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C.D. Howe Institute A Canadian think tank that pursues independent research with the objective of raising living standards and "fostering economically sound public policies."
CABEI Central American Bank for Economic Integration
Cabotage 1. Navigation and trade by ship along a coast, especially between ports within a country. Since the 1920 Jones Act, this has been restricted in the U.S. to domestic shipping companies.
2. Air transportation within a country. Often restricted to domestic carriers, in an example of barriers to trade in services.
CACM Central American Common Market.
CAEMC Central African Economic and Monetary Community.
CAF 1. Charities Aid Foundation
2. Corporacion Andina de Fomento.
CAFTA U.S.-Central American Free Trade Agreement, also called CAFTA-DR.
Cairnes-Haberler Model A trade model in which all factors of production are assumed immobile between industries. See specific factors model.
Cairns Group A group of agricultural exporting countries, currently (March 2020) numbering 19, that was formed in 1986 to act as a counterweight especially to the EU in international negotiations on agriculture. Named after the city in Australia where the group first met, in August 1986.
Calibration In economic models, particularly computable general equilibrium models, this refers to the assignment of values to parameters so as to align the model with real-world data.
California effect The possibility that international trade and FDI will induce countries with low environmental standards to raise them closer to those in high-standards countries. Due to Vogel (1995), who recalled California repeatedly raising environmental standards to be followed by other states and the nation.
Call option A financial contract that permits (but does not require) the buyer of the option to buy a commodity or financial instrument (perhaps a currency) from the seller of the option at a specified price and during a specified time period. Also just called a "call." Contrasts with a put option.
CAN Comunidad Andina (Spanish for Andean Community)
Canada Border Services Agency An agency of the government of Canada that, among other duties, determines whether imports have been dumped or subsidized and may, if determined by the Canadian International Trade Tribunal to be also causing injury, be subject to anti-dumping duty or countervailing duty.
Canada-EU Trade Agreement Comprehensive Economic and Trade Agreement.
Canada-US Auto Pact The "Canada-United States Automotive Products Agreement of 1965" which reduced trade barriers on specified trade between Canada and the United States in automobiles and original-equipment auto parts.
Canada-US Free Trade Agreement A free trade agreement between Canada and the United States signed in 1989 and superseded by the NAFTA in 1994.
Canadian International Trade Tribunal An "independent quasi-judicial body" of the government of Canada among whose duties are determination of injury in anti-dumping, countervailing duty, and safeguard cases. The first two of these also require action by the Canada Border Services Agency
Cancún Ministerial The 5th ministerial meeting of the WTO held in Cancún, Mexico, September 10-14, 2003 as part of the Doha Round. The meeting failed to reach agreement on a framework text for the round because of disagreements between the US/EU and the developing-country G-20, mostly over agricultural subsidies.
Canonical model of currency crises This term has been used to refer to the model that Krugman (1979b) presented of a currency crisis that results when domestic policy is pursued in a manner inconsistent with a pegged exchange rate. [Origin]
CAP Common Agricultural Policy
Cap and trade A mechanism of regulation the sets upper limits (caps) on levels of action or production for individual entities and then allows them to form a market to exchange (trade) these rights. Used primarily for environmental regulation, these arrangements can function within or across economic units, including countries.
Capacity building The term used repeatedly in the Doha Declaration referring to the assistance to be provided to developing countries in establishing and administering their trade policies, conducting analysis, and identifying their interests in trade negotiations.
Capital 1. The plant and equipment used in production.
2. One of the main primary factors, the availability of which contributes to the productivity of labor, comparative advantage, and the pattern of international trade.
3. A stock of financial assets.
4. Of a bank, its assets minus its liabilities.
Capital abundant A country is capital abundant if its endowment of capital relative to other factors is large compared to other countries. Relative capital abundance can be defined by either the quantity definition or the price definition.
Capital account 1. (Current definition) Since sometime in the 1990s, "capital account" refers to a minor component of international transactions, involving unilateral transfers of ownership of property. The common definition, below, describes what is now called the financial account.
2. (Common definition) A country's international transactions arising from changes in holdings of real and financial capital assets (but not income on them, which is in the current account). Includes FDI, plus changes in private and official holdings of stocks, bonds, loans, bank accounts, and currencies.
3. (Bretton-Woods definition) Same as common definition except excluding official reserve transactions. This definition was used under the Bretton Woods System of pegged exchange rates, but is less meaningful under floating exchange rates.
Capital account balance Balance on capital account
Capital account deficit Debits minus credits on capital account. See deficit.
Capital account surplus Credits minus debits on capital account. Same as balance on capital account. See surplus.
Capital accumulation Addition to the stock of capital.
Capital adequacy ratio The ratio of a bank's capital to its risk-weighted credit exposure (liabilities). International standards, such as Basel III recommend a minimum for this ratio, intended to permit banks to absorb losses without becoming insolvent, in order to protect depositors.
Capital augmenting Said of a technological change or technological difference if one production function produces the same as if it were the other, but with a larger quantity of capital. Same as factor augmenting with capital the augmented factor. Also called Solow neutral.
Capital consumption allowance The name used in the National Income and Product Accounts for depreciation of capital.
Capital control Any policy intended to restrict the free movement of capital, especially financial capital, into or out of a country.
Capital density The amount of capital per unit land area in a country. Sometimes used for just particular types of capital, such as housing capital or human capital.
Capital depreciation See depreciation.
Capital duty A tax on the value of a newly formed company, or one that has newly been transfered to a different taxing jurisdiction.
Capital flight Large financial capital outflows from a country prompted by fear of default or, especially, by fear of devaluation.
Capital flow International capital movement.
Capital formation Capital accumulation
Capital gain The increase in value that the owner of an asset experiences when the price of the asset rises, including when the currency in which the asset is denominated appreciates. Contrasts with capital loss.
Capital good A good, such as a machine, that, once in place, becomes part of the capital stock.
Capital inflow A net flow of capital, real and/or financial, into a country, in the form of increased purchases of domestic assets by foreigners and/or reduced holdings of foreign assets by domestic residents. Recorded as positive, or a credit, in the balance on capital account.
Capital infusion An increase in financial capital provided to a bank, corporation, or other entity from outside.
Capital intensity A measure of the relative use of capital, compared to other factors such as labor, in a production process. Often measured by the ratio of capital to labor, or by the share of capital in factor payments.
Capital intensive Describing an industry or sector of the economy that relies relatively heavily on inputs of capital, usually relative to labor, compared to other industries or sectors. See factor intensity.
Capital-labor ratio The ratio of the quantity of capital (usually only physical) to the quantity of labor, usually as employed in a particular industry, but sometimes referring to the entire factor endowment of a country.
Capital loss The decrease in value that the owner of an asset experiences when the price of the asset falls, including when the currency in which the asset is denominated depreciates. Contrasts with capital gain.
Capital market A broad term, encompassing all the many mechanisms by which saving can be conveyed to those who wish to use it for investment. Most obviously, it includes the markets for stocks and bonds.
Capital market imperfection Anything that interferes with the ability of economic agents to borrow and lend as much as they wish at a rate of interest that truly reflects probability of repayment. A common source of imperfection is asymmetric information.
Capital mobility The ability of capital to move internationally. The degree of capital mobility depends on government policies restricting or taxing capital inflows and/or outflows, plus the risk that investors in one country associate with assets in another.
Capital movement Capital inflow and/or outflow.
Capital outflow A net flow of capital, real and/or financial, out of a country, in the form of reduced holdings of domestic assets by foreigners and/or increased holdings of foreign assets by domestic residents. Recorded as negative, or a debit, in the balance on capital account.
Capital output ratio The ratio of the quantity of capital to the quantity of output, usually in the one-sector economy of a simple growth model.
Capital-saving A technological change or technological difference that is biased in favor of using less capital, compared to some definition of neutrality.
Capital scarce A country is capital scarce if its endowment of capital relative to another factor, usually labor, is small compared to other countries. Relative capital scarcity can be defined by either the quantity definition or the price definition.
Capital stock The total amount of physical capital that has been accumulated, usually in a country.
Capital-using A technological change or technological difference that is biased in favor of using more capital, compared to some definition of neutrality.
Capitalism An economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism.
Capitalist 1. An owner (or sometimes only a manager) of capital.
2. Associated or identified with capitalism.
Car Wash Lava Jato
Carbon leakage The possibility that environmental policies such as a carbon tariff that are intended to reduce carbon emissions in one country may cause production to move to other countries with less stringent policies and thus increase carbon emissions there.
Carbon tariff A tariff levied on the basis of carbon dioxide that an import's production emits into the atmosphere. The purposes are to treat imports equally with domestic goods that are subject to costly environmental regulation or tax, and also to motivate other countries to use such environmental policies.
