image displayed if flash reader not installed

Dictionary of Trade Policy

A   B   C   D   E-L   M-R   S-Z




Absolute Advantage    

Adam Smith first developed the idea in The Wealth of Nations (1776) that international trade could be mutually beneficial by allowing countries to exploit the opportunities of an international division of labor. Any country may enjoy an absolute advantage over others in the production of specific goods, and would benefit from trading those goods in exchange for others in which its partner has an advantage. For example, Great Britain has an absolute advantage in the production of cloth, and Portugal enjoys a similar advantage in the production of wine; both countries’ welfare will improve by trading these commodities. This concept yields a narrow view of the gains from trade, insofar as it fails to capture the benefits that countries might enjoy even when one partner has an absolute advantage in the production of all traded commodities. It is thus to be distinguished from the more sophisticated notion of comparative advantage. (Note that while Smith used the phrase “absolute advantage” at various points, especially in his discussion of colonies, he did not mean it in the sense employed here. The qualifier “absolute” was added by later commentators to distinguish Smith’s conception from that of Ricardo.)


Acceptable Level of Risk

Known more formally as the “appropriate level of sanitary or phytosanitary protection,” defined in Annex A of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures as, “The level of protection deemed appropriate by the Member establishing a sanitary or phytosanitary measure to protect human, animal or plant life or health within its territory.”


Access to Medicines

An aim of developing countries in WTO negotiations on intellectual property rights, in answer to concerns that the protection of pharmaceutical patents raises the costs of essential drugs. See the Doha Declaration on the TRIPs Agreement and Public Health.



In general international law, the acceptance by one or more states of a treaty that had already been concluded by other states. The term is defined in Article 2 of the Vienna Convention on the Law of Treaties to mean "the international act so named whereby a State establishes on the international plane its consent to be bound by a treaty." In trade policy, the process by which a country joins an international organization such as the WTO or a regional trade arrangement such as the European Union (where it is also known as enlargement). The corresponding term for the process by which an individual country enlarges itself through the incorporation of new territory is "annexation."

Accession to the WTO is covered by WTO Article XII (replacing GATT Article XXXIII), which provides very few rules or guidelines for the conduct of this process. The GATT contracting parties developed a fairly regular process through actual experience, the basic outlines of which remain in effect for accessions to the WTO. The process has both multilateral and bilateral components. The multilateral aspects begin with the formation of a working party composed of existing members, to which the applicant country submits a memorandum outlining its trade policy. The working party addresses a series of questions to the applicant and acts collectively to negotiate the non-tariff aspects of the applicant country’s terms of accession. Commitments are recorded in a protocol and a working party report. There are also bilateral tariff negotiations that are conducted concurrently, in which the applicant negotiates a schedule of tariff concessions; since the advent of the WTO, it has also negotiated schedules of commitments on services and agriculture. Once the talks are concluded, the protocol of accession is opened for signature by the acceding government and the contracting parties. The rules formally provide that a two-thirds majority is required for acceptance, but in actual practice accessions — like most other GATT decisions — are conducted on the basis of consensus. See also succession and non-application.

For further information on accession to the WTO see


Acquis Communautaire

The full body of European Union law and policy. Countries that accede to the EU are obliged to accept the acquis in its entirety and to make whatever adjustments are needed in their laws and administrative organs. It includes all the EU's treaties and laws, declarations and resolutions, international agreements on EU affairs, and the judgments given by the Court of Justice. It also includes action that EU governments take together in the area of “justice and home affairs” and on the Common Foreign and Security Policy.



See African, Caribbean, and Pacific Countries. 



See Anti-Counterfeiting Trade Agreement.


Actionable Subsidy

A subsidy that may be actionable under the countervailing duty law. Actionable subsidies are addressed in Part III of the Agreement on Subsidies and Countervailing Measures. See also non-actionable subsidies and prohibited subsidies.


Action-Forcing Event

This rather artless expression is often employed in Washington to mean an upcoming event, such as an international meeting (e.g., a summit or a stock-taking) or the deadline for some mandatory government action, that can have the effect of focusing attention and action. Such events can move initiatives from the back burner to some higher level of priority. In the WTO, examples of action-forcing events would include ministerial conferences and the anticipated expiration of grants of negotiating authority in the United States.


The explanatory provisions in Article I of GATT 1947.

