Download Global Trade Terms

Global Trade Terms
Global economy- the merging of regional economies in which nations become
dependent on each other for goods and services.
Globalization- the development of an increasingly integrated global economy marked
especially by free trade, free flow of capital, and the tapping of cheaper foreign labor
markets. Globalization can be described as a process by which the people of the world
are unified into a single society. This process is a combination of economic,
technological, sociocultural and political forces.
Import- A good or service purchased from a seller in another country.
Export- A good or service sold to a buyer in another country.
Balance of Trade- The relationship between the value of a country’s exports and its
imports.
Trade deficit- A situation occurring when the value of a nation’s imports exceeds that of
its exports. Example: The US has a trade deficit with China.
Trade surplus- A situation occurring when the value of a nation’s exports exceeds that
of its imports. Example: China has a trade surplus with the US.
Tariff- A tax or duty levied on imports. Also called a duty.
Free Trade- The absence of any trade restrictions.
Comparative Advantage- the ability of a party(nation/company) to produce a particular
good or service at a lower cost over another
Inflation- A period during which the purchasing power of the dollar is falling. Caused
by such things as increases in demand or costs.
Deflation- A decrease in the general level of prices; a period during which the purchasing
power of the dollar is rising.
Capital- any form of wealth or goods capable of being employed in the production of
more wealth or goods.
Wage labour- The socioeconomic relationship between a worker and an employer in
which the worker sells their labour under a contract (employment), and the employer
buys it, often in a labour market.
Nationalization- The act of a government taking public ownership of private industry or
assets.
Recession- a general slowdown in economic activity over a period of time
Protectionism- the use of trade restrictions like tariffs to protect domestic
industries/workers against competition from other nations
Subsidy- money that is paid usually by a government to keep the price of a product or
service low or to help a business or organization continue to function.
Economic Systems
Traditional- goods and services exchanged without use of money; barter economy
Command- production of goods and services determined by a central government;
production often does not reflect consumer demand; command economies existed in
communist countries like the Soviet Union, Cuba, China, and North Korea. North Korea
is the only one that still has a full command economy.
Market- production of goods and services determined by demands of consumers.
Property and business is privately owned and operated for profit with little government
interference. Also known as free market, free enterprise, and capitalism. The United
States is often associated with a market economy.
Mixed- combination of command and market economy characteristics. Private property
and businesses are owned and operated for profit. Government may have ownership of
public lands and state owned companies (like a state oil company). Government has
oversight of business practices to ensure worker safety, environmental protection, and
fair and ethical business practices. Government may fix prices on some goods and protect
some industries from foreign competition. Most countries in the world have some level of
mixed economy.
GNP (Gross National Product) and GDP(Gross Domestic Product)
GNP- total value of all goods and services produced by a country over a year
 Because economies have become so interconnected, the GNP may reflect the
value of goods and services produced in one country by a company based in
another country. To adjust for these situations a 2nd statistic is used- GDP.
GDP- the total value of all goods and services produced within a country in a given
period of time.
The economy is said to be doing good when there is a high GDP and low rate of inflation.
Low GDP- developing countries with lack of an industrial base
High GDP- developed countries with many levels of economic activity
Levels of Economic Activities
Primary activities- gathering of raw materials to use immediately or in the making of a
final product; Major businesses in this sector include agriculture, agribusiness, fishing,
forestry and all mining and quarrying industries.
Secondary activities- adding value to materials by changing their form, manufacturing
sector
Tertiary activities- providing business or professional services, service sector; The
service sector consists of the "soft" parts of the economy such as insurance, government,
tourism, banking, retail, education, and social services.
Quaternary activities- provide information, management, and research activities by
highly-trained persons, information sector
Quinary activities- the mangerial job associated with decision making in large
corporations
Organizations and Agreements
World Trade Organization (WTO)- Global international organization dealing with the
rules of trade between nations formed in 1995. Previously called GATT-the General
Agreement of Tariffs and Trade formed in 1948. The World Trade Organization deals
with the rules of trade between nations at a near-global level; it is responsible for
negotiating and implementing new trade agreements, and is in charge of policing member
countries' adherence to all the WTO agreements, signed by the bulk of the world's trading
nations and ratified in their parliaments. Most of the WTO's current work comes from the
1986-94 negotiations called the Uruguay Round, and earlier negotiations under the
GATT. The organization is currently the host to new negotiations, under the Doha
Development Agenda (DDA) launched in 2001. Although the stated aim of the WTO is
to promote free trade and stimulate economic growth, some believe that globally free
trade results in the rich (both people and countries) becoming richer, while the poor are
getting poorer.
World Bank- Officially, the International Bank for Reconstruction and Development
formed in 1945 is an internationaly supported bank that provides loans to developing
countries for development programs with the stated goal of reducing poverty. Some
critics of the World Bank believe that the institution was not started in order to reduce
poverty but rather to support US business interests, and that the bank has actually
increased poverty.
International Monetary Fund(IMF)- The International Monetary Fund (IMF) is an
international organization that oversees the global financial system by observing and
stabilizing exchange rates and balance of payments, as well as offering financial and
technical assistance. The United States contributes the most with 18 % of total quotas
and therefore has the most voting power. Two criticisms from economists have been that
financial aid is always bound to so-called "Conditionalities", including Structural
Adjustment Programs. Conditionalities, which are the economic performance targets
established as a precondition for IMF loans, it is claimed, retard social stability and hence
inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an
increase in poverty in recipient countries. The BRICS have gained more voting power
recently.
G8- The Group of Eight (G8) also known as Group of Seven and Russia, is an
international forum for the governments of Canada, France, Germany, Italy, Japan,
Russia, the United Kingdom and the United States. Together, these countries represent
about 65% of the world economy and the majority of global military power (7 of the top
8 positions for military expenditure, and almost all of the world's active nuclear
weapons.) The group's activities include year-round conferences and policy research,
culminating with an annual summit meeting attended by the heads of government of the
member states. The European Commission is also represented at the meetings.
G20- The Group of Twenty (G-20) Finance Ministers and Central Bank Governors was
established in 1999 to bring together systemically important industrialized and
developing economies to discuss key issues in the global economy. Member countries:
Argentina, Australia, Brazil, Canada, China, France, Germany, India,Indonesia, Italy,
Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, United
Kingdom, United States of America
BRICS Countries- Brazil, Russia, India, China, South Africa are considered on the same
economic level
NAFTA- North American Free Trade Agreement- The North American Free Trade
Agreement (NAFTA) eliminated the majority of tariffs on products traded among the
United States, Canada and Mexico, and gradually phases out other tariffs over a 10-year
period
The Dominican Republic–Central America Free Trade Agreement, commonly called
DR-CAFTA, is a free trade agreement (legally a treaty under international law, but not
under US law). Originally, the agreement encompassed the United States and the Central
American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua,
and was called CAFTA. In 2004, the Dominican Republic joined the negotiations, and
the agreement was renamed DR-CAFTA.
The Trans-Pacific Partnership (TPP)- The Trans-Pacific Partnership (TPP) is
a trade agreement among twelve Pacific Rim countries including the US concerning a
variety of matters of economic policy, which was reached on 5 October 2015 after 7
years of negotiations. President Trump does not support it.