Important Trade Terms and Definitions
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Andean Group
Free trade zone made up in 1967 of Bolivia, Columbia, Ecuador, Peru, and Venezuela
Anti-dumping duties
Duties imposed on imported products that are determined to be either lower than the price in the home market or lower than the cost of production
Anti-trust policy
Action taken by governments to prohibit monopolies or unfair control by one firm
Asian Pacific Economic Cooperation (APEC)
Organization of eighteen countries that have committed to free trade by 2020.
CARICOM
Free trade area of the Caribbean countries that was formed in 1973.
Caribbean Basin Initiative
Created by the US in 1983 in order to create business in the Caribbean and Central America.
Council of Economic Advisors (CEA)
Provides the President with nonpolitical, technical advice on economic issues concerning inflation and unemployment.
Countervailing duties
If injury to a domestic industry can be shown, then a country subject to the unfair subsidy practices of another can take action against that other country in the form of a duty
Customs Union
Free trade area with a common external tariff
Dumping
Sale of exports at an unfairly low price (lower than the price in the home market or the cost of production)
Economic Union
Economic integration involving the free flow of trade and investment as well as goods
“Fast track” negotiating authority
Delegation of authority from Congress to the US President to reduce tariffs without congressional approval. This authority was bestowed in five-year increments and was first used during the Tokyo Round of multilateral trade negotiations.
Free trade
The situation that exists when the international exchange of goods is neither restricted nor encouraged by government-imposed trade barriers
Free trade agreement (FTA)
An international agreement to allow free trade among the negotiating parties
General Agreement on Tariffs and Trade (GATT)
An agreement created in 1948, although never a legal organization. The GATT is composed of Articles of Agreement that delineate proper state behavior with respect to international trade.
General Agreement on Trade in Services (GATS)
Initiated by the US in the Uruguay Round of GATT, this agreement expanded the rules of trade in the services sector.
Generalized System of Preferences (GSP)
Program of unilateral trade concessions to the developing countries under GATT.
Group of Seven (G-7)
Group of the world’s seven largest economy that meet to coordinate economic policy.
International Commodity Agreements (ICAs)
Accords between producers and consumers aimed at stabilizing or increasing the price of particular products.
International Labor Organization (ILO)
A division of the United Nations that sets labor standards around the world
International Monetary Fund (IMF)
International economic institution that is a source of short-term funds. Originally set up under the Bretton Woods system, the IMF assists countries with current account imbalances and currency problems.
International Trade Commission (ITC)
Has no formal policymaking role; the ITC is an investigative body for such things as the antidumping, countervailing duty, and escape clause proceedings
Jones Act (Merchant Marine Act of 1920)
A federal statute that provides for the promotion and maintenance of the American merchant marine. Among other purposes, the law regulates maritime commerce in U.S. waters and between U.S. ports. Section 27 of the Jones Act requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. The Act was introduced by Senator Wesley Jones (R-WA).
Managed trade
Arises when industrial policies are adopted domestically and then the country attempts to modify existing international trade regimes so that the new industrial policy will not become a form of protectionism.
Marshall Plan
The American program after World War II designed to assist Europe with reconstruction in the form of grants and loans.
Mercantilism
Protectionist theory in which the national policy is to accumulate wealth and national power by limiting imports and expanding exports.
Mercado Commun Del Sur (MERCOSUR)
Pact created in March 1991 by Brazil, Argentina, Paraguay, and Uruguay to form a customs union in South America
Most Favored Nation (MFN)
A guarantee of nondiscrimination or equal treatment in trade relations based on the GATT principle that “any advantage favor, privilege, or immunity granted by an contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.”
Monetary Union
Step towards economic integration in which parties agree to a common currency or a fixed exchange rate between the currencies.
National Economic Council (NEC)
Chaired by the President, this Cabinet-level group represents the operational principle of cooperative policymaking at the highest political level.
National Export Initiative
Program announced in February 2010 by then Secretary of Commerce, Gary Locke. The focus of this program is to be a more robust effort by the Obama-administration to expand its trade advocacy in all forms, with emphasis on small- and medium-sized enterprises (SMEs)
National Security Council (NSC)
Charged with coordinating international political and military policy and providing foreign policy advice to the President.