Ad Referendum

An agreement that is provisionally approved by countries, pending ratification. See also initialing.


Ad Valorem

In reference to tariffs, a rate that is set according to the value of a good.


Ad Valorem Equivalent (AVE)

A calculation for a specific tariff that, based upon a given price level, indicates the equivalent ad valorem tariff rate. For example, a specific tariff of $2 per dozen for some item would translate into a 20 percent AVE if the average price of that product were $10 per dozen. AVEs will fluctuate with prices; assuming that prices trend upwards, they will also tend to decline over time. For example, that 20 percent AVE would decline to a 10 percent AVE if the average price increased to $20 per dozen. See also compound tariff.

AVEs are quite easy to calculate when they are to be used for purely analytical purposes (assuming that price and volume data are available), but matters are much more complicated when the results of these calculations will have substantive consequences. That is the case, for example, when AVEs need to be calculated for purposes of subjecting a tariff to a formula cut. Countries have vested interests in ensuring that their own tariffs start from relatively high bases, and thus can argue at length over such matters as the base period for calculations, the source of data, etc.

In U.S. law (19 U.S.C. 2481), the term is somewhat tautologically defined as "the ad valorem equivalent of a specific rate or, in the case of a combination of rates including a specific rate, the sum of the ad valorem equivalent of the specific rate and of the ad valorem rate." The law further specifies that, "The ad valorem equivalent shall be determined by the President on the basis of the value of imports of the article concerned during the most recent representative period."

In the case of the Doha Round agricultural negotiations, it was decided (after extended discussions) that the following formula would be used to calculate AVEs for agricultural products:

AVE = (SP * 100)/(UV * XR), where
UV = V/(Q * CQ), where
V = value of imports
Q = quantity of imports
CQ = conversion factor for quantity units, where appropriate
XR: CURRENCY EXCHANGE RATE, where appropriate

It was also agreed that the calculations of AVEs will be made in terms of a weighted average for the period 1999-2001, in the case of seasonal tariffs, a separate AVE will be calculated for each of the seasons. The import values and import quantities will be sourced from the WTO Integrated Database the most disaggregated tariff line level.


Ad Valorem Tariff

A tariff assessed as a percentage of the value of the imported goods. For example, a duty of 20 percent ad valorem applied to $300 worth of imports would require that a $60 tariff be paid (0.20 * 300 = 60). It is to be distinguished from a specific tariff or a compound tariff.


In antidumping calculations, adjustments are made to the prices of goods to ensure that comparisons are not distorted by factors extraneous to the central issue of price discrimination between markets. Adjustments may be made on the basis of differences in physical characteristics, quantities sold, packing and delivery costs, circumstances of sale, and applicable indirect taxes and duties.


Administered Price

In agricultural economics, a price that the state sets for commodities. Policymakers may use a variety of interventionist measures (including import restrictions or export subsidies) in order to ensure that producers receive the administered price. See also deficiency payment.


Administered Protection

See trade-remedy laws.


Administering Authority

The agency that administers the trade-remedy laws. In the United States the process is bifurcated: It is the International Trade Administration of the Department of Commerce that conducts antidumping and countervailing duty investigations, but the U.S. International Trade Commission conducts injury tests. Only ITA is specifically identified, however, as the administering authority. This responsibility had rested with the Department of the Treasury for decades, but in 1979 President Carter transferred authority to ITA (under pressure from Congress). See the definition given in section 1677 of Title 19 of the U.S. Code.


Administrative Protective Order

In U.S. law, a legal mechanism that controls the limited disclosure of business proprietary information to representatives of interested parties. In trade-remedy cases the Department of Commerce authorizes the release of proprietary information under administrative protective order only when the representatives file a request in which they agree to the following four conditions: (a) to use the information only in the antidumping proceeding, (b) to secure the information and protect it from disclosure to any person not subject to an administrative protective order, (c) to report any violation of the terms of the protective order, and (d) to acknowledge that they may be subject to sanctions if they violate the terms of the order.


