Definitions

Question 1

Intra industry trade index

Answer 1

Index that measures exports and imports belonging to the same industry.

Question 2

Bilateral investment treaty

Answer 2

Agreement between two countries regarding the promotion, the protection and the liberalization of investments made by investors from respective countries in each other’s territory.

Question 3

Pareto efficient

Answer 3

allocation such that no other allocation makes somebody better off without making somebody else worse off

Question 4

Nontariff barrier

Answer 4

Barriers to trade other than tariff such as quotas, anti-dumping, domestic procurement policies, subsidies, technical barrier, import licensing procedures, etc

Question 5

Gains from trade

Answer 5

Situation where trade leads to a higher surplus for society as a whole

Question 6

Prisoner’s dilemma

Answer 6

Situation where unilateral decisions lead to the least desirable outcome.

Question 7

Opportunity cost

Answer 7

Value of the next best alternative that was given up when choosing a first alternative.

Question 8

Import tariff

Answer 8

tax imposed on imported goods (beneficial to domestic producers and the government but detrimental to consumers)

Question 9

Custom union

Answer 9

Free trade among members with common tariff schedule with respect to nonmembers

Question 10

Global value chain

Answer 10

Worldwide range of activities involved in the design, production, handling and distribution of materials, finished products and/or services.

Question 11

Comparative advantage

Answer 11

Situation where a firm/country producing a good has a lower opportunity cost of producing that good than another firm/country.

Question 12

Offshoring

Answer 12

Work getting done by a firm (own or other) in a different country.

Question 13

External economies of scale

Answer 13

Situation where the average cost of producing a good decreases as the quantity produced by an industry increases

Question 14

Trade creation

Answer 14

Creation of new flows of international trade between members for goods and services (new imports for domestic consumers, new exports for domestic firms). Both members gain from new trade and the trade volume increases.

Question 15

Internal economies of scale

Answer 15

Situation where the average production cost decreases as the quantity produced by a firm increases

Question 16

Foreign direct investments

Answer 16

Investments made to acquire a lasting interest in enterprises operating outside of the investor’s own country.

Question 17

Outsourcing

Answer 17

Contracting work to a third party.

Question 18

Value chain

Answer 18

Full range of activities that firms and workers do to bring a product or a service from its conception to its end use and beyond.

Question 19

Nonlinear tariff cut

Answer 19

Percentage cuts that apply differently to different tariff rates.

Question 20

Externality

Answer 20

side effect or consequence of a market activity (production or consumption) that is not reflected in the price or costs nor taken into account bythe market.

Question 21

GDP

Answer 21

Sum of all values added in a territory

Question 22

Supply chain

Answer 22

Activities related to manufacturing and distribution of a product.

Question 23

Regional trade agreement (RTA)

Answer 23

Treaty between two or more governments that define the rules of trade for all signatories.

Question 24

Linear tariff cut

Answer 24

Percentage cut that applies to all tariff rates in the same way

Question 25

Free trade area

Answer 25

Free trade among members of the area, and members keep their own tariff schedule with respect to nonmembers

Question 26

Value added

Answer 26

Difference between gross sales and intermediary inputs costs

Question 27

Trade diversion

Answer 27

Trade increases between two members but at the expense of trade with a nonmember.