International Economics

Taxes imposed on imports. Tariffs raise the price to the domestic consumer and reduce the quantity demanded.

The ratio of exports plus imports to GDP; often used as an indicator of the relative importance of international trade in an national economy.

A regional trade agreement whose member nations allow the free movement of inputs as well as outputs, and who share a common external tariff toward nonmembers.

A small town in New Hampshire that was, in July 1944, the site of talks establishing the international financial and economic order after World War II. The International Monetary Fund and the World Bank emerged from the Bretton Woods Conference.

The policy of customs unions in which the members adopt the same tariffs toward nonmembers.

An agreement among two or more member countries to engage in free trade with each other and to share a common external tariff toward nonmembers.

The name for the trade negotiations that began in 2000 undder the auspices of the World Trade Organization.

The current WTO round of trade negotiations. (See Doha Development Agenda)

The most complete form of economic integration, these unions are common markets that also harmonize many standards while having the same or substantially similar fiscal and monetary policies. Economic unions may include a common currency.

Assets held by the national monetary authority that can be used to settle international payments. Dollars, euros, yen and monetary gold are examples of reserves.

Occurs when a person lets others pay for a good or service, or lets them do the work when he or she knows that he or she cannot be excluded from consumption of the good or from the benefits of the work.

A preferential trade agreement in which countries permit the free movement of outputs (goods and services) across their borders as long as the outputs originate in one of the member countries.

The main international agreement covering the rules of trade in most, but not all, goods. The GATT's origins can be traced to negotiations that took place in 1946, after World War II.

The changes in economic policy that borrowing nations are required to make in order to receive International Monetary Fund loans. The changes usually involve policies that reduce or eliminate a severe trade deficit and/or a central government budget deficit. In practical terms, they involve reduced expenditures by the government and by the private sector (to reduce imports) and increased taxes. (See also International Monetary Fund.)

A set of rules of behavior. Institutions set limits, or constraints, on social, political, and economic interaction. An institution may be informal (e.g., manners, taboos, or customs) or formal (e.g., constitutions or laws).

One of the original Bretton Woods institutions, the IMF's responsibilities include helping member countries that suffer from instability or problems with their balance of payments. It also provides technical expertise in international financial relations.

In international economics, a place where nations can borrow after all sources of commercial lending have dried up. Today, the IMF (International Monetary Fund) fills this role.

The idea that every member of the World Trade Organization (WTO) is required to treat each of its trading partners as well as it treats its most favored trading partner. In effect, MFN prohibits one country from discriminating against another.

The idea that foreign firms operating inside a nation should not be treated differently from domestic firms.

A good or service that is not reduced by consumption. For example, listening to a radio broadcast does nto reduce its availability to others.

When people who do not pay for a good or service cannot be excluded from its consumption. National defense is an example.

(See Nondiminishable)

An agreement that covers only some goods and/or services and is less than a free-trade agreement.

Goods that share two characteristics: nonexcludability and nonrivalry or nondiminishability. If they are excludable but nondiminishable goods, they are sometimes called collective goods.

A numerical limit on the volume of imports.

Agreements between two or more countries, each offering the others preferential access to its markets. RTA's provide varying degrees of access and variable amounts of deep integration.

Freedom from outside intervention, or self-determination.

A preferential trade area; a group of nations that reduces or eliminates barriers between themselves while maintaining higher tariffs and other barriers to trade against nonmember, third-party countries.

The opposite of trade diversion. Trade creation occurs when trade policies cause a shift in production from a higher-cost producer (often a domestic one) to a lower-cost producer.

The opposite of trade creation. Trade diversion occurs when trade policies cause a shift in production and imports from a lower-cost producer to a higher-cost producer.

Multilateral negotiating rounds under the auspices of the GATT or the WTO.

The last concluded round of tariff negotiations within the GATT framework, the Uruguay Round began in 1986 in Punta del Este, Uruguay, concluded in 1993, and was ratified in 1994. Among other accomplishments, it created the World Trade Organization.

A Bretton Woods institution, originally charged with the responsibility for providing financial and technical assistance to the war-torn economies of Europe. In the 1950's the World Bank began to shift its focus to developing countries.

A country has an absolute productivity advantage in a good if its labor productivity is higher; that is, it is able to produce more output with an hour of labor than its trading partner can.