Administrative Review

Annual reviews conducted of antidumping and countervailing duty orders, as well as suspension agreements. These reviews can lead to adjustments (up or down) in the calculated margins and duties, the application of existing orders to new suppliers, complete or partial rescissions of orders, or their revocation altogether. In the United States it is the practice of the Department of Commerce to conduct such a review twelve months after an antidumping or countervailing duty order is issued in an investigation, in order to determine whether entries should be liquidated at the duty rate specified in the order or at a different rate. Subsequent annual reviews may be conducted on request to determine whether the existing duty rate should be modified, or that an order should be revoked entirely.


visory Centre on WTO Law

A Geneva-based intergovernmental organization established in 2001. The ACWL gives free legal advice and training on WTO law and provides support in WTO dispute settlement proceedings at discounted rates. These services are available to the developing country Members of the ACWL and to LDCs that are Members of the WTO or are in the process of acceding to the WTO. Its website is at

Advisory Committee on Trade Policy and Negotiations (ACTPN)

A private sector advisory group to the U.S. government that covers matters of trade policy and related issues. It is at the top of a pyramid of such advisory bodies. In addition to business, labor, and agricultural representatives, it also has members from other segments of civil society. This is the current title of an institution that undergone numerous changes in name and composition since its direct predecessor, the Public Advisory Committee on Trade Policy, was established in 1968. Predecessor bodies had been in place since the establishment of the RTAA program in the 1930s.

African, Caribbean, and Pacific Countries (ACP)

The former colonies of member states of the European Union that receive preferential tariff treatment and other forms of assistance. These countries include Angola, Antigua and Barbuda, Bahamas, Barbados, Belize, Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Cameroon, Chad, Comoros, Congo, Congo Democratic Republic, Cook Islands, Côte D'Ivoire, Djibouti, Dominica, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, the Gambia, Ghana, Grenada, Guinea, Guinea-Bissau, Guyana, Haiti, Jamaica, Kenya, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Mali, Marshall Islands, Mauritania, Mauritius, Micronesia (Federated States of), Mozambique, Namibia, Nauru, Niger, Nigeria, Niue, Palau, Papua New Guinea, Dominican Republic, Central African Republic, Rwanda, São Tomé and Príncipe, Senegal, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Africa, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sudan, Suriname, Swaziland, Tanzania, Togo, Tonga, Trinidad and Tobago, Tuvalu, Uganda, Vanuatu, Western Samoa, Zambia, and Zimbabwe. Its website is at


African Growth and Opportunity Act (AGOA)

A U.S. program of non-reciprocal preferences for sub-Saharan African countries approved as Title I of the Trade and Development Act of 2000. Click here to see the text of the law.


Aggregate Measurement of Support (AMS)

One of the measures of government intervention in the agricultural economy that is used for purposes of analysing and negotiating possible reductions. Unlike a purely analytical yardstick such as the producer subsidy equivalent, this measure has actual consequences under WTO law. According to Article 1 of the Uruguay Round Agreement on Agriculture, AMS is the annual level of support provided for an agricultural product in favor of the producers of the basic agricultural product or non-product-specific support provided in favor of agricultural producers in general, other than the exempt categories of support. See also boxes and equivalent measurement of support.



See African Growth and Opportunity Act.


Agreement on ...

Most of the agreements reached in the GATT and WTO are styled as the "Agreement on" one subject or another, such as the Agreement on Agriculture, the Agreement on Government Procurement, etc.

Agricultural Products

Products that are subject to the rules of the Uruguay Round Agreement on Agriculture. Article 2 and Annex 1 of the agreement define agricultural products to be all items in chapters 1 to 24 of the Harmonized System, other than fish and fish products, plus certain additional items such as hides and skins, wool and animal hair, etc. All other items are commonly referred to in WTO parlance as industrial products, including many primary products (e.g., metallic ores) that one would not ordinarily consider to be industrial (in the sense of “manufactured”). See also basic agricultural product.

See the Uruguay Round Agreement on Agriculture and the provisions of the Doha Ministerial Declaration dealing with new negotiations on agriculture.

See the CENTRAL guide to Trade in Agriculture.


Air Transportation Convention

An international agreement concluded at Warsaw in 1929, known more properly as the Convention for the Unification of Certain Rules Relating to International Transportation by Air. The agreement, which deals with the rights and responsibilities of carriers and passengers, is still in effect. Air transportation services are outside the scope of GATS.


Amber Box

See boxes.



