281 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)