Trade Terms

Directory 

General Terms

GATT —General Agreement on Tariffs and Trade, which has been superseded as an international organization by the WTO. An updated General Agreement is now one of the WTO’s agreements.

GATT 1947 — The old (pre-1994) version of the GATT.

GATT 1994 — The new version of the General Agreement, incorporated into the WTO, which governs trade in goods.

Members — WTO governments (first letter capitalized, in WTO style).

MFN — Most-favoured-nation treatment (GATT Article I, GATS Article II and TRIPS Article 4), the principle of not discriminating between one’s trading partners.

national treatment — The principle of giving others the same treatment as one’s own nationals. GATT Article III requires that imports be treated no less favourably than the same or similar domestically-produced goods once they have passed customs. GATS Article XVII and TRIPS Article 3 also deal with national treatment for services and intellectual property protection.

TPRB, TPRM — The Trade Policy Review Body is General Council operating under special procedures for meetings to review trade policies and practices of individual WTO members under the Trade Policy Review Mechanism.

transparency — Degree to which trade policies and practices, and the process by which they are established, are open and predictable.

Uruguay Round — Multilateral trade negotiations launched at Punta del Este, Uruguay in September 1986 and concluded in Geneva in December 1993. Signed by Ministers in Marrakesh, Morocco, in April 1994.

Tariffs 

binding, bound — see “tariff binding”

electronic commerce — The production, advertising, sale and distribution of products via telecommunications networks.

free-rider — A casual term used to infer that a country which does not make any trade concessions, profits, nonetheless, from tariff cuts and concessions made by other countries in negotiations under the most-favoured-nation principle.

Harmonized System — An international nomenclature developed by the World Customs Organization, which is arranged in six digit codes allowing all participating countries to classify traded goods on a common basis. Beyond the six digit level, countries are free to introduce national distinctions for tariffs and many other purposes.

ITA — Information Technology Agreement, or formally the Ministerial-Declaration on Trade in Information Technology Products, under which  participants will remove tariffs on IT products by the year 2000.

ITA II — Negotiations aimed at expanding ITA’s product coverage.

nuisance tariff — Tariff so low that it costs the government more to collect it than the revenue it generates.

schedule of concessions — List of bound tariff rates.

tariff binding — Commitment not to increase a rate of duty beyond an agreed level. Once a rate of duty is bound, it may not be raised without compensating the affected parties.

tariff escalation — Higher import duties on semi-processed products than on raw materials, and higher still on finished products. This practice protects domestic processing industries and discourages the development of processing activity in the countries where raw materials originate.

tariff peaks — Relatively high tariffs, usually on “sensitive” products, amidst generally low tariff levels. For industrialized countries, tariffs of 15% and above are generally recognized as “tariff peaks”.

tariffs — Customs duties on merchandise imports. Levied either on an ad valorem basis (percentage of value) or on a specific basis (e.g. $7 per 100 kgs.). Tariffs give price advantage to similar locally-produced goods and raise revenues for the government.

WCO — World Customs Organization, a multilateral body located in Brussels through which participating countries seek to simplify and rationalize customs procedures.

Non-Tariff Measures 

anti-dumping duties — Article VI of the GATT 1994 permits the imposition of anti-dumping duties against dumped goods, equal to the difference between their export price and their normal value, if dumping causes injury to producers of competing products in the importing country.

circumvention — Measures taken by exporters to evade anti-dumping or countervailing duties.

countervailing measures — Action taken by the importing country, usually in the form of increased duties to offset subsidies given to producers or exporters in the exporting country.

dumping — Occurs when goods are exported at a price less than their normal value, generally meaning they are exported for less than they are sold in the domestic market or third-country markets, or at less than production cost.

NTMs — Non-tariff measures such as quotas, import licensing systems, sanitary regulations, prohibitions, etc.

price undertaking — Undertaking by an exporter to raise the export price of the product to avoid the possibility of an anti-dumping duty.

PSI — Preshipment inspection — the practice of employing specialized private companies to check shipment details of goods ordered overseas — i.e. price, quantity, quality, etc.

QRs — Quantitative restrictions — specific limits on the quantity or value of goods that can be imported (or exported) during a specific time period.

rules of origin — Laws, regulations and administrative procedures which determine a product’s country of origin. A decision by a customs authority on origin can determine whether a shipment falls within a quota limitation, qualifies for a tariff preference or is affected by an anti-dumping duty. These rules can vary from country to country.

safeguard measures — Action taken to protect a specific industry from an unexpected build-up of imports — governed by Article XIX of the GATT 1994.

subsidy — There are two general types of subsidies: export and domestic. An export subsidy is a benefit conferred on a firm by the government that is contingent on exports. A domestic subsidy is a benefit not directly linked to exports.

tariffication — Procedures relating to the agricultural market-access provision in which all non-tariff measures are converted into tariffs.

trade facilitation — Removing obstacles to the movement of goods across borders (e.g. simplification of customs procedures).

