trade liberalization, including both multilateral and preferential trade agreements, that extend beyond the static gains from trade. Such dynamic effects are thought to make the gains from trade substantially larger than in the static model. |
| Dynamic gains from trade | The hoped-for benefits from trade that accrue over time, in addition to the conventional static gains from trade of trade theory. Sources of these gains are not well understood or documented, although there exists a variety of possible theoretical reasons for them and some empirical evidence that countries have benefited more than the static gains alone would suggest. |
| Dynamic model | Any model with an explicit time dimension. To be meaningfully dynamic, however, it should include variables and behavior that, at one time, depend on variables or behavior at another time. Models may be formulated in discrete time or in continuous time. Contrasts with a static model. |
| Doha Ministerial | The WTO ministerial meeting held in Doha, Qatar, in November 2001, at which it was agreed to begin a new round of multilateral trade negotiations, the Doha Round. |
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