Caribbean Basin Initiative A non-reciprocal preferential trading arrangement originally enacted in 1983 by the United States, providing duty-free access to a group of Caribbean countries for selected products. It was renewed and extended in 2000 and currently (March 2020) has 17 beneficiary countries.
Caribbean Community The Caribbean Community and Common Market was formed among four Caribbean countries in 1973 and had 15 members as of March 2020. Its purpose is the promotion of economic integration among the member countries and coordination of foreign policies.
Caribbean Development Bank A financial institution whose members are primarily the countries of the Caribbean region and whose purpose is to foster economic development in the region.
CARIBCAN A non-reciprocal commitment by Canada to provide duty-free access to exports of most products from 18 Commonwealth Caribbean countries and territories.
CARICOM Caribbean Community and Common Market
CARICOM Single Market and Economy The economic objectives of the CARICOM group, which include becoming a common market.
CARIFORUM The Caribbean sub-group of the ACP countries that functions within the framework of the Cotonou Agreement and the EU. As of March 2020 it had 15 members.
CARIFORUM-EC EPA An economic partnership agreement between the European Community and the CARIFORUM countries, signed in 2008.
Carousel approach A method of trade retaliation, especially when authorized by a WTO dispute settlement finding, in which tariffs are levied on a changing list of the target country's exports, in order to maximize pressure on its government. Required of USTR by the Trade and Development Act of 2000. [Origin]
Carriage of Goods by Sea Act U.S. legislation governing ocean transport of cargo.
Carrier A firm that provides transportation of persons or goods.
Carry trade The practice of borrowing in the currency of a country where interest rates are low and lending the proceeds in the currency of a country where interest rates are higher, to profit from the difference. Success depends on exchange rates remaining relatively constant. Also known as uncovered interest arbitrage.
Carry-along trade Goods that a firm exports that it did not itself produce. Practice identified by, and named by, Bernard et al. (2012), who observe that much of trade takes this form.
Cartagena Agreement The 1969 agreement, also known as the Andean Pact, that led ultimately to the Andean Community.
Cartagena Protocal The Cartagena Protocal on Biosafety to the Convention on Biological Diversity is a 2003 international agreement for "the safe handling, transport and use of living modified organisms (LMOs) resulting from modern biotechnology."
Cartel A group of firms or countries that seeks to raise the price of a good by restricting its supply and/or by price fixing. The term is usually used for international groups, especially involving state-owned firms and/or governments.
Cascading tariffs Same as tariff escalation.
Cash-and-carry A provision of the neutrality acts of 1937 and 1939 permitting the export first of raw materials, and then all trade, with belligerent nations if they were paid for immediately and carried on non-American ships. This was replaced in 1941 by the Lend-Lease Act.
Cato Institute A US think tank "dedicated to the principles of individual liberty, limited government, free markets and peace." It is a strong promoter of free trade.
CBA Cost-benefit analysis
CBD Convention on Biological Diversity
CBI Caribbean Basin Initiative
CBP United States Customs and Border Protection
CBSA Canada Border Services Agency
CCCN Customs Cooperation Council Nomenclature
CCT Conditional cash transfer
CDB Caribbean Development Bank
CDF Cumulative distribution function
Cecchini Report A 1988 report by a group of experts, chaired by Paolo Cecchini, examining the benefits and costs of creating a single market in Europe, in accordance with provisions of the Treaty of Rome.
CED Comprehensive Economic Dialogue
CEEC Central and Eastern European countries.
CEFTA Central European Free Trade Agreement.
Ceiling See price ceiling.
Celtic Tiger Name for Ireland during its period of very rapid economic growth, which ended with the financial crisis of 2008. Name was prompted by analogy with the Asian Tigers.
Cent Subunit of any of several currencies, including the dollar, euro, krona, and rand.
Centavo 1. Subunit of a peso.
2. Subunit of the Brazilian real.
Center for Economic and Policy Research An Washington DC-based organization established in 1999 that conducts and disseminates research on economic policy issues, both US domestic and international.
Center for Global Development A think tank that "works to reduce global poverty and inequality through rigorous research and active engagement with the policy community."
Center for International Data A center that collects, enhances, creates, and disseminates international economic data for use by scholars. The center was created in 1999, is housed at the Department of Economics, University of California Davis, and is directed by Robert Feenstra.
Center on Budget and Policy Priorities A US-based and focused "nonpartisan research and policy institute" founded in 1981, with a left-leaning bent. Although it focuses mostly on US domestic issues including health and poverty in addition to budgets, it touches occasionally on issues of international trade and its effects.
Centime Subunit of the franc.
Céntimo Subunit of a colón (no longer used).
Centre for Economic Policy Research A European network for economic research in many fields of economics including international trade and international macroeconomics. Its affiliated researchers issue working papers and conduct academic conferences.
Central African Economic and Monetary Community One of two monetary unions in Africa whose members share the CFA franc. The other is WAEMU.
Central American Bank for Economic Integration "The leading source of multilateral financing for the integration and development of Central America," CABEI acts as a development bank for the region.
Central American Common Market A group of Central American countries -- El Salvador, Guatemala, Honduras, and Nicaragua -- that formed a common market in 1960, with Costa Rica added in 1962. It largely disintegrated in the 1970s and 80s due to military conflicts, but reformed as the Central American Free Trade Zone (but without Costa Rica) starting in 1993.
Central and Eastern European countries Refers, informally, usually to the former Communist countries of Europe.
Central bank The institution in a country (or a currency area) that is normally (but see currency board) responsible for managing the supply of the country's money and the value of its currency on the foreign exchange market.
Central bank intervention See exchange market intervention.
Central bank reserves International reserves.
Central European Free Trade Agreement 1. A free trade agreement initiated 2006 among Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Moldova, Montenegro, Serbia and the United Nations Interim Administration Mission in Kosovo. Croatia left when it joined the EU in 2013.
2. A free trade agreement initiated 1993 among the Czech Republic, Hungary, Poland, Slovakia, and Slovenia, later also including Bulgaria and Romania. Its purpose was in part to reverse the bias against trade among these neighboring countries that had developed during the process of transition. This was superseded by the accession of these countries to the Europeann Union.
Central Intelligence Agency Intelligence gathering (and espionage) agency of the United States government, publisher of the World Factbook.
Central parity Par value.
Central planning The guidance of the economy by direct government control over a large portion of economic activity, as contrasted with allowing markets to serve this purpose.
Centre William Rappard The building in Geneva, Switzerland, that houses the World Trade Organization.
CEPAL Comision Economica para America Latina y el Caribe (Spanish for Economic Commission for Latin America and the Caribbean.
CEPII "France's leading institute for research on the international economy." Known particularly for the economic data that it makes available.
CEPR 1. Centre for Economic Policy Research
2. Center for Economic and Policy Research
CEPT Common effective preferential tariff
CER Australia-New Zealand Closer Economic Relations Trade Agreement.
Certainty Precise knowledge of an economic variable, as opposed to belief that it could take on any of multiple or a range of values. Contrasts with uncertainty. One aspect of complete information.
CES Function A function with constant elasticity of substitution. CES is popular for both production and utility functions. Used extensively in New Trade Theory as the Dixit-Stiglitz utility function for differentiated products under monopolistic competition. With arguments X = (X1,...,Xn), the function is F(X) = A[ΣiaiXiρ]1/ρ, where ai, A are positive constants and σ = 1/(1-ρ) is the elasticity of substitution. Due to Arrow et al. (1961). [Origin]
CES preferences Preferences represented by a CES utility function.
CET function Constant elasticity of transformation function.
CETA Comprehensive Economic and Trade Agreement between Canada and the EU.
Ceteris paribus Latin phrase meaning, approximately, "holding other things constant." Used as shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable. Contrasts with mutatis mutandis.
CFA 1. Communauté Financière Africaine (African Financial Community) in WAEMU
2. Coopération Financière en Afrique Centrale (Financial Cooperation in Central Africa) in CAEMC
CFA franc Currency of the Communaute Financiere Africaine, and thus of both the West African Economic and Monetary Union and the Central African Economic and Monetary Community.
CFC Chlorofluorocarbon
CFIUS Committee on Foreign Investment in the United States
CFTA Continental Free Trade Area
CGE Computable general equilibrium.
CGD Center for Global Development.
Chaebol A form of large business in South Korea, a conglomerate consisting of many companies centered around a parent company. They are family controlled and have strong ties to government. They are similar to the keiretsu of Japan, except that the chaebol do not own banks.
Chain of comparative advantage A ranking of goods or countries in order of comparative advantage. With two countries and many goods, goods can be ranked by comparative advantage (e.g., by relative unit labor requirements in the Ricardian model). A country's exports will then lie nearer one end of the chain than its imports. With two goods, many countries can be ordered similarly.
