Definitions Flashcards
Intra industry trade index
Index that measures exports and imports belonging to the same industry.
Bilateral investment treaty
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.
Pareto efficient
allocation such that no other allocation makes somebody better off without making somebody else worse off
Nontariff barrier
Barriers to trade other than tariff such as quotas, anti-dumping, domestic procurement policies, subsidies, technical barrier, import licensing procedures, etc
Gains from trade
Situation where trade leads to a higher surplus for society as a whole
Prisoner’s dilemma
Situation where unilateral decisions lead to the least desirable outcome.
Opportunity cost
Value of the next best alternative that was given up when choosing a first alternative.
Import tariff
tax imposed on imported goods (beneficial to domestic producers and the government but detrimental to consumers)
Custom union
Free trade among members with common tariff schedule with respect to nonmembers
Global value chain
Worldwide range of activities involved in the design, production, handling and distribution of materials, finished products and/or services.
Comparative advantage
Situation where a firm/country producing a good has a lower opportunity cost of producing that good than another firm/country.
Offshoring
Work getting done by a firm (own or other) in a different country.
External economies of scale
Situation where the average cost of producing a good decreases as the quantity produced by an industry increases
Trade creation
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.
Internal economies of scale
Situation where the average production cost decreases as the quantity produced by a firm increases
Foreign direct investments
Investments made to acquire a lasting interest in enterprises operating outside of the investor’s own country.
Outsourcing
Contracting work to a third party.
Value chain
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.
Nonlinear tariff cut
Percentage cuts that apply differently to different tariff rates.
Externality
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.
GDP
Sum of all values added in a territory
Supply chain
Activities related to manufacturing and distribution of a product.
Regional trade agreement (RTA)
Treaty between two or more governments that define the rules of trade for all signatories.
Linear tariff cut
Percentage cut that applies to all tariff rates in the same way