GATT Article XXX provided that amendments of the General Agreement “shall become effective, in respect of those contracting parties which accept them, upon acceptance by two-thirds of the contracting parties and thereafter for each other contracting party upon acceptance by it.” The original GATT agreement consisted of 34 articles, rather than the present 38. Amendments provided for non-application and special treatment for developing countries (see Part IV). Since the 1960s it has been more common to modify GATT through the negotiation of additional agreements or understandings, rather than amendments to the agreement per se. See for example the Agreement on Implementation of Article VI of The General Agreement on Tariffs And Trade 1994.

Article X of the Agreement Establishing the WTO provides an amendment procedure that applies to all of the multilateral trade agreements. These procedures are generally based on consensus.

In the U.S. Congress, the power to amend bills and other legislative instruments is an especially important parliamentary authority. This is particularly true in the Senate; the rules of the House of Representatives make it easier to control the number and variety of permissible amendments. “Killer” amendments are sometimes proposed with the deliberate intention of making the bill unattractive either to some of its supporters or to the president. The Senate also has the power to amend treaties. This is one reason why fast-track authority, which prohibits amendments to the implementing legislation for an agreement, is considered to be so advantageous. See the reading entitled The Legislative Process and the Fast Track. See also rider.

The procedures for amending the U.S. Constitution are governed by Article V. It requires either two-thirds approval in both houses of Congress or a constitutional convention (the latter option never having been employed), followed by the approval of three-fourths of the states. See the entry on the Constitution for trade-related amendments.


American Selling Price (ASP)

A method of customs valuation that is no longer in use. Tariffs were assessed not on the actual price of the good but instead on the price at which that good sold in the United States. The ASP method was applied only to certain products, such as some types of chemicals and shoes, and generally multiplied the nominal duty rates by a considerable degree. The United States negotiated a customs valuation agreement in the Kennedy Round that would have eliminated this practice, but Congress refused to approve the measure. A similar agreement reached in the Tokyo Round won congressional approval, primarily because it was bundled with all other commitments in the Trade Agreements Act of 1979 and, as the first bill approved under the fast-track procedures, this was a package deal that Congress had to accept or reject as a whole.


American System

The name given by Senator Henry Clay (1777-1852) to a proposed U.S. policy of protectionism and internal development. The term dates to the debate over the Tariff Act of 1824.


Amicus Curiae

Literally, friends of the court. Persons or institutions that are not parties to a case, but either petition or are asked to submit arguments on matters in which they have interests or expertise.


Analogue Country

See Surrogate Country.


Analytical Index

The GATT Analytical Index and the WTO Analytical Index collectively form the most comprehensive review of GATT/WTO law and precedents. Formally entitled Analytical Index: Guide to GATT Law and Practice, the latest version of this two-volume set was issued in 1995 at the time of the transition from GATT to the WTO. The first edition of the WTO Analytical Index was released in 2003.  The GATT Analytical Index is available on-line at The WTO Analytical Index is available on-line at See also BISD.


Andean Community

Successor to the Andean Pact, this group was established in 1997 and seeks to form a customs union among Bolivia, Colombia, Ecuador, Peru, and Venezuela. In contrast to its predecessor, this RTA is based on principles of free trade and open regionalism. It operates as a bloc for negotiations in the FTAA. It also cooperates in the WTO, but — because the terms of each country’s accession to GATT were different — does not operate in that institution as a bloc. See the official codified text of the Cartagena Agreement (originally reached in 1969). The group's website is at


Andean Pact

Established in 1969, this is the predecessor to the current Andean Community. The group was established at a time when import-substitution industrialization was the typical trade strategy of most Latin American countries. Within this strategy, the main purpose of an RTA was to expand the size of the internal market and thus ameliorate some of the inefficiencies of the ISI model. Chile was among the original members, but left after the 1973 coup.


Andean Trade Preferences Act (ATPA)

Non-reciprocal preferences extended by the United States in 1991, granting duty-free treatment to most imports from Bolivia, Colombia, Ecuador, and Peru. The product coverage is comparable to that of the Caribbean Basin Initiative before that program was expanded in 2000. The original law expired in December, 2001, but the program was renewed and expanded by the Andean Trade Promotion and Drug Eradication Act (part of the Trade Act of 2002).


Annecy Round

The second round of GATT negotiations (1949), held in the resort town of Annecy, France.



