Absolute advantage: A person or company has an absolute advantage when it can best perform a task or produce a product. 

Balance of trade: The balance of trade is the difference between a country’s total imports and exports. When exports exceed imports, there is a trade surplus; the converse yields a trade deficit.

Capital Goods:Plants and heavy equipment (vehicles, generators, and metal works) used in the production of goods.

Comparative advantage: A country/business/entity is said to have a comparative advantage in producing whichever good has the lowest opportunity cost. (See opportunity cost definition.) That is, it has a comparative advantage in whichever good it sacrifices the least to produce.

Customs Union: A customs unions isany group of nations that has agreed to eliminate tariffs on goods traded among members, while imposing common external tariffs on goods entering from outside the group. The European Union is the best-known example.

Developing countries: The World Bank classifies countries according to their Gross National Income (GNI) per capita as either low income, middle income, or high income. Low income and middle income economies are referred to as developing economies.

Dumping: A company is said to be dumping a product when it exports the product at a price lower than the price it charges in the home market. Dumping is problematic for businesses in the importing country because they have to cope with a foreign competitor that sells products very cheaply. Dumping is considered an unfair business practice. With the WTO anti-dumping agreements, governments can appeal to the WTO to retaliate against countries where companies break dumping laws.

Firm: A firm is an independent unit that uses the factors of production to produce goods and services.

Free trade area (FTA): A free trade areas is characterized by a cooperative arrangement among two or more countries to eliminate tariff barriers among themselves while not applying a uniform external tariff on imports from non-participant countries.

Goods and services: A good is a tangible item that someone has made, mined, or grown. Goods include naturally occurring substances (e.g. oil, iron ore), agricultural products (e.g. grains, livestock), and manufactured or processed products (e.g. packaged foods, toys, timber, furniture, computers, machine parts). A service is a form of work, assistance, or advice that provides something of value to someone else but does not produce a tangible item. Air, rail, or sea transportation are services. Communication by telephone or Internet is a service. So is the work done by engineers, doctors, lawyers, architects, and entertainers. Tourism is a service, too; The money spent by foreign visitors at Disney World, the Grand Canyon, and other attractions inside the United States represents earnings from the export of tourism services. The distinction between goods and services can sometimes be blurry. When a musician plays a concert, for example, he or she provides entertainment services to those who attend. If the performance is recorded and turned into a CD though, the musician also has created a tangible good.

Industrial country: Industrial countries are those countries whose society has shifted from an agricultural based economy to a modern industrial economy.

Industrial Revolution: The Industrial Revolution refers to the social and economic changes that occurred in Great Britain from the middle of the 18th to the middle of the 19th century. British society shifted from a primarily agricultural society to a modern industrial society. Other countries quickly followed the British transition.

Intellectual property: Intellectual property refers to the creations of the mind, such as inventions, literary or artistic works, and the symbols, names, and designs used in commerce. Intellectual property is divided into two categories: industrial property, which includes inventions and trademarks; and copyrights, which include novels, plays, films, and paintings, among many other things. Intellectual property can be a cause of trade disputes when standards for protection of intellectual property differ in different countries. For instance, it is in the interest of U.S. companies to have intellectual property rights on items such as music respected in China. The Chinese government is not as strident in its enforcement of copyright as the U.S. is, so this can cause some friction. IP has also played a controversial role in the ability of developing countries to provide their citizens with affordable pharmaceuticals.

Multilateral: If something is multilateral, it means that more than two countries participate in it. A multilateral agreement is an agreement that at least three countries have signed. A multilateral institution is an organization in which at least three countries participate. If just two countries reach an agreement between themselves, that agreement is said to be bilateral. The United States, for example, has a bilateral free-trade agreement with Israel. But NAFTA, a free trade agreement among three countries—the United States, Canada, and Mexico—is a multilateral agreement. When people use the term multilateral, however, they usually have in mind something involving more than three countries. The post-World War II multilateral trade rounds, for example, have involved dozens of countries.

Non-tariff barriers (NTB): Import quotas, burdensome customs formalities, foreign exchange controls, or other measures or policies (other than tariffs) that restrict or prevent trade.

Opportunity costs: In economic terms, opportunity cost is the amount of good or service that is sacrificed or given up in order to produce another good or service.

Protectionism: Protectionism refers to the establishment of barriers to the importation of goods and services from foreign countries to protect domestic producers.

Quantitative restrictions: Quantitative restrictions seek to limit access to imports by making them scarce, which, according to the laws of supply and demand, makes them more expensive. Most countries in the world apply quotas to the import of certain goods and services (although applying tariffs is much more common).

Quotas are quantitative restrictions on the import of certain goods and services. Rather than imposing tariffs, governments wishing to limit access to or raise the prices of certain goods or services will sometimes specify in laws or regulations that total yearly imports of a particular good or service may not exceed a certain quota, which may be expressed as a quantity of exports or as a dollar value of exports. The United States maintains import quotas on imported clothing, sugar, peanuts, and several other items. Under an international agreement governing trade in clothing and fabrics, the United States applies different import quotas to the clothing produced by different developing countries.

Tariff: Tarrifs are a list of taxes or customs duties payable on imports or exports.

Wholesalers: A wholesaler is an agent that sells goods in large quantities to retailers, who then sell those goods to the general public.


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