VRA, VER, OMA — Voluntary restraint arrangement, voluntary export restraint, orderly marketing arrangement. Bilateral arrangements whereby an exporting country (government or industry) agrees to reduce or restrict exports without the importing country having to make use of quotas, tariffs or other import controls.

Textiles and Clothing 

ATC — The WTO Agreement on Textiles and Clothing which integrates trade in this sector back to GATT rules within a ten-year period.

carry forward — When an exporting country uses part of the following year’s quota during the current year.

carry over — When an exporting country utilizes the previous year’s unutilized quota.

circumvention — Avoiding quotas and other restrictions by altering the country of origin of a product.

CTG — Council for Trade in Goods — oversees WTO agreements on goods, including the ATC.

integration programme — The phasing out of MFA restrictions in four stages starting on 1 January 1995 and ending on 1 January 2005.

ITCB — International Textiles and Clothing Bureau — Geneva-based group of some 20 developing country exporters of textiles and clothing.

MFA — Multifibre Arrangement (1974-94) under which countries whose markets are disrupted by increased imports of textiles and clothing from another country were able to negotiate quota restrictions.

swing — When an exporting country transfers part of a quota from one product to another restrained product.

TMB — The Textiles Monitoring Body, consisting of a chairman plus ten members acting in a personal capacity, oversees the implementation of ATC commitments.

transitional safeguard mechanism — Allows members to impose restrictions against individual exporting countries if the importing country can show that both overall imports of a product and imports from the individual countries are entering the country in such increased quantities as to cause — or threaten — serious damage to the relevant domestic industry.

Agriculture/SPS 

Agenda 2000 — EC’s financial reform plans for 2000–06 aimed at strengthening the union with a view to receiving new members. Includes reform of the CAP (see below).

border protection — Any measure which acts to restrain imports at point of entry.

BSE — Bovine spongiform encephalopathy, or “mad cow disease”.

box — Category of domestic support. — Green box: supports considered not to distort trade and therefore permitted with no limits. — Blue box: permitted supports linked to production, but subject to production limits and therefore minimally trade-distorting. — Amber box: supports considered to distort trade and therefore subject to reduction commitments.

Cairns Group — Group of agricultural exporting nations lobbying for agricultural trade liberalization. It was formed in 1986 in Cairns, Australia just before the beginning of the Uruguay Round. Current membership: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay.

CAP — Common Agricultural Policy — The EU’s comprehensive system of production targets and marketing mechanisms designed to manage agricultural trade within the EU and with the rest of the world.

Codex Alimentarius — FAO/WHO commission that deals with international standards on food safety.

distortion — When prices and production are higher or lower than levels that would usually exist in a competitive market.

deficiency payment — Paid by governments to producers of certain commodities and based on the difference between a target price and the domestic market price or loan rate, whichever is the less.

EEP — Export enhancement programme — programme of US export subsidies given generally to compete with subsidized agricultural exports from the EU on certain export markets.

food security — Concept which discourages opening the domestic market to foreign agricultural products on the principle that a country must be as self-sufficient as possible for its basic dietary needs.

internal support — Encompasses any measure which acts to maintain producer prices at levels above those prevailing in international trade; direct payments to producers, including deficiency payments, and input and marketing cost reduction measures available only for agricultural production.

International Office of Epizootics — Deals with international standards concerning animal health.

multifunctionality — Idea that agriculture has many functions in addition to producing food and fibre, e.g. environmental protection, landscape preservation, rural employment, etc. See non-trade concerns.

non-trade concerns — Similar to multifunctionality. The preamble of the Agriculture Agreement specifies food security and environmental protection as examples. Also cited by members are rural development and employment, and poverty alleviation.

peace clause — Provision in Article 13 of the Agriculture Agreement says agricultural subsidies committed under the agreement cannot be challenged under other WTO agreements, in particular the Subsidies Agreement and GATT. Expires at the end of 2003.

reform process/programme — The Uruguay Round Agriculture Agreement starts a reform process. It sets out a first step, in the process, i.e. a programme for reducing subsidies and protection and other reforms. Current negotiations launched under Article 20 are for continuing the reform process.