The term given to measures intended to combat the circumvention of trade barriers, especially trade-remedy orders and quotas. A common example is the revision of antidumping or countervailing duty orders to cover new shippers of the same products, or minor changes in the products. See also transshipment and trade deflection. See the Decision on Anti-Circumvention.


Anti-Counterfeiting Trade Agreement (ACTA)

A draft treaty to establish international standards for intellectual property rights enforcement. It is outside the scope of either the WTO or WIPO. The treaty was signed in October, 2011 by Australia, Canada, Japan, Morocco, New Zealand, Singapore, South Korea, and the United States, and in January, 2012, by the European Union and 22 of its member states. It has not yet been ratified by any of the signatories, and will not enter into force unless and until six of them do so.

Click here for the text of the treaty (or here for the PDF version).



See dumping.



See Competition Policy.



See Asia Pacific Economic Cooperation.



What most people call “clothing,” alternatively known as “garments” (especially in the industry itself and in associated labor unions). It is the final stage in the chain of processing from fiber to yarn to fabric (also known as textiles) to apparel, with intermediate stages for each of these major categories. The textile and apparel trade has a vocabulary all its own. See the Agreement on Textiles and Clothing.


Appellate Body

As provided for by Article 17 of the Dispute-Settlement Understanding, the Appellate Body hears appeals from dispute-settlement panel cases. Establishment of this permanent review body was one of the key reforms that the DSU made to the earlier dispute-settlement mechanism of the GATT.


Appellations of Origin

The identification of a product by the name of a country, region, or locality where it originated, especially in the case of alcohol (e.g., champagne) and specialty foods (e.g., types of cheese). See Section 3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights. See also geographical indications.


Applied Rate

The tariff rate that a country actually applies to imports. This rate can be at or below the bound rate, but cannot legally exceed that rate (if a country indeed has a binding on the product in question).

See the PDF document on The A-B-C-Ds of Tariff Negotiations, which explains the relationship between applied rates, bound rates, commitments, and discrimination.

In some countries, and especially in developing countries, there are wide disparities between the applied and the bound rates for many or all products. This is sometimes described as a case in which there is "a lot of water in the bound rate," meaning that the country can make a concession that reduces its bound rate without necessarily affecting its applied rate. For example, imagine that a country has a bound rate on 10% on Product X, but its applies rate on that same product is just 1%. The country could cut its tariff by as much as 90% and still be taking out the "water" in the binding; only a reduction of more than 90% would actually oblige the country to reduce the applied rate. Some analysts argue that commitments that merely take out the water are insignificant, while others take the view that such a commitment amounts to liberalization insofar as it reduces uncertainty regarding a country's potential tariff rates in the future.

In the United States these rates are usually identical once the phase-in period for a tariff-reduction agreement has ended (apart from the few products for which there is no bound rate). See also duty suspensions.

See the U.S. tariff schedule and the PDF document How to Read the U.S. Tariff Schedule.


Appropriate Level of Sanitary or Phytosanitary Protection

See acceptable level of risk.


Arab League

More properly known as the League of Arab States, this organization was established in 1945. Its 22 members are Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen. The Arab League does not presently have observer status in the WTO; this is a matter of some controversy.



An arrangement by which the parties to a dispute agree to the appointment of an impartial chairperson or a group of competent persons to decide the disputed issue and agree in advance to abide by the decision that is rendered. See Article 25 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, which provides for "[e]xpeditious arbitration within the WTO as an alternative means of dispute settlement."


Arm's-Length Transaction

In U.S. antidumping investigations, transactions between affiliates may be used as a basis for normal value, cost of production, and constructed value only if the transactions are at arms length. Arms-length transactions are those in which the selling price between the affiliated parties is comparable to the selling prices in transactions involving persons who are not affiliated.



Perhaps the most multi-purpose word in trade policy, it can variously mean a traded good (e.g., an article of clothing), a specific entry in the Harmonized System tariff nomenclature (although the term “item” is preferred), a provision in a treaty or other international agreement, or a monograph in a journal. When used in the first of these senses, it is a synonym for “good” or “product.” The term is generally not used to describe fungible or bulk commodities.