Change in consumer surplus The change in consumer surplus due to a change in market conditions, usually a price change. For a price change, it is measured by the area to the left of the demand curve between the two prices, indicating a gain if price falls and a loss if it rises.
Change in producer surplus The change in producer surplus due to a change in market conditions, usually a price change. For a price change, it is measured by the area to the left of the (upward sloping part of the) supply curve between the two prices, indicating a gain if price rises and a loss if it falls.
Change in tariff heading To be considered substantial transformation and therefore qualify under a rule of origin in an FTA, an input must fall under a different tariff heading than the output.
Chapeau In the context of GATT articles, this means an introductory paragraph.
Chapter See HS chapter.
Chapter 11 1. In NAFTA, this portion deals with foreign direct investment. Most controversially, it includes a provision for investor-state dispute settlement.
2. A portion of U.S. bankruptcy law under which a firm can file for protection while it reorganizes.
Chapter 19 A provision of NAFTA that provides for review by an independent panel of anti-dumping and countervailing duty determinations.
Charities Aid Foundation An international nongovernmental organization that describes itself as "a charity, a bank and a champion for better giving," helping donors to have a bigger impact.
Châtelier Principle See Le Châtelier Principle.
Chatham House More formally called the Royal Institute of International Affairs, Chatham House is a London-based, independent policy institute whose mission is "to help build a sustainably secure, prosperous and just world."
Cherry-picking FDI FDI that takes the form of acquiring only better than average firms. To the extent his happens, it makes it more difficult to determine empirically whether FDI improves the productivity of acquired firms.
CHF Acronym for the currency of Switzerland, the Swiss franc, standing for Confœderatio Helvetica Franc.
Chiang Mai Initiative An agreement in 2000 among the "ASEAN+3" countries to cooperate in four main areas: monitoring capital flows, regional surveillance, swap networks, and training personnel.
Chiang Mai Initiative Multilateralization An arrangement begun in 2009 among the countries of the Chiang Mai Initiative formalizing a multilateral currency swap arrangement to replace the bilateral swap arrangement that preceded it.
Chicken War A trade dispute between the U.S. and the EEC that began in 1962 when the EEC extended the variable levy of the CAP to poultry, tripling German tariffs on U.S. chickens. A GATT panel quantified the damage and led to U.S. retaliatory tariffs on cognac, trucks, and other goods. The U.S. 25% tariff on trucks today is a remnant of the chicken war and is sometimes called the chicken tariff.
Child labor 1. Employment of children under a specified minimum age.
2. Work that is harmful to a child's physical or mental health, development, or education, and that is therefore targeted for elimination by labor standards.
Child Labor Deterrence Act A bill introduced into the US Congress by Tom Harkin, but never passed, that would have prohibited imports of products produced by child labor.
China 2025 Made in China 2025.
China International Payments System Launched October 8, 2015, this is the first step in a system for wiring funds, denominated in RMB, into China and is intended to lead to internationalizing the Chinese currency.
China MFN renewal MFN China renewal
China-Pakistan Economic Corridor A China-initiated infrastructure project intended to connect China's western Xinjiang region to the port of Gwadar, Pakistan. Part of the Belt and Road Initiative.
China shock The large increase in exports from China, especially to the United States, that occurred during the first decade of the 21st century, after China joined the WTO. The disruptive effects were studied by Autor, Dorn, and Hanson (2013), then given this name in Autor, Dorn, and Hanson (2016)
China specific safeguard See Section 421.
Chindia A collective name for China and India, sometimes used in discussing the increasing role that these two countries play in the international economy.
Chinese Economic Area Unofficial name for the area comprising Hong Kong, Taiwan, and either China as a whole or just its Special Economic Zones.
Chinn-Ito index A measure of a country's openness on its capital account (i.e., its financial account), denoted KAOPEN. Due to Chinn and Ito (2006).
CHIPS A payments system of The Clearing House Payments Company that says it is "the largest private sector USD clearing system in the world, clearing and settling $1.5 trillion in domestic and international payments per day."
Chlorinated chicken dispute The issue of whether Europe should be able to restrict, or require labeling of, imports from the US of chicken that has been bathed in a chlorine solution to kill bacteria.
Chlorofluorocarbon A chemical once used in refrigerators, air conditioners, and as aerosol propellants that, when released high into the atmosphere, destroyed the ozone. This environmental danger was resolved by banning these chemicals as well as banning trade in products that included them, through the Montreal Protocol.
CIA 1. Cash in advance
2. Central Intelligence Agency
CIAO The acronym coined by Easterly (2006) for his four requirements for development aid to be successful: C = Customer Feedback; I = Incentives; A = Accountability; and O = Outcomes.
CIF The price of a traded good including transport cost. It stands for "cost, insurance, and freight," but is used only as these initials (usually lower case: c.i.f.). It means that a price includes the various costs, such as transportation and insurance, needed to get a good from one country to another. Contrasts with FOB.
CIPF China International Payments System
Circular flow The "circular flow of income and expenditure" refers to the fact that income earned in production is spent on goods that were produced, providing the funds to pay that income. In an open economy, expenditure leaks out of that circle as imports, but re-enters as exports or as capital inflows.
Circular migration The movement of a country's people first out of the country and then back in.
Circumvention Actions taken by traders to avoid paying duties.
CIS Commonwealth of Independent States
CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora
CITT Canadian International Trade Tribunal
Civil Aircraft Agreement See Agreement on Trade in Civil Aircraft.
Civil society The name used to encompass a wide and self-selected variety of interest groups, worldwide. It does not include for-profit businesses, government, and government organizations, whereas it does include most NGOs.
Civil society organization Non-governmental organization
Classification of Products by Activity Statistical Classification of Products by Activity is the classification system used for both goods and services in the European Union. Its structure is parallel to that of NACE.
Classification system A system for organizing, recording, and reporting data of a particular kind, such as international trade and industrial output. Typical systems divide data into categories, each assigned numbers. These may be subdivided, using additional digits, so that more digits mean a finer, or more disaggregated, classification.
Classical Referring to the writings, models, and economic assumptions of the first century of economics, including Adam Smith, David Ricardo, and John Stuart Mill.
Classical transfer problem The transfer problem
Clear A market is said to clear if supply is equal to demand. Market clearing can be brought about by adjustment of the price (or the exchange rate, in the case of the exchange market), or by some form of government (or central bank) intervention in or regulation of the market.
Clearing agreement A reciprocal trade agreement between two countries to buy a specified minimum amount of each other's products over a certain time, using a specified clearing currency.
Clearing House The Clearing House
Clearing system An arrangement among financial institutions for carrying out the transactions among them, including canceling out offsetting credits and debits on the same account.
Closed currency position A commitment to take or make delivery of a currency in the future that is covered by a contract in the forward market; opposite of an open position.
Closed economy An economy that does not permit economic transactions with the outside world; a country in autarky. Contrasts with open economy.
Closer Economic Relations See Australia-New Zealand Closer Economic Relations Trade Agreement.
Closure See macroeconomic closure.
CMEA Council for Mutual Economic Assistance
CMIM Chiang Mai Initiative Multilateralization
CMS analysis Constant market share analysis
CN The Combined Nomenclature
Coase Theorem The proposition that the allocation of property rights does not matter for economic efficiency, so long as they are well defined and a free market exists for the exchange of rights between those who have them and those who do not. Due to Coase (1960).
Coastwise trade Trade from one location on a coast to another on the same coast, usually assumed to be within the same country. In the US, this is the trade covered by the Jones Act.
Cobden-Chevalier Treaty A preferential trade agreement between Britain and France that went into effect in 1860. It was followed by a flurry of other such agreements among European countries.
Cobb-Douglas function A popular functional form for production and utility functions. With arguments X = (X1,...,Xn), the function is F(X) = AΠiXiαi, where A and αi, Σiαi = 1, are positive constants. This function has elasticity of substitution between arguments equal to one. As a production or utility function, it has competitive expenditure shares equal to αi. Due to Cobb and Douglas (1928).
Cobo Subunit of the naira.
CoCo Contingent convertible bond
Codex Alimentarius This is the international "food code," consisting of standards, codes of practice, guidelines, and recommendations for producing and processing food. It is administered by the Codex Alimentarius Commission.
COCOM Coordinating Committee for Multilateral Export Controls
Coefficient 1. A number or symbol multiplied by a variable, usually written as preceding that variable.
2. In a regression analysis, the estimated numerical association between one variable and another, often taken to represent the sign and size of the causal effect of one on the other, though really only indicating correlation.
COGSA Carriage of Goods by Sea Act.
Collapse See Great Trade Collapse.