SPS regulations — Sanitary and Phytosanitary regulations — government standards to protect human, animal and plant life and health, to help ensure that food is safe for consumption.

variable levy — Customs duty rate which varies in response to domestic price criterion.

Intellectual Property 

Berne Convention — Treaty, administered by WIPO, for the protection of the rights of authors in their literary and artistic works.

CBD — Convention on Biological Diversity.

compulsory licensing — For patents: when the authorities license companies or individuals other than the patent owner to use the rights of the patent — to make, use, sell or import a product under patent (i.e. a patented product or a product made by a patented process) — without the permission of the patent owner. Allowed under the TRIPS Agreement provided certain procedures and conditions are fulfilled. See also government use.

counterfeit — Unauthorized representation of a registered trademark carried on goods identical or similar to goods for which the trademark is registered, with a view to deceiving the purchaser into believing that he/she is buying the original goods.

exhaustion — The principle that once a product has been sold on a market, the intellectual property owner no longer has any rights over it. (A debate among WTO member governments is whether this applies to products put on the market under compulsory licences.) Countries’ laws vary as to whether the right continues to be exhausted if the product is imported from one market into another, which affects the owner’s rights over trade in the protected product. See also parallel imports.

geographical indications — Place names (or words associated with a place) used to identify products (for example, “Champagne”, “Tequila” or “Roquefort”) which have a particular quality, reputation or other characteristic because they come from that place

government use — For patents: when the government itself uses or authorizes other persons to use the rights over a patented product or process, for government purposes, without the permission of the patent owner. See also compulsory licensing.

intellectual property rights — Ownership of ideas, including literary and artistic works (protected by copyright), inventions (protected by patents), signs for distinguishing goods of an enterprise (protected by trademarks) and other elements of industrial property.

IPRs — Intellectual property rights.

Lisbon Agreement — Treaty, administered by WIPO, for the protection of geographical indications and their international registration.

Madrid Agreement — Treaty, administered by WIPO, for the repression of false or deceptive indications of source on goods.

mailbox — Refers to the requirement of the TRIPS Agreement applying to WTO members which do not yet provide product patent protection for pharmaceuticals and for agricultural chemicals. Since 1 January 1995, when the WTO agreements entered into force, these countries have to establish a means by which applications of patents for these products can be filed. (An additional requirement says they must also put in place a system for granting “exclusive marketing rights” for the products whose patent applications have been filed.)

parallel imports — When a product made legally (i.e. not pirated) abroad is imported without the permission of the intellectual property right-holder (e.g. the trademark or patent owner). Some countries allow this, others do not.

Paris Convention — Treaty, administered by WIPO, for the protection of industrial intellectual property, i.e. patents, utility models, industrial designs, etc.

piracy — Unauthorized copying of materials protected by intellectual property rights (such as copyright, trademarks, patents, geographical indications, etc) for commercial purposes and unauthorized commercial dealing in copied materials.

Rome Convention — Treaty, administered by WIPO, UNESCO and ILO, for the protection of the works of performers, broadcasting organizations and producers of phonograms.

TRIPS — Trade-Related Aspects of Intellectual Property Rights.

UPOV — International Union for the Protection of New Varieties of Plants (Union internationale pour la protection des obtentions végétales)

Washington Treaty — Treaty for the protection of intellectual property in respect of lay-out designs of integrated circuits.

WIPO — World Intellectual Property Organization.

Investment 

export-performance measure — Requirement that a certain quantity of production must be exported.

FDI — Foreign direct investment.

local-content measure — Requirement that the investor purchase a certain amount of local materials for incorporation in the investor’s product.

product-mandating — Requirement that the investor export to certain countries or region.

trade-balancing measure — Requirement that the investor use earnings from exports to pay for imports.

TRIMS — Trade-related investment measures.

Dispute settlement 

Appellate Body — An independent seven-person body that, upon request by one or more parties to the dispute, reviews findings in panel reports.

automaticity — The “automatic” chronological progression for settling trade disputes in regard to panel establishment, terms of reference, composition and adoption procedures.

DSB — Dispute Settlement Body — when the WTO General Council meets to settle trade disputes.

DSU — The Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes.

nullification and impairment — Damage to a country’s benefits and expectations from its WTO membership through another country’s change in its trade regime or failure to carry out its WTO obligations.

panel — Consisting of three experts, this independent body is established by the DSB to examine and issue recommendations on a particular dispute in the light of WTO provisions.

Services 

accounting rate — In telecoms, the charge made by one country’s telephone network operator for calls originating in another country.

commercial presence — Having an office, branch, or subsidiary in a foreign country.