Articles of Agreement of the International Monetary Fund

An international treaty that sets out the purposes, principles, and financial structure of the IMF. The agreement was drafted by representatives of 45 countries at a conference held in Bretton Woods, New Hampshire in 1944, and entered into force in December, 1945. The articles have since been amended in 1969, 1978, and 1992. The agreement is referenced in articles II, VII, XIV, XV, and Ad Article XII of GATT 1947, and in Article XII of GATS. See the Declaration on the Relationship of the World Trade Organization with the International Monetary Fund.


Asia-Pacific Economic Cooperation (APEC)

An international organization with members on both sides of the Pacific Basin. Its members are Australia, Brunei Darussalam, Canada, Chile, the People's Republic of China, Hong Kong, China, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Chinese Taipei, Thailand, the United States of America, and Vietnam.

The APEC forum was established in 1989 as an informal dialogue group. It has since become a more active and ambitious undertaking that promotes open trade and economic cooperation among a membership that is highly diverse in its geography, economy, and politics. The declared objective of the group is to establish “free and open trade and investment in the Asia-Pacific no later than 2010 in the case of industrialized economies and 2020 in the case of developing economies.” In the meantime, the group set a very active and diverse work program that entails cooperative activities on the part of governments and private sector groups. Negotiations in APEC have aimed at producing non-discriminatory agreements that complement and expand the members’ WTO commitments. These include autonomous liberalization on the national level, as well as more formal negotiation of regional and multilateral agreements. Examples of APEC sectoral negotiations include the Information Technology Agreement, the Early Voluntary Sectoral Liberalization initiative, and mutual encouragement of the countries’ national Individual Action Plans. APEC does not as yet have an effective dispute-settlement system for its members, due primarily to the early stage of its agreements. APEC has encountered serious difficulties in achieving its declared objectives, however, and it is doubtful that the region-wide trade agreement will be achieved on the declared schedule.


ATA Carnet

A special international customs document for “Admission Temporaire-Temporary Admission,” it allows certain goods to be imported into a country on a temporary basis without having to engage in the usual formalities and without having to pay duty or value-added taxes on the goods. Domestic associations in participating countries that are members of the International Bureau of Chambers of Commerce issue carnets to residents to be used abroad. In the United States this task is performed by the United States Council for International Business. Carnets are generally used for commercial samples, professional equipment, and advertising material.



See Andean Trade Preferences Act.


Autarchy or Autarky

A term that means either autocratic rule in a political context or self-sufficiency in an economic context. While the two spellings are often used interchangeably, and one encounters “autarchy” much more often, most philological authorities agree that the “ch” spelling is best used when referring to a political context and the “k” spelling when referring to an economic autarky. One occasionally finds a confluence of both the economic and the political practice, as was the case for the Soviet Union.

A trade strategy based on autarky is the most extreme form of protectionism, and has historically been pursued by very few countries. See for example Plutarch’s biography of Lycurgus, the lawgiver of Sparta, for a classical account of the ideological underpinnings of autarky. Japan in the Tokugawa era and China during the Cultural Revolution offer other important examples. No country in the world today offers a pure example of autarky, although North Korea and Burma (also known as Myanmar) come close.


Auto Pact

The Automotive Products Trade Agreement reached in 1965 between the United States and Canada, providing duty-free treatment of most automotive products. A precursor to both the U.S.-Canada FTA and NAFTA, this was the first major discriminatory trade agreement undertaken by the United States in the post-war era.


Autonomous Liberalization

A variation on the autonomous tariff, this is liberalization that a country undertakes on its own and not as part of a trade agreement. For example, a country may opt to reduce its tariff rates without insisting that this be done through negotiations. Actions taken autonomously are generally not binding upon the country, and can be reversed at will. They nevertheless fall within the requirements of the most-favored-nation principle (e.g., tariffs that are autonomously reduced for one partner must be reduced for all, unless a waiver is granted). One issue in WTO negotiations, especially the GATS, is how members can obtain “credit” for actions that they have undertaken autonomously.


Autonomous Tariff

A system in which a country sets its tariff rates solely through domestic procedures (e.g., the enactment of legislation), rather than through the negotiation of binding agreements. For example, this was the principal method employed by the United States prior to the enactment of the Reciprocal Trade Agreements Act of 1934.


Back Burner

A common Washington expression that means an item of lower priority. This reference to the arrangement of a stovetop is often used to describe the downgrading of an initiative, as in “the bill was put on the back burner.”