Collective action clause A provision in the agreement between the issuer and the holder of a bond allowing restructuring of that debt if agreed to by a specified supermajority of the bond holders.
Collective action problem The difficulty of getting a group to act when members benefit if others act, but incur a net cost if they act themselves.
Collusion Cooperation among firms to raise price and/or take other actions to increase their collective profits.
Colón The main currency unit of Costa Rica. It is divided into 100 céntimo.
Columbian Exchange The exchange of goods, but also populations, diseases, and ideas, that took place between the Eastern Hemisphere and the Western Hemisphere, across the Atlantic Ocean, in the centuries following the voyage of Christopher Columbus in 1492.
Column 1 rates In the United States, this refers to the MFN tariff rates that are applied to countries with whom the US has normal trade relations.
Column 2 rates In the United States, this refers to the usually higher-than-MFN tariff rates that are applied to countries with whom the US does not have normal trade relations. As of March 2020, only Cuba and North Korea are subject to Column 2 tariffs. (Trade with several countries, including these, is simply prohibited.)
Combined Nomenclature The system of classification of goods used by the European Union for statistics of international trade.
COMECON Council for Mutual Economic Assistance
COMESA Common Market of Eastern and Southern Africa
Command economy An economy in which decisions about production and allocation are made by government dictate, rather than by decentralized responses to market forces.
Commercial bank An institution that accepts and manages deposits from households, firms and governments and uses a portion of those deposits to earn interest by making loans and holding securities.
Commercial paper Short-term, negotiable debt of a firm; thus a bond of short maturity issued by a company.
Commercial policy Government policies intended to influence international commerce, including international trade. Includes tariffs and NTBs, as well as policies regarding exports.
Commercial risk The risk for an exporter that the buyer will not pay. Contrasts with political risk and exchange risk.
Commercial service Any service provided by a firm, as opposed to being provided by a government agency or an individual worker.
Committee on Foreign Investment in the United States An inter-agency committee of the US government that reviews foreign direct investment into the United States to determine if it might endanger US national security and, if so, stop it.
Commodity Could refer to any good, but in a trade context a commodity is usually a raw material or primary product that enters into international trade, such as metals (tin, manganese) or basic agricultural products (coffee, cocoa).
Commodity agreement See international commodity agreement.
Commodity currency The currency of a country whose exports are dominated by one or more commodities. The value of such a currency is ofter dependent on the prices of these commodities.
Commodity dependent economy An economy that relies heavily on exports of commodities. UNCTAD defines it as one for which "more than 60 per cent of its total merchandise exports are composed of commodities."
Commodity pattern of trade The trade pattern of a country or the world, focusing on goods and services traded as opposed to the factor content of that trade.
Commodity prices Usually means the prices of raw materials and primary products.
Commodity terms of trade 1. Real price of commodities relative to manufactures. This would be the same as the most familiar terms of trade -- the net barter terms of trade -- for many developing countries that export primary commodities and import manufactures.
2. This terms is also used more broadly as a synonym for the net barter terms of trade for any country.
Common Agricultural Policy The regulations of the European Union that seek to merge their individual agricultural programs, primarily by stabilizing and elevating the prices of agricultural commodities. The principle tools of the CAP are variable levies and export subsidies.
Common currency A currency that is shared by more than one country. Thus the currency of a currency area.
Common effective preferential tariff The CEPT tariff is the tariff that a member of the ASEAN Free Trade Area applies to imports that originate in another AFTA country. Unlike conventional free trade areas, the CEPT tariff is not required to be zero, but only between zero and 5%. In addition, countries are permitted to designate products as excluded from the CEPT for several reasons.
Common external tariff The single tariff rate on a product agreed to by all members of a customs union on imports of that product from outside the union.
Common market 1. A group of countries that eliminate all barriers to movement of both goods and factors among themselves, and that also, on each product, agree to levy the same tariff on imports from outside the group. Equivalent to a customs union plus free mobility of factors.
2. Early in its existence, what is now the European Union was called informally The Common Market.
Common Market for Eastern and Southern Africa A trade agreement involving 21 nations (as of March 2020) of Eastern and Southern Africa. It went into effect in 1994, replacing a Preferential Trade Area that had begun in 1982, with the aim of forming a free trade area by 2000 and achieving other trade liberalization and transport facilitation over a period of 16 years.
Common Reporting Standard A standard developed by the OECD and approved July15, 2014, calling on countries to obtain and share information from their financial institutions, with the purpose of deterring tax non-compliance.
Common tangent A straight line that is tangent to two or more curves. Used in the Lerner diagram.
Common trade policy In addition to the common external tariff required by a customs union, the European Union has a common trade policy that encompasses rules for exports and imports, export credit insurance, and the administration of anti-dumping and countervailing duties.
Commonwealth, The Formerly the British Commonwealth or the Commonwealth of Nations, this is a voluntary group of 54 countries (as of March 2020) many of whom had been British colonies in the British Empire. Its mission is "to improve the well-being of all Commonwealth citizens and to advance their shared interests globally."
Commonwealth of Independent States An organization formed in 1991 of the nations that had been part of the USSR. Current membership (March 2020) includes 12 countries.
Communaute Financiere Africaine Communaute Financiere Africaine = African Financial Community: a group of Central and West African countries, formerly ruled by France, who share two versions of a common currency, the CFA franc, that is guaranteed by the French treasury.
Communism An economic system in which capital is owned by government. Contrasts with capitalism.
Community indifference curve One of a family of indifference curves intended to represent the preferences, and sometimes the well-being, of a country as a whole. This is a handy tool for deriving quantities of trade in a two-good model, although its legitimacy depends on the existence of community preferences, which in turn requires very restrictive assumptions. See Leontief (1933).
Community preferences A set of consumer preferences, analogous to those of an individual as might be represented by a utility function, but representing the preferences of a group of consumers. The existence of well-behaved community preferences requires restrictive assumptions about individual preferences and/or incomes.
Company This word has many meanings, but in economics it is usually a synonym for firm.
Comparative advantage The ability to produce a good at lower cost, relative to other goods, compared to another country. In a Ricardian model, comparison is of unit labor requirements; more generally it is of relative autarky prices. With perfect competition and undistorted markets, countries tend to export goods in which they have comparative advantage. See also absolute advantage. Due to Ricardo (1815). [Origin]
Comparative static Refers to a comparison of two equilibria from a static model, usually differing by the effects of a single small change in an exogenous variable.
Compensated demand curve A demand curve constructed under the assumption that demander's income is not held constant, but rather is varied to hold utility at a constant level. The change in consumer surplus calculated from particular compensated demand curves measures compensating variation and equivalent variation.
Compensating variation An amount of money that just compensates a person, group, or whole economy, for the welfare effects of a change in the economy, thus providing a monetary measure of that change in welfare. Same as willingness to pay. Contrasts with equivalent variation.
Compensation 1.The GATT principle that members who violate GATT rules must either compensate other countries by lowering tariffs or making other concessions, or be subject to retaliation.
2. The actual or potential payment made by the winners from a change in trade or other policy to the losers, intended to undo the harm to the latter. Actual compensation is rare, but the potential for compensation is used as the basis for most evaluations of the gains from trade.
3. The wage paid to labor plus other benefits provided by the employer, such as health care costs.
Compensation principle As a basis for welfare comparisons, the idea that if a policy change (such as a tariff reduction) could be Pareto improving if it were accompanied by appropriate lump-sum transfers from winners to losers, then it is viewed as beneficial even when those transfers do not occur.
Compensation trade Countertrade, including especially payment for foreign direct investment out of the proceeds from that investment.
Competition The interactions between two or more sellers or buyers in a single market, each attempting to get or pay the most favorable price. Economists usually interpret and model these interactions as among individual economic agents -- firms or consumers. Popular terminology extends also to competition among nations, especially competing exporters.
Competition policy Policies intended to prevent collusion among firms and to prevent individual firms from having excessive market power. Major forms include oversight of mergers and prevention of price fixing and market sharing. Called "anti-trust policy" in the U.S. One of the Singapore Issues.
Competitive 1. Applied to a market or industry, this usually means perfectly competitive and contrasts with imperfectly competitive.
2. Applied to a firm or a country's products, this means having low price, high quality, or other attractive characteristics compared to other firms or countries. Applied to a firm, this may also include the effectiveness and aggressiveness of its marketing. See competitiveness.
Competitive advantage Competitiveness. Contrasts with comparative advantage.
Competitive devaluation An exchange rate devaluation by one country in response to devaluation by another, intended to keep its exports competitive.
Competitive equilibrium See equilibrium.
Competitive factor market A market for a factor in which both suppliers and demanders are perfectly competitive, thus taking the factor price as given.