GATS — The WTO’s General Agreement on Trade in Services.

general obligations — Obligations which should be applied to all services sector at the entry into force of the agreement.

Initial commitments — Trade liberalizing commitments in services which members are prepared to make early on.

modes of delivery — How international trade in services is supplied and consumed. Mode 1: cross border supply; mode 2: consumption abroad; mode 3: foreign commercial presence; and mode 4: movement of natural persons.

multi-modal — Transportation using more than one mode. In the GATS negotiations, essentially door-to-door services that include international shipping.

national schedules — The equivalent of tariff schedules in GATT, laying down the commitments accepted — voluntarily or through negotiation — by WTO members.

natural persons — People, as distinct from juridical persons such as companies and organizations.

offer — A country’s proposal for further liberalization.

protocols — Additional agreements attached to the GATS. The Second Protocol deals with the 1995 commitments on financial services. The Third Protocol deals with movement of natural persons.

prudence, prudential — In financial services, terms used to describe an objective of market regulation by authorities to protect investors and depositors, to avoid instability or crises.

schedule — “Schedule of Specific Commitments” — A WTO member’s list of commitments regarding market access and bindings regarding national treatment.

specific commitments — See “schedule”.

Regionalism/Trade and Development 

ACP — African, Caribbean and Pacific countries. Group of 71 countries with preferential trading relation with the EU under the former Lomé Treaty now called the Cotonou Agreement.

Andean Community — Bolivia, Colombia, Ecuador, Peru and Venezuela.

APEC — Asia Pacific Economic Cooperation forum.

ASEAN — Association of Southeast Asian Nations. The seven ASEAN members of the WTO — Brunei, Indonesia, Malaysia, Myanmar, the Philippines, Singapore and Thailand — often speak in the WTO as one group on general issues. The other ASEAN members are Laos and Vietnam.

Caricom — The Caribbean Community and Common Market comprises 15 countries.

CTD — The WTO Committee on Trade and Development

Customs union — Members apply a common external tariff (e.g. the EC).

EC — European Communities (official name of the European Union in the WTO).

EFTA — European Free Trade Association.

free trade area — Trade within the group is duty free but members set own tariffs on imports from non-members (e.g. NAFTA).

G15 — Group of 15 developing countries acting as the main political organ for the Non-Aligned Movement.

G77 — Group of developing countries set up in 1964 at the end of the first UNCTAD (originally 77, but now more than 130 countries).

G7 — Group of seven leading industrial countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States.

GRULAC — Informal group of Latin-American members of the WTO.

GSP — Generalized System of Preferences — programmes by developed countries granting preferential tariffs to imports from developing countries.

HLM — WTO High-Level Meeting for LDCs, held in October 1997 in Geneva.

ITC — The International Trade Centre, originally established by the old GATT and is now operated jointly by the WTO and the UN, the latter acting through UNCTAD. Focal point for technical cooperation on trade promotion of developing countries.

LDCs — Least-developed countries.

MERCOSUR — Argentina, Brazil, Paraguay and Uruguay.

NAFTA — North American Free Trade Agreement of Canada, Mexico and the US.

Quad — Canada, EC, Japan and the United States.

SACU — Southern African Customs Union comprising Botswana, Lesotho, Namibia, South Africa and Swaziland.

S&D — “Special and differential treatment” provisions for developing countries. Contained in several WTO agreements.

UNCITRAL — United Nations Centre for International Trade Law, drafts model laws such as the one on government procurement.

UNCTAD — The UN Conference on Trade and Development.

Trade and Environment 

Agenda 21 — The Agenda for the 21st Century — a declaration from the 1992 Earth Summit (UN Conference on the Environment and Development) held in Rio de Janeiro.

Article XX — GATT Article listing allowed “exceptions” to the trade rules.

Basel Convention — An MEA dealing with hazardous waste.

BTA — Border tax adjustment

CITES — Convention on International Trade in Endangered Species. An MEA.

CTE — The WTO Committee on Trade and Environment.

EST — Environmentally-sound technology.

EST&P — EST and products.

ex ante, ex post — Before and after a measure is applied.

LCA — Life cycle analysis — a method of assessing whether a good or service is environmentally friendly.

MEA — Multilateral environmental agreement.

Montreal Protocol — An MEA dealing with the depletion of the earth’s ozone layer.

PPM — Process and production method.

TBT — The WTO Agreement on Technical Barriers to Trade.

waiver — Permission granted by WTO members allowing a WTO member not to comply with normal commitments. Waivers have time limits and extensions have to be justified.