Non-tariff barriers (NTBs)
Measures designed to protect against imports without the use of tariffs. Includes quotas, customs and agricultural policies, health regulations, environmental standards, and voluntary export restraints (VERs).
Normal Trade Relations (NTR)
See MFN. This is merely an updated name under the WTO.
North American Free Trade Agreement (NAFTA)
Free trade agreement entered into by Mexico, the United States, and Canada in 1993 under which all tariffs have been reduced to zero.
Organization for Economic Cooperation and Development (OECD)
International organization of industrialized countries that discusses issues of development
Office of Management and Budget (OMB)
Although not visible in trade policy on a daily basis, the OMB deals mostly with defense and foreign aid policy
Protectionism
The use of import barriers and non-tariff barriers to protect local industry from competition with imported goods and services.
Section 201
Consistent with the GATT’s escape clause, Section 201 states that if the US International Trade Commission (ITC) determines that an increase in imports causes injury to a domestic producer of a like or competitive product, then the President can take action to assist the domestic producer to adjust to foreign competition. This remedy must be applied globally.
Section 301
The principal US law used to fight market access barriers. Under Section 301, the USTR is authorized to retaliate against foreign trade policies that hurt US exports. If the USTR determines that a policy or action of a foreign government is inconsistent with international agreements or is unjustifiable, then the USTR is required to take action. If the USTR finds that a policy of a foreign government is merely discriminatory and restricts US trade, then the USTR may, but is not required to, act.
Smoot-Hawley Tariff
1930s law that set US tariffs to 52%. Without normal trade relations, this law is still applicable.
Special 301
Requires the USTR to identify countries in violation of intellectual property rights law
Super 301
Requires the USTR to initiate Section 301 investigations against countries with closed markets and trade barriers in place and to take action against them
Tariffs
Taxes imposed on the import of commodities
Terms of trade
Relationship between the prices of a country’s imports and those of their exports.
Trade Act of 1974
Granted fast-track authority for the first time to the President, opening the way for the Tokyo Round negotiations. The Jakson-Vanik Amendment to this Act states that countries without normal trade relations will receive the 52% Smoot-Hawley tariff, and that NTR can be extended on a yearly basis.
Trade Expansion Act of 1962
Gave the President the authority to implement trade barrier reductions and created the US Trade Representative
Transpacific Partnership (TPP)
The Trans-Pacific Partnership is a free-trade pact being negotiated among 12 Pacific Rim countries: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The TPP is an effort to shape a comprehensive agreement that would not only reduce tariffs and other barriers to open markets, but establish standards on a range of issues like intellectual property rights, government procurement and the role of the state in private enterprise.
Transatlantic Trade and Investment Promotion (TTIP)
The Transatlantic Trade and Investment Partnership is a trade agreement that is presently being negotiated between the European Union and the United States. It aims at removing trade barriers in a wide range of economic sectors to make it easier to buy and sell goods and services between the EU and the US.
US Agency for International Development (USAID)
Agency that implements foreign economic and humanitarian assistance programs, dating back to the Marshall Plan.
US International Trade Commission
Agency that is responsible for determining the effect of imports on US industries and determining if any measures should be taken against unfair trade practices.
US Trade & Development Agency
Another foreign aid channel of Congress, however, aid recipients are stipulated to buy American-made products in any development projects financed by aid. USTDA has a stated goal to increase US exports, where as USAID is agnostic to exports.
US Trade Representative (USTR)
Unaffiliated with any agency; head of trade policy formulation, chief trade negotiator for the United States, and representative of the US in major international trade organizations. The USTR manages the interagency coordination process and the private sector advisory committees on trade policy.
Voluntary Export Restraints (VERs)
Bilateral agreements that stipulate that low-cost exporters will “voluntarily” reduce exports to countries where their goods are threatening industry and employment.
World Bank
Multilateral economic institution that focuses on long-term projects in developing countries
World Trade Organization (WTO)
Came into existence in 1995 after the Uruguay Round of the GATT. Based on GATT principles, the WTO’s purpose is to be a multilateral entity to enforce trade laws and to serve as a forum for negotiations designed to reduce trade barriers.