Competitiveness Usually refers to characteristics that permit a firm to compete effectively with other firms due to low cost, superior technology, or aggressive marketing, perhaps internationally. Thus the condition of being competitive (definition #2). Applied to nations, the word has a mercantilist connotation.
Competitiveness index A measure of an economy's international competitiveness, such as the Global Competitiveness Index or the Global Manufacturing Competitiveness Index
Complement 1. Two goods are complements if they tend to be consumed together, so that an increase in demand for one is associated with an increase in demand for the other.
2. Formally, one good is a complement for another if an increase in demand for one (or a fall in its price) causes an increase in the demand for the other. Opposite of substitute.
Complementary demand In the context of development via import substitution, this refers to the need for sufficient domestic demand for any industrial product the production of which is to be encouraged.
Complementary exporting The export of one firm's products through the distribution channels of another firm.
Complementary slackness The pair of conditions that capture optimality in the presence of a constraint. For example, to maximize f(x) s.t. x≥0, one requires both f′≤0 and xf′=0, where f′=df/dx. These two conditions assure that if x>0, then f′(x)=0 and if x=0, then f′≤0.
Complementation agreement 1. Free trade agreement
2. An agreement between a firm and governments of two or more countries to eliminate duties on its output, in order to attract it to locate in one of the countries.
Complete information The assumption that economic agents (buyers and sellers, consumers and firms) know everything that they need to know in order to make optimal decisions. Types of incomplete information are uncertainty and asymmetric information.
Complete specialization 1. Non-production of some of the goods that a country consumes, as in definition 2 of specialization.
2. Production only of goods that are exported or nontraded, but none that compete with imports.
3. Production of only one good.
4. Being the only country in the world to produce a good.
Complete the internal Market A target of European integration, stated in a 1985 White Paper from the European Commission, which was to remove all barriers between national markets so that they would become, in effect, a single European market.
Composite currency An entity defined as a specified combination of two or more currencies, normally existing only as a unit of account rather than as a physical currency. Examples include the SDR and the ECU.
Composite good A fictional good that is used in economic analysis to stand in for a large number of goods, usually all other goods than the one that is the focus of attention.
Compound tariff A tariff that combines both a specific and an ad valorem component. Thus, on an import with quantity q and price p, a compound tariff collects a revenue equal to tsq + tapq, where ts is the specific tariff and ta is the ad valorem tariff.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership The trade agreement, including an FTA, agreed by the eleven non-US members of the Trans-Pacific Partnership in 2018 after President Trump pulled the US out of the TPP.
Comprehensive Economic and Trade Agreement The Canada-EU trade agreement, the negotiations for which were completed August 2014. It entered into force provisionally September 21, 2017, and awaits (as of March 2020) ratification by each member of the EU.
Comprehensive Economic Dialogue Conversations between high officials of the US and China that began in 2017 after the first meeting between Presidents Trump and Xi.
Compromise Tariff of 1833 A response to dissatisfaction with the high tariffs of the Tariff of Abominations of 1828 and subsequent acts that failed to satisfy the states of the US South, this act initiated the gradual reduction in tariffs over the next decade.
Compulsory licensing A requirement for a patent holder to let others produce its product, under specified terms. Countries may require this of foreign patent holders so as to access a product at lower cost. This is permitted by the TRIPs Agreement for certain purposes, such as protecting public health.
Computable general equilibrium Refers to economic models of microeconomic behavior in multiple markets of one or more economies, solved computationally for equilibrium values or for changes due to specified policies. The equations are calibrated with data from the countries being modeled, while behavioral parameters are either assumed or adapted from estimates elsewhere.
Computed value A method of customs valuation when neither transaction value nor deductive value are available: sum the costs of production and preparing goods for export, then include imputed profit and overhead.
Comtrade A database maintained by the United Nations including official international trade statistics.
Comunidad Andina Andean Community
Comvariance An analogue to covariance for three variables. For three variables x, y, and z with values xi, yi, zi, i=1,…,n, the comvariance is com(x,y,z) = Σi=1…n(xi-m(x))(yi-m(y))(zi-m(z)), where m(·) is the mean of the values in its argument. Due to Deardorff (1982).
Concave 1. Said of a curve that bulges away from some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is concave from below (or concave to something below it) if all straight lines connecting points on it lie on or below it. Contrasts with convex.
2. Said of a function if the set of points below it is convex, and thus if fx1+(1−λ)x2) < λf(x1)+(1−λ)f(x2) where f is the function of a vector x and 0<λ<1.
Concentration 1. See industrial concentration.
2. Concentration of exports and/or imports can be be measured by the Hirschman index.
Concentration ratio One of two common measures of industry concentration, defined as the sum of the market shares of the largest n firms. n is some small number such as 4 or 6, and the result is called the "n-firm concentration ratio" or "CRn". The other common measure is the Herfindahl index.
Concertina tariff reduction The reduction of a country's highest tariff to the level of the next highest, followed by the reduction of both to the level of the next highest after that, and so forth. Also called the concertina rule. This is known to raise welfare if all goods are net substitutes.
Concession The term used in GATT negotiations for a country's agreement to bind a tariff or otherwise reduce import restrictions, usually in return for comparable "concessions" by other countries. Use of this term, with its connotation of loss for what economic theory suggests is often a source of gain, is part of what has been called GATT-Speak.
Concessional financing Loans made by a government at an interest rate below the market rate as an indirect method of providing a subsidy.
Concessional sale Sale of a product at a price lower than the market would indicate. Often part of a package of foreign aid.
Conditional cash transfer A program in a developing country to encourage pro-growth and poverty-reducing activities by households by paying them cash conditional on behavior. Used especially for education, requiring sending children to school.
Conditional MFN The levying of most favored nation tariffs on exports of a country only if it has satisfied certain conditions. Members of the WTO can apply conditional MFN only to non-members.
Conditionality The requirements imposed by the IMF and World Bank on borrowing countries to qualify for a loan, typically including a long list of budgetary and policy changes comprising a structural adjustment program.
Cone of diversification See diversification cone.
Conference Board A "global, independent business membership and research association working in the public interest," founded in 1916. It provides data and analysis intended to improve performance of businesses.
Conference Board of Canada The "foremost independent, not-for-profit applied research organization in Canada." Among other services, it provides data on several economic variables for a number of countries in its Oxford World Outlook.
Confidence fairy A term used frequently in New York Times opinion pieces by Paul Krugman during and after the global recession that began in 2007, referring to the views of those who believe that the economy can be stimulated by balancing government budgets so as to reassure potential investors.
Conflict diamonds Blood diamonds.
Congestion The costs and inefficiencies that result when a space becomes crowded. For example, costs of international trade may rise due to congestion of ports, if these facilities are not expanded along with trade.
Conglomerate A company, often a multinational, that includes several unrelated kinds of business.
Connectivity Openness to international trade and other international interactions, this term is used by some development economists to capture the need for this in development.
Consensus Essentially, this means unanimous agreement, and it is the basis for decision making in the WTO. Formal voting is avoided, and a decision will be blocked if any member formally objects.
Conservative Social Welfare Function A social welfare function that takes special account of the costs to individuals of losing relative to the status quo, and that therefore seeks to avoid large losses to significant groups within the population. Due to Corden (1974).
Consignment 1. Something that is put into the care of another, as when a batch of traded goods is consigned to a shipper for transport to another location.
2. A method of marketing in which the seller entrusts a product to an agent, who then attempts to sell it on the seller's behalf, or on consignment.
Console A bond with no maturity date, which instead pays a fixed amount per year forever. Its simplicity makes it a convenient example in textbooks, where it appears much more frequently than in the real world.
Constant cost This could have many meanings, but when stated as an assumption of an economic model, it means that cost of producing a good, per unit, is the same for all units, and thus does not rise or fall with output.
Constant dollars Dollars of constant purchasing power. That is, corrected for inflation. More precisely includes reference to a base year for comparison, e.g., "in constant 1992 dollars." Same as constant prices.
Constant elasticity of substitution function See CES function
Constant elasticity of transformation function A function representing an economy's transformation curve along which the elasticity of transformation is constant.
Constant market share analysis A technique for decomposing the change in a country's trade into components that correspond to holding its market shares constant in various markets. Introduced to international trade by Tyszynski (1951), it is an application of shift and share analysis of Creamer (1943).
Constant prices See constant dollars.
Constant returns to scale A property of a production function such that scaling all inputs by any positive constant also scales output by the same constant. Such a function is also called homogeneous of degree one or linearly homogeneous. CRTS is a critical assumption of the H-O Model of international trade. Contrasts with increasing returns and decreasing returns.
Constraint set The set of options among which a decision-maker is able to choose, given its resources and the market conditions that it faces.