Back Loading

A process by which most or all of the liberalization comes at the end of an implementation period. One such example was the Uruguay Round Agreement on Textiles and Clothing, under which the system of import quotas on textile and apparel products was eliminated in four stages over a ten-year period. The great majority of the actual liberalization, however, came in the fourth and final stage.


Balance of Concessions

The GATT/WTO notion of reciprocity is based on the idea that members have made concessions to one another in a balanced fashion. This phrase does not, however, appear anywhere in GATT 1947.


Balance of Payments

The overall relationship between a country’s income and its external payments, taking into account the balance of trade as well as other transactions such as investment, loans, invisibles, etc. GATT Article XII and the Understanding on the Balance-of-Payments Provisions offer disciplines for the imposition of restrictions that members may employ in order to safeguard their external financial position and balance of payments.


Balance of Payments Consultations

As provided under Article XV of GATT 1947, consultations that require coordination between the WTO and the International Monetary Fund to ensure that the trade and payments implications of any quantitative restrictions imposed for balance-of-payments reasons are fully analyzed within the respective jurisdictions of both organizations. Any member that imposes quantitative restrictions for balance-of-payments reasons is expected to hold consultations with other interested members. See also the Understanding on the Balance-of-Payments Provisions of GATT 1994.


Balance of Trade

The overall relationship between a country’s imports and its exports, either globally or with respect to specific partners. In the mercantilist conception of trade, maintaining a favorable balance — ensuring that exports exceeded imports — was a key goal of economic statecraft.


Bank for International Settlements (BIS)

Created in 1930 to serve as a forum for international monetary and regulatory cooperation, as a bank for central banks, as a center for monetary and economic research, and as agent or trustee to facilitate the implementation of various international financial agreements. Initial members included six central banks and a U.S. financial institution.


Bargaining Chip

In negotiations, any item that the negotiator expects to use as a medium of exchange for some other desired thing or outcome. The term is often employed in a negative sense by those who oppose an anticipated bargain (as in, “We don’t want our jobs to be mere bargaining chips for the diplomats”). See also bargaining tariff.


Bargaining Tariff

A tariff that a country has raised specifically for the purpose of negotiating for its reduction in exchange for other countries’ accessions. For example, the United States might seek to obtain some concession from Brazil by first increasing its tariff on coffee, and then proposing that a reduction in this tariff be exchanged for reduced Brazilian tariffs on products of interest to the United States. In a system based on bound tariffs, it is now rare for countries to employ this device.


Barriers to Entry

Impediments to competition that are intended to keep new entrants out of a market. Tariffs and other trade restrictions form a barrier to entry that restricts import competition, but other barriers can serve to prevent potential domestic competitors from entering the market. Barriers to entry are a focus of competition policy, and are an important manifestation of rent-seeking activity.



Also known as counter-trade, barter is based on transactions that do not involve money as a medium of exchange.


Basic Agricultural Product

According to Article 1(b) of the Uruguay Round Agreement on Agriculture, “the product as close as practicable to the point of first sale as specified in a Member’s Schedule and in the related supporting material.” See also agricultural product.


Basic Instruments and Selected Documents (BISD)

The principal publication of GATT case law and decisions, first issued in 1952 and followed by 40 supplements through 1994. See also the Analytical Index.


Basic Telecommunications Services Agreement

Negotiated under the auspices of the General Agreement on Trade in Services, this WTO agreement contains specific commitments on market access and national treatment taken by signatories in the area of basic telecommunications. This includes, but is not limited to, voice services, packet-switched data transmission services, circuit-switched data transmission services, telex services, telegraph services, facsimile services, and private leased circuit services. Click here to see the agreement.


Beggar Thy Neighbor

To show no regard for the welfare of other countries in the pursuit of one’s own economic interests. The protectionist policies adopted by most countries in the 1930s were often called a beggar-thy-neighbor approach that was ultimately self-defeating. Adam Smith may have been the first to use this construction, observing with disapproval in a passage of The Wealth of Nations that “nations have been taught that their interest consisted in beggaring all their neighbours.”


Beneficiary Country

A country that has been designated to receive benefits under a preferential program such as the GSP.


Berne Convention for the International Protection of Copyrights

Concluded in 1886 and revised in 1971, the convention requires that signatories extend national treatment in the protection of intellectual property rights. Article 9 of the TRIPs Agreement partially incorporates the Berne Convention into WTO law. The treaty is administered by WIPO.


