- 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.
Absolute advantage 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.
Absolute advantage 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 1. 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.
2. Roll-up
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 by price.
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 the GATT, 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 be short-term capital flows that respond to expectations of intervention.
Accumulation The acquisition of an increasing quantity of something. The accumulation of factors, especially capital, is a primary mechanism for economic growth.
ACE Automated Commercial Environment
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 2011, the group included 79 countries.
ACS Association of Caribbean States
ACTA Anti-Counterfeiting Trade Agreement
Actionable subsidy A subsidy that is not prohibited by the WTO but that member countries are permitted to levy countervailing duties against.
ACTPN Advisory Committee on Trade Policy and Negotiations
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
ADD Anti-dumping duty.
Adding-up problem The concern that if several developing countries expand their exports of the same good simultaneously, then the price of that good in world markets will fall worsening their terms of trade, perhaps lowering their export revenues and real incomes as a result.
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 extreme speculative 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 the base 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 cost The cost -- temporary but sometimes severe -- incurred by a person or firm in moving from one equilibrium to another. Many of the costs associated with trade liberalization are adjustment costs and are not accounted for in the usual measures of gains from trade.
Adjustment mechanism The theoretical process by which a market changes in disequilibrium, moving toward equilibrium if the process is stable. See Walrasian and Marshallian adjustment.
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, and safeguards 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 to international trade are the ITC and ITA.
Administrative entry procedure Formalities required to bring a product into a country. If these are unnecessarily difficult or time consuming, they constitute a nontariff barrier.
Administrative guidance In the context of trade policy, this usually refers an informal system of Japanese industrial policy, called gyosei-shido, where official pronouncements serve as guidelines for domestic businesses.
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.
Advisory Committee on Trade Policy and Negotiations The highest-level of several committees that advise USTR on trade policy and trade negotiations. This one includes representatives of private-sector businesses, trade associations, unions, state and local governments, and other organizations.
AEC 1. African Economic Community
2. ASEAN Economic Community
AEI American Enterprise Institute
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, as well as trade facilitation and technical assistance to African producers, to African countries that qualify. As of August 2012, 41 countries had been declared eligible.
AFTA ASEAN Free Trade Area
AG Comparable to "Inc" in the U.S. and Ltd in the U.K., this abbreviation for the German Aktiengesellschaft indicates a limited-liability corporation.
Agenda 21 A plan of action adopted at the Rio Summit to promote sustainable development.
Agent 1.An entity within the economy that makes economic decisions and engages on economic activity. Used to refer to individual consumers, households, and firms.
2. One who acts on behalf of someone else.
3. 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 to agglomeration. 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 services into manageable groups. For macroeconomic purposes, all goods and services are usually aggregated into just one.
AGOA African Growth and Opportunity Act
Agrarian reform Change in the policies affecting agriculture, usually including redistribution of land and sometimes also changes in other policies related to the inputs and outputs of agriculture.
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.
Agreement on Trade in Civil Aircraft A plurilateral agreement within the WTO eliminating duties on aircraft (except military) and aircraft parts. It includes disciplines on government procurement and inducements to purchase. As of August 2012 it had 31 signatories.
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 improve market 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 the World Bank to developing countries in the form of monetary grants, loans at low interest rates, in kind, or a combination of these.
AID USAID
Aid for trade The strategy of promoting economic development by helping countries to create or improve the infrastructure needed to facilitate international trade. This was one of the intended components of the Doha Round negotiations, and was institutionalized in a WTO work program on Aid-for-Trade in the Hong Kong Ministerial.
Airbus Airbus, a subsidiary of EADS, is a company producing aircraft in Europe. It was originally backed by a consortium of four companies from four countries (France, Germany, Spain, and the U.K.) and their governments. That backing has been one of the subjects of the Boeing-Airbus Dispute.
Aktiengesellschaft See AG.
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)
Alchian-Allen Theorem The proposition, due to Alchian and Allen (1964), that when the same absolute cost (as for transportation) is added to the prices of a low-price, low-quality good and a high-price, high-quality good, the relative demand for the latter will increase, since it's relative price falls. Summarized as "shipping the good apples out," the result has been confirmed in international trade by Hummels and Skiba (2004).
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.
Allocative efficiency 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.
ALOP Appropriate level of protection
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 the total value of which is to be reduced. The term is used primarily in the Agriculture Agreement and includes most domestic support measures that distort production and trade. Also called orange box. See box.
American Enterprise Institute American Enterprise Institute for Public Policy Research is a think tank doing research and writing on "issues of government, politics, economics, and social welfare," including international economics. Politically, it is somewhat right-of-center, providing a home for US Republicans when not in government. Contrasts with the Brookings Institution.