Constrict While this word generally means to make something narrower, in economics it is commonly used for making something, especially the money supply, smaller (or perhaps to allow it to grow more slowly).
Consular fees and formalities Charges and procedures required of importers. May constitute nontariff barriers.
Consultation The first step in the WTO dispute settlement process, whereby countries are expected to consult directly regarding any objection or disagreement and seek to resolve it without further steps.
Consultative Group to Assist the Poor A consortium of public and private funding organizations working to expand access to financial services in poor countries.
Consumer movement Mode 2 of four modes of supply of traded services, this one entails the buyer moving (temporarily) to the foreign location of the seller, as in the case of tourism.
Consumer price index A price index for the goods purchased by consumers in an economy, usually based on only a small sample of what they consume. Commonly used to measure inflation. Contrasts with the implicit price deflator.
Consumer subsidy equivalent Same as consumer support estimate
Consumer support estimate Introduced by the OECD to quantify agricultural policies, this measures transfers to or from consumers that are implicit in these policies. Since industrialized-country agricultural producers are routinely supported by raising prices, CSE estimates are usually negative. See also PSE.
Consumer surplus The difference between the most that consumers would be willing to pay for a good and what they do pay. For each unit, this is the vertical distance between the demand curve and price. For all units purchased at some price, it is the area below the demand curve and above the price. Normally useful only as the change in consumer surplus.
Consumption 1. The purchase of goods and services by households.
2. The aggregate of such purchases over an economy.
3. The depletion of a stock of something due to use, as in capital consumption allowance.
Consumption correlation See international consumption correlations puzzle.
Consumption externality An externality arising from consumption. Common examples are herd immunity from vaccines (positive) and adverse effects of second-hand smoke from cigarettes (negative).
Consumption function The function relating aggregate consumption to aggregate income and sometimes other variables such as wealth.
Consumption possibility frontier A graph of the maximum quantities of goods (usually two) that an economy can consume in a specified situation, such as autarky and free trade. Used to illustrate the potential benefits from trade by showing that it can expand consumption possibilities.
Contagion The phenomenon of a financial crisis in one country spilling over to another, which then suffers many of the same problems.
Container The standardized rectangular box, 20- or 40-feet long, used for shipping merchandize especially internationally.
Content protection See domestic content protection.
Content requirement See domestic content requirement.
Contestable market A market that, even though it has only a single or a small number of sellers, could readily admit more, so that the pricing behavior of current sellers is constrained by the potential for entry. Term introduced by Baumol et al. (1982)
Continental Free Trade Area African Continental Free Trade Agreement
Continental system The attempt by French Emperor Napoleon Bonaparte to destroy the trade and thus the economy of Britain by a blockade of its trade and by ordering allies of France to cease trade with the British. It was effective only briefly in 1807-08 and 1810-12.
Contingent convertible bond A debt instrument that functions initially as a bond, but that in pre-specified circumstances converts to equity. The use of these, especially by banks, is hoped to reduce the likelihood or seriousness of financial crises.
Contingent protection Administered protection.
Contingent Reserve Arrangement An arrangement among the BRICS countries each to commit resources to provide a safety net for members of the group in case of emergencies such as might be caused by sudden capital outflows.
Continuous random variable A random variable that can take on any value along a real line or interval. Contrasts with a discrete random variable.
Continuous time The use of a continuous variable to represent time, as in an economic model. Contrasts with discrete time.
Continuum model A model in which some entities that are normally discrete and exist in finite numbers are modeled instead by a continuous variable. This can sometimes simplify the treatment of large numbers of entities. In trade theory, the most notable example is the continuum-of-goods model.
Continuum-of-goods model A class of trade models in which goods are indexed by a continuous variable, approximating the case of very large numbers of goods. The classic examples are Dornbusch, Fischer, and Samuelson (1977, 1980). [Origin]
Contract curve 1. In an Edgeworth Box for consumption, the allocations of 2 goods to 2 consumers that are Pareto efficient. Starting with an allocation that may not be on the contract curve, it shows the ways that the consumers might contract to exchange the goods with each other. Defined and named by Edgeworth (1881).
2. In an Edgeworth Box for production, this term is sometimes also used for the efficiency locus.
Contracting party A country that has signed the GATT. The term CONTRACTING PARTIES with both words capitalized means all Contracting Parties acting jointly.
Contraction Economic contraction
Contractionary Tending to cause aggregate output (GDP) and/or the price level to fall. Term is typically applied to monetary policy (a decrease in the money supply or an increase in interest rates) and to fiscal policy (a decrease in government spending or a tax increase), but may also apply to other macroeconomic shocks. Contrasts with expansionary.
Convention A statement of principle as to acceptable behavior. For example, members of the International Labor Organization have agreed to a long list of conventions regarding the acceptable treatment of workers.
Convention on Biological Diversity This is an international legal instrument for the conservation and sustainable use of biological diversity that went into force in December 1993. It currently (March 2020) has 196 parties and 168 signatures.
Convention on International Trade in Endangered Species Convention on International Trade in Endangered Species of Wild Fauna and Flora is an agreement originally among 80 governments in 1975 to use licensing to prevent trade in wild animals and plants from threatening their survival. There are currently (March 2020) 183 countries party to the agreement.
Conventional international law The portion of international law that results from formal agreements among nations, such as the GATT. Contrasts with customary international law.
Convergence The process of becoming quantitatively more alike. In an international context, it often refers to countries becoming more alike in terms of their factor prices or in terms of their per capita incomes, perhaps as a result of trade or other forms of economic integration.
Convergence criteria See Maastricht criteria
Convertible currency A currency that can legally be exchanged for another or for gold. In times of crisis, governments sometimes restrict such exchange, giving rise to black market exchange rates.
Convex 1. Said of a curve that bulges toward some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is convex from below (or convex to something below it) if all straight lines connecting points on it lie on or above it. Contrasts with concave.
2. Said of a set that contains all straight line segments joining points within it.
3. Said of a function if the set of points above it is convex, and thus if fx1+(1−λ)x2) > λf(x1)+(1−λ)f(x2) where f is the function of a vector x and 0<λ<1.
Convex combination The convex combination of two points (or vectors), x and y, is their weighted average, with nonnegative weights on each: λx + (1−λ)y, where 0≤λ≤1.
Convex hull The boundary of the set of points that are either members of, or convex combinations of, points from two or more other sets. The convex hull of two or more isoquants consists of the innermost of the isoquants themselves plus the points between them on their common tangents.
Convexity This is just the state of being convex. More generally in economics it refers to the sets (production possibilities, preferences, and constraints) which, if they are convex, may yield well behaved economic equilibria. In contrast, models that are nonconvex tend to have multiple equilibria and display discontinuous behavior (jumps).
COOL Country of Origin Labeling
Coordinating Committee for Multilateral Export Controls A cooperative arrangement among a group of countries in the West intending to prohibit exports of strategic products to countries of the Eastern Bloc. Created in 1949, it was dissolved on March 31, 1994, and succeeded in December 1995 by the Wassenaar Arrangement.
Coordination Cooperation in setting economic policy, especially across countries, so that policies of different governments reinforce each other rather than canceling each other out.
Copenhagen Consensus Center A think tank that has initiated conferences that produced the Copenhagen Consensus, enlisting scholars to quantify the costs and benefits of various means to address the world's economic problems.
Copenhagen criteria The conditions that must be met for a country to gain entry to the European Union, as established by the Copenhagen European Council in 1993 and strengthened in Madrid in 1995.
Copyright The legal right to the proceeds from and control over the use of a created product, such as a written work, audio, video, film, or software. The TRIPs agreement requires that copyright extend over the life of the author plus at least 50 years. The US and many other countries use 70 years.
Core The set of allocations that cannot be improved upon by a subset of consumers trading among themselves. In a pure exchange economy, the core is the contract curve.
Core inflation The rate of inflation excluding certain sectors whose prices are most volatile, specifically food and energy.
Core labor standard Several labor standards that are considered the most basic and fundamental. The ILO identifies eight conventions as "fundamental," covering the topics: freedom of association and collective bargaining, forced labor, child labor, and discrimination.
Core propositions The core propositions of the HO Model are the factor price equalization theorem, the Heckscher-Ohlin Theorem, the Stolper-Samuelson Theorem, and the Rybczynski Theorem, according to Ethier (1974).
Corn Laws British regulations on the import and export of grain (known in British English as corn), mainly wheat, intended to control its price. The laws were repealed in 1846, signaling a shift toward free trade.
Corner solution A solution to an economic model in which a constraint is binding that might not always be binding. For example, if a country that could produce positive amounts of two goods instead, for some prices, produces only one, that is a corner solution.
Corporacion Andina de Fomento A financial institution created to "promote and foster the integration of the Andean region." It acts as a development bank for Latin America.
