Glossary: International Trade

absolute advantage
when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
common market
economic agreement between countries to allow free trade in goods, services, labor, and financial capital between members while having a common external trade policy
comparative advantage
when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production
economic union
economic agreement between countries to allow free trade between members, a common external trade policy, and coordinated monetary and fiscal policies
free trade agreement
economic agreement between countries to allow free trade between members
gain from trade
a country that can consume more than it can produce as a result of specialization and trade
General Agreement on Tariffs and Trade (GATT)
forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade; the precursor to the World Trade Organization
import quotas
numerical limits on the quantity of products that can be imported
intra-industry trade
international trade of goods within the same industry
national interest argument
the argument that there are compelling national interests against depending on key imports from other nations
nontariff barriers
ways a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
protectionism
government policies to reduce or block imports
splitting up the value chain
many of the different stages of producing a good happen in different geographic locations
tariffs
taxes that governments place on imported goods
value chain
how a good is produced in stages
World Trade Organization (WTO)
organization that seeks to negotiate reductions in barriers to trade and to adjudicate complaints about violations of international trade policy; successor to the General Agreement on Tariffs and Trade (GATT)