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. Also ANZCERTA and just CER.
Andean Community An organization currently (August 2012) of four Andean countries -- Bolivia, Colombia, Ecuador, and Peru, -- formed in 1997 out of the Andean Pact (Venezuela ceased membership in 2006). 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.
Annecy Round The second (1949) of the trade rounds conducted under the auspices of the GATT.
Ante See ex ante.
Anti-competitive Contributing to market power and associated behavior, especially including prices above those that would occur with perfect competition.
Anti-Counterfeiting Trade Agreement A plurilateral agreement signed October 1, 2011, to combat the "proliferation of commercial-scale counterfeiting and piracy" in the realm of intellectual property.
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, motivated by it's initial purpose of breaking up trusts.
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 settlement panels.
Appellation of origin A geographical indication.
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."
Appropriate level of protection In the SPS Agreement of the WTO, the acceptable level of risk to health that WTO members are entitled to pursue through SPS measures.
APT ASEAN Plus Three
Arab League Informal name of the League of Arab States.
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 tariffs and/or NTBs.
Armington assumption 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 by homogeneous products.
Armington elasticity The elasticity of substitution between products of different countries.
Arm's length price The of a product in a transaction between unrelated buyer and seller. Contrasts with transfer price.
Arrangement on Export Credits A "gentlemen's agreement" among governments of the OECD to limit the generosity of the terms and conditions of export credits that they provide.
Article A specific section of a negotiated agreement.
Article XIX The Safeguards Clause of the GATT.
Article XXIV The article of the GATT that permits countries to form free trade areas and customs 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+3 ASEAN Plus Three
ASEAN+6 ASEAN Plus Six
ASEAN Economic Community The goal of ASEAN to become more fully integrated economically by 2015, achieving a single market and other objectives.
ASEAN Free Trade Area A free trade area announced in 1992 among the ASEAN countries that is in the process of being implemented. It does not quite meet the the normal definition of an FTA, however, in that tariffs on imports from members are not necessarily zero, but rather given by the common effective preferential tariff.
ASEAN Plus Three The group of countries included in ASEAN augmented to also include China, Japan, and South Korea. Since 1997, this group has met periodically to pursue many areas of cooperation.
ASEAN Plus Six The group of countries included in ASEAN augmented to also include China, Japan, South Korea, India, Australia, and New Zealand. This group has met occasionally to pursue cooperation.
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 August 2012, 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 August 2012, ADB reported having 67 member countries, of which 48 were within Asia.
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 expected returns 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 and external 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.
Assist A service or other input to production provided by an importer to the foreign exporter, the value of which must be added to the invoice price in calculating its value for customs purposes.
Association Agreement Early predecessor to the Europe Agreements but excluding provision for political dialogue.
Association of Caribbean States A group of 25 countries of the Caribbean that signed a convention in 1994 to foster "consultation, cooperation and concerted action."
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 August 2012.
ASWP Any safe world port. Meaning that the product offered with this designation will be delivered to essentially anywhere in the world.
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 the Euro 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
Atlantic Council An organization based in Washington, DC, that seeks to promote leadership and engagement in international affairs.
Atlas Method The method used by the World Bank for comparison of national incomes (GNI or GNP) across countries. It essentially uses nominal exchange rates averaged over three years with adjustment for inflation at home and abroad. Contrasts with the PPP method.
ATPDEA Andean Trade Promotion and Drug Eradication Act
Attrition The decline in employment in a firm or industry that occurs naturally due to workers' quitting or retiring. The pain of shrinking an industry due, say, to trade liberalization is minimized if it can be accomplished through attrition. In the UK, attrition is called natural wastage.
Auction quota An import quota that is allocated by selling the rights to the highest bidder. The auction price then provides a market-determined measure of the quota's ad valorem equivalent.
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 equilibrium In a model of an economy, the configuration of prices and quantities at which quantities supplied and demanded within the economy are equal, so that no trade would take place even if it were permitted.
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.
Authors' rights Copyright (term used primarily in Latin America)
Auto Pact See Canada-US Auto Pact.
Automated Commercial Environment ACE is an online system developed by U.S. Customs and Border Protection to process international trade.
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.
Automaticity The feature of the WTO dispute settlement mechanism whereby panel reports are adopted (subject to review by the Appellate Body) automatically unless blocked by a unanimous vote of the membership. Under the prior GATT, unanimity was required to adopt, rather than reject, panel reports.
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 the consumption 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 with accommodating 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.
AVE Ad valorem equivalent
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-represents prohibitive tariffs, since they get zero weight.
Average tax rate The amount paid as tax as a fraction of the amount being taxed. In the case of an income tax, the total amount of tax as a fraction of total income. Contrasts with marginal tax rate.