Corporate income tax A tax on the profits of corporations. Differences in corporate tax rates across countries can be a cause of foreign direct investment as well as transfer pricing and tax inversion.
Corporate tax Corporate income tax.
Correlation A measure of the extent to which two economic or statistical variables move together, normalized so that it ranges from −1 to +1. It is defined as the covariance of the two variables divided by the square root of the product of their variances. Used in trade theory to express weak relationships among economic variables.
Correlation result A theoretical property of models with arbitrary numbers of goods or other variables that takes the form of a correlation among variables rather than the strict prediction for each one that may not be attainable. Used for comparative advantage and other properties of trade models in higher dimensions.
Corruption Dishonest or partial behavior on the part of a government official or employee, such as a customs or procurement officer. Also actions by others intended to induce such behavior, such as bribery or blackmail.
Corruption Perceptions Index An annual scoring of countries based on "how corrupt their public sectors are seen to be," done by Transparency International.
Cost advantage Possession of a lower cost of production or operation than a competing firm or country. In the case of countries, this could refer to an absolute advantage, although it is more likely a comparative advantage.
Cost-benefit analysis The use of economic analysis to quantify the gains and losses from a policy or program as well as their distribution across different groups in a society.
Cost function A function relating the minimized total cost in a firm or industry to output and factor prices.
Cost, insurance, freight See CIF.
Cost of capital The cost incurred by a firm to raise additional funds. Depends on the interest rate and taxes that it faces, as well as its ability to raise funds by issuing equity.
Cost of living The cost of a representative bundle of goods and services in consumption, usually as measured by the consumer price index.
Cotonou Agreement A partnership agreement between the EU and the ACP Countries signed in June 2000 in Cotonou, Benin, replacing the Lomé Convention. Its main objective is poverty reduction, "to be achieved through political dialogue, development aid and closer economic and trade cooperation."
Council 1. Any of many organizations that use this word in their name.
2. Council of the European Union
3. European Council
Council for Mutual Economic Assistance An international organization formed in 1956 among the Soviet Union and other Communist countries to coordinate economic development and trade. It was disbanded in 1991. Also known as COMECON.
Council of the European Union Also called the Council of Ministers or simply the Council, this adopts EU law and policy. It is composed of the national ministers from each member country for the issues being decided. The presidency of the Council rotates every six months among the member countries and chairs most of the meetings.
Counter-cyclical 1. Moving in the opposite direction to the business cycle. That is, tending to rise when GDP falls and vice versa. Contrasts with procyclical.
2. Designed to offset or counteract the effects of fluctuations of an economic variable that rises and falls over time. Examples are increased payments to unemployed workers when GDP falls below full employment, and increased payments to farmers when crop prices fall below some target level.
Counterfeit goods Products that appear to duplicate branded goods without the permission of the brand owner. If they are in fact duplicates, then buyers benefit from a low price, while brand owners may lose. Often, however, they are inferior copies, useless or even dangerous.
Counterpurchase contract A form of countertrade in which the foreign seller is required to purchase something from the buyer, usually unrelated goods or services.
Countertrade Trade in which part or all of payment is made in goods or services. See barter. Countertrade can take several forms.
Countervailing duty A tariff levied against imports because they are subsidized by the exporting country's government, designed to offset (countervail) the effect of the subsidy.
Country hopping 1. Most commonly refers to trips by tourists who visit several countries in succession.
2. In the context of international trade, it refers to movements of production by manufacturers from one country to another to avoid tariffs, anti-dumping duties, countervailing duties, and other trade barriers.
Country of origin The country in which a good was produced, or in the case of a traded service, the home country of the service provider. With fragmentation, origin is often ambiguous. For some purposes, such as trade within an FTA, its determination is subject to rules of origin.
Country of Origin Labeling 1. Any labeling of products with their country of origin.
2. Referring to the specific requirement of US law that imported meats be labeled with the country of origin. This requirement was subject to a WTO dispute brought in 2008 by Canada and lost by the US.
Country ranking Any of several lists of countries ordered by some measure of their performance or characteristics.
Country risk The risk associated with operating in, trading with, or especially holding the assets issued by, a particular country. In the case of assets, country risk helps to explain why borrowers in some countries must pay higher interest rates than borrowers from other countries, thus paying a country risk premium.
Country size Any of many measures of the size of a country. For most economic comparisons, however, country size refers to GDP.
Coupon The interest payment on a bond, so-named because bonds originally were pieces of paper with small sections, called coupons, that were cut off and exchanged for the interest payments.
Cournot competition The assumption, often assumed to be made by firms in an oligopoly, that other firms hold their outputs constant as they themselves change behavior. Contrasts with Bertrand competition. Both are used in models of international oligopoly, but Cournot competition is used more often.
Cournot's law That the sum of the balances of payments or of trade across all countries must be zero. Term seems to have been coined by, and perhaps only used by, Mundell (1960, p. 102), who credited it to Cournot (1897).
Court of International Trade See U.S. Court of International Trade.
Covariance A measure of the extent to which two economic or statistical variables move up and down together. For two variables x and y with values xi, yi, i=1,…,n, the covariance is cov(x,y) = Σi=1…n(xi-m(x))(yi-m(y)), where m(·) is the mean of the values in its argument.
Cover 1. To use the forward market to protect against exchange risk. Typically, an importer with a commitment to pay foreign currency in the future would buy it forward, an exporter with a future receipt would sell it forward, and a purchaser of a foreign bond would sell forward the expected proceeds. See hedge.
2. To engage in a transaction that offsets an open position.
Coverage ratio A measure of the presence of nontariff barriers, defined as the value of imports subject to one or a group of NTBs, divided by the total value of imports. Contrasts with frequency ratio and tariff equivalent.
Covered interest arbitrage A set of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return. See also one-way arbitrage.
Covered interest parity Equality of returns on otherwise comparable financial assets denominated in two currencies, with the forward market used to cover against exchange risk. Covered interest parity requires, approximately, that i = i* + p where i is the domestic interest rate, i* is the foreign interest rate, and p is the forward premium.
Covered interest rate The covered interest rate, in a currency other than your own, is the nominal interest rate plus the forward premium on the currency; thus the percent you will earn holding the foreign asset while protecting against exchange-rate change by selling the foreign currency forward.
CPA Classification of Products by Activity.
CPB Acronym of the Netherlands Bureau for Economic Policy Analysis, literally from the Dutch for Central Planning Bureau, although it was never engaged in planning.
CPEC China-Pakistan Economic Corridor.
CPI Consumer price index.
CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
CR4 The 4-firm concentration ratio.
CRA Contingent Reserve Arrangement.
Crawling peg An exchange rate that is pegged, but for which the par value is changed frequently by small amounts and in a pre-announced fashion in response to signals from the exchange market.
Creation See trade creation.
Credibility The condition of being believed. Particularly relevant when a government or central bank tries to influence an economic variable, such as the exchange rate or the rate of inflation, since belief that it will fail induces market responses that hasten that failure.
Credit 1. Recorded as positive (+) in the balance of payments, any transaction that gives rise to a payment into the country, such as an export, the sale of an asset (including official reserves), or borrowing from abroad. Opposite of debit.
2. A loan. For example, a trade credit.
Credit crunch A shortage of available loans. In well-functioning markets, this would simply mean a rise in interest rates, but in practice it often means that some borrowers cannot get loans at all, a situation of credit rationing.
Credit tranche See tranche.
Creditor A lender.
Creditor nation A country whose ownership of assets abroad exceeds the value of the assets within the country that are owned by foreigners. Contrasts with debtor nation.
Creeping inflation This term seems to be used both for a rate of inflation that is low but nonetheless high enough to cause problems, and for a rate of inflation that itself gradually moves higher over time.
Crony capitalism Used to describe a capitalist economy in which government or corporate officials and insiders provide lucrative opportunities for their friends and relatives. Term became popular during the Asian Crisis to describe some of the victim countries, but is now often used elsewhere as well.
Crony-capitalism index A measure of crony capitalism by country constructed by The Economist based on wealth relative to GDP generated by rent seeking in ten sectors of the economy.
Cross-border supply The provision of an internationally traded service across national borders without requiring physical movement of buyer or seller, as when the service can be provided by long-distance communication. Mode 1 of four such modes of supply of traded services.
Cross-country regression The use of regression analysis on data from multiple countries, the purpose being to describe and perhaps explain their differences. For example, regressions of country GDP growth rates on their levels of trade or openness show a strong positive relationship between trade and growth, though without establishing causation.
Cross elasticity 1. An elasticity that has been ignored by a student in a problem set. :(
2. The elasticity of supply or demand for one good or service with respect to the price of another.
Cross-hauling The simultaneous shipment of the same product in opposite directions over the same route. The export of the same good by two countries to each other would be cross-hauling, if it occurs at the same time.
Cross-licensing The permission by two firms to use each other's intellectual property rights.
Cross rate 1. The exchange rate between two currencies as implied by their values with respect to a third currency.
2. Thus, since most currencies are commonly quoted in U.S. dollars, the exchange rate between any two currencies other than the dollar.
Cross retaliation Retaliation in which the response is in a different sector or under a different WTO agreement than the action that prompted it. E.g., a country suspends intellectual property protection in response to a violation of anti-dumping in manufacturing; or restricts service imports in response to an illegal subsidy in agriculture.
Cross sectional variation The differences in an economic variable that exist at the same time comparing different economic units, such as consumers, firms, industries, or countries. Often used to seek evidence of causes of trade, growth, and other behaviors. Contrasts with time series variation.
Cross subsidy The use of profits from one activity to cover losses from another. Thus the use of high prices for some of a firm's products, for example, to permit it to price below cost for others. In international trade, this could be one explanation for dumping.
Crowding out The effect that an increase in one kind of spending can have in reducing another kind of spending. Most frequently mentioned is the effect of an increase in government spending on investment, which falls when an increase in the budget deficit drives up the interest rate.
CRS 1. Constant returns to scale = CRTS
2. Common Reporting Standard
CRTS Constant returns to scale
Crude Crude oil.
CSE Consumer support estimate
CSME CARICOM Single Market and Economy
CSO Civil society organization
Cultural argument for protection The view that imports undermine a country's culture and identity -- for example by changing consumption patterns to ones more similar to those abroad, or by reducing demands for domestically produced art and music -- and therefore that imports should be restricted.
Cum Latin for "with," as in tax cum subsidy.
Cumulation 1. In an anti-dumping case against imports from more than one country, the summation of these imports for the purpose of determining injury. That is, the imports are deemed to have caused sufficient injury if all of them together could have done so, even if individually they would not.
2. In overlapping free trade areas, a provision that allows inputs from one FTA to qualify as originating under another FTA's rules of origin. May be bilateral, diagonal, or full.
Cumulative distribution function A function specifying the probability that a random variable will take on values at or below its argument.
Currency 1. The money used by a country; e.g., the national currency of Japan is the yen.
2. The physical embodiment of money, in the forms of paper bills or notes, and metal coins.
Currency area A group of countries that share a common currency. Originally defined by Mundell (1961) as a group that have fixed exchange rates among their national currencies. [Origin]
Currency basket A group of two or more currencies, with amounts of each, that may be used as a unit of account, or to which another currency may be pegged.
Currency bloc 1. A group of countries that share a common currency; a currency area.
2. A group of countries that peg their different national currencies to a single currency.
Currency board An extreme form of pegged exchange rate in which management of both the exchange rate and the money supply are taken away from the central bank and given to an agency with instructions to back every unit of circulating domestic currency with foreign currency. Operates similarly to the gold standard.
Currency convertibility See convertible currency.
Currency crisis The crisis that occurs when particpants in an exchange market come to perceive that an attempt to maintain a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation.
Currency depreciation See depreciation.
Currency factor The portion of a rate of return that is due to the currency in which the asset is denominated. The currency factor can be nonzero either because of currency risk or because of expected appreciation or depreciation.
Currency in circulation The amount of a country's currency that is in the hands of the public (households, firms, banks, etc.), as opposed to sitting in the vaults or on the books of the central bank.
Currency intervention Exchange market intervention.
Currency manipulation The use of exchange market intervention to keep the exchange rate above or below the equilibrium exchange rate. The term is most likely to be applied to a country that keeps its currency undervalued for the purpose of making its goods more competitive.
Currency misalignment An exchange rate that is above or below the equilibrium exchange rate, perhaps but not necessarily due to currency manipulation.
Currency mismatch Having assets that are denominated in a currency different from liabilities, so that a change in exchange rate between those currencies can have a large positive or negative effect on net wealth.
Currency realignment A change in the par value of a pegged exchange rate.
Currency reserves This usually means international reserves.
Currency risk Uncertainty about the future value of a currency, especially for someone who holds an asset or financial commitment denominated in another currency.
Currency risk premium The extent to which the interest rate on bonds denominated in a currency exceeds what can be explained by default risk and expected changes in the exchange rate. What remains is presumed to be compensation for currency risk.
Currency speculation To buy or sell a currency in anticipation of its appreciation or depreciation respectively, the intent being to make a profit or avoid a loss. See speculation.
Currency substitution Dollarization.
Currency swap See swap.
Currency union A group of countries that agree to peg their exchange rates and to coordinate their monetary policies so as to avoid the need for currency realignments.
Currency war 1. Efforts by multiple countries to influence exchange rates to their own perceived advantage, at the expense of others. Term used in September 2010 by Guido Mantega, Brazil's finance minister, referring to actions by China, and then by other countries in response, to prevent their currencies from appreciating.
2. This term has also been applied to conflicts between central banks trying to maintain the value of their currencies, on the one hand, and speculators on the other.
Current account A country's international transactions arising from current flows, as opposed to changes in stocks which are part of the financial account (formerly the capital account). Includes trade in goods and services (including payments of interest and dividends on capital) plus inflows and outflows of transfers.
Current account balance Balance on current account
Current account deficit Debits minus credits on current account. See deficit.
Current account surplus Credits minus debits on current account. Same as balance on current account. See surplus.
Current dollars The phrase, "in current dollars" means "not adjusted for inflation."
Current prices Refers to prices in the present, rather than in some base year; e.g., "GDP at current prices" means GDP as measured, in contrast to real GDP, or "GDP at XXXX prices," where the latter is measured in the prices of year XXXX.
CUSFTA Canada-US Free Trade Agreement.
CUSTA Same as Canada-US Free Trade Agreement.
Customary international law The portion of international law that has developed over time through custom and usage, rather than formal agreement. Contrasts with conventional international law.
Customer feedback One of the four requirements for successful development aid posed by Easterly (2006) in his acronym CIAO: that donors seek feedback from recipients of as to what can be most helpful.
Customs The process that through which imported goods must pass in crossing the border of a country or other customs area.
Customs area A geographic area that is responsible for levying its own customs duties at its border.
Customs authority The government agency that monitors the border, administers regulations on which goods can and cannot enter, and levies tariffs.
Customs brokerage A firm that facilitates the clearance of goods through customs by handling the paperwork.
Customs classification 1. The category defining the tariff to be applied to an imported good.
2. The act of determining this category, which may be subject to various rules and/or to the discretion of the customs officer.
Customs clearance The processing of imported goods through a country's border procedures for inspection and taxation.
Customs Cooperation Council Nomenclature An international system of classification of goods for specifying tariffs, called the Brussels Tariff Nomenclature prior to 1976, and later superseded by the Harmonized System of Tariff Nomenclature
Customs declaration A written statement by an importer or traveler of the dutiable imports that they are bringing into a country.
Customs duty An import tariff.
Customs harmonization Efforts to adopt common procedures across countries for identifying and valuing imported goods for the purpose of levying customs duties. One such effort was the adoption of the harmonized system of customs classification.
Customs officer An employee of the customs authority who monitors goods moving across a national border and levies tariffs.
Customs procedure The practices used by customs officers to clear goods into a country and levy tariffs. Includes clearance documentation and inspection, determinination of a good's classification, and assigning its value as the base for an ad valorem tariff. Any of these can impede trade and constitute an NTB.
Customs Service See U.S. Customs Service.
Customs station An office through which imported goods must pass in order to be monitored and taxed by customs officers.
Customs territory A geographical area the borders of which are managed, imposing duties and controls on goods entering the area. A customs territory need not be an internationally recognized country, and the customs territory of a country may be larger or smaller than the country.
Customs union A group of countries that adopt free trade (zero tariffs and no other restrictions on trade) on trade among themselves, and that also, on each product, agree to levy the same tariff on imports from outside the group. Equivalent to an FTA plus a common external tariff.
Customs user fee A charge levied on traders for the service of passing through customs.
Customs valuation procedure The method by which a customs officer determines the customs value. When this method is biased against importing, it becomes an NTB.
Customs Valuation Agreement The Customs Valuation Agreement of the WTO replaced the Customs Valuation Code, but specified similar rules: Use a transaction value when available; if not, use deductive value or computed value.
Customs Valuation Code A plurilateral agreement of the Tokyo Round specifying rules for customs valuation.
Customs value The value of an imported good for the purpose of levying an ad valorem tariff.
Cutthroat competition Predation.
CVD Countervailing duty
Cyclical unemployment The portion of unemployment that is due to the business cycle and thus rises in recessions but then disappears eventually after the recession ends.