Best Endeavors

Some clauses in GATT/WTO agreements and other international agreements merely provide for countries to undertake their best endeavors to achieve some specified end. Such provisions are often compromises that have been offered to countries that had sought the establishment of more precise and enforceable obligations. Best-endeavors clauses are common, for example, in provisions encouraging the extension of special and differential treatment to developing countries (e.g., GATT Article XXXVI).


Best Information Available

In trade-remedy cases, if a respondent fails to cooperate by providing the requested information the administering authority will use the best information that is available to the investigators. This is often the information supplied by the petitioner.


Bicycle Theory

The notion that “trade liberalization is like a bicycle” and will tip over if it does not keep moving forward. The image is often cited in support of proposals for new negotiations. Not to be confused with the hub-and-spoke metaphor.


Bilateral Investment Treaty (BIT)

Investment issues are not comprehensively covered by either WTO law or other multilateral agreements, and hence are largely left to national legislation and bilateral agreements. BITs are bilateral agreements that establish rules regarding the right of establishment, expropriation and nationalization, arbitration, the repatriation of capital, and other matters. The European Union, the United States, and others have reached dozens of BITs with trading partners, especially developing countries and economies in transition. For the United States, the BITs are the successor to the older series of friendship, commerce, and navigation treaties. The failed Multilateral Agreement on Investment was intended to be a multilateral version of a BIT.

Click here for links to the U.S. BITs.



The term today means the negotiation of free trade agreements or customs unions between a pair of trading partners. In the 1930s and 1940s it was understood to mean the negotiation of illiberal agreements between countries that were based more on managed trade than on free trade, and typically involved elements of barter or special clearing arrangements. Advocates of liberal trade feared at the end of the Second World War that countries would revert to prewar patterns of bilateralism.



In a trade agreement, a legally enforceable obligation. The term applies both to goods (with respect to tariffs) and services (with respect to other measures affecting any of the four modes of delivery). See bound rate, concession, none, and unbound.

In the economic analysis of quantitative restrictions, a quota or other limit that is set at a level that actually constrains trade. As a general rule, a quota is said to be binding only if a country manages to fill at least 90 percent of it. For example, suppose that a country that is capable of producing 100 units of widgets per year reaches an agreement with a trading partner to limit its annual exports to 1000 units per year. This commitment is binding in the same sense that a 60 mile per hour speed limit legally inhibits the pace of pedestrians.



The interdiction of trade to or from a particular port or country by another country’s military forces. In contrast to embargoes and other sanctions, which may be undertaken by countries that are either at peace or in a state of war, a blockade is almost always an act of war (apart from some 19th Century exceptions known as pacific blockades). As such, it is outside the purview of GATT/WTO law (see GATT Article XXI).


Blue and Green Issues

Informal term for labor rights (“blue collars”) and environmental issues (“green”).


Blue Box

See boxes.


Bonded Goods

Goods that are imported and stored in a bonded warehouse, usually after the owners have deposited a bond guaranteeing that the duty will be paid when and if the goods are withdrawn for domestic sale.


Bonded Warehouse

A secure storage area in which goods that are subject to excise taxes or customs duties are stored, pending payment of taxes or duties.


Booze and Butts

Negotiators’ slang for alcohol and cigarettes, both of which tend to be subject to high tariffs and excise taxes. These are among the principal items targeted for reductions in the tariff negotiations that accompany WTO accessions.


Border Measure

A measure employed by a government to regulate trade at the border, such as a tariff or quantitative restriction. Border measures are to be distinguished from interventionist measures that are enforced “inside the borders,” such as taxes, subsidies, or regulatory barriers.


Border Tax Adjustment

Remission of indirect taxes on exported goods, including sales taxes and value-added taxes, designed to ensure that national tax systems do not impede exports, and the imposition of domestic taxes on imported goods, to ensure that they do not receive preferential treatment as compared with domestically produced goods. GATT articles VI and XVI permit frontier adjustments on exports for indirect taxes but not for direct taxes such as income taxes.



See negative list.


Bound Rate

The tariff rate that a country has bound itself to in a trade negotiation or agreement. Also known as a binding or a bound tariff. The applied rate may be at or below the bound rate, but cannot legally exceed the bound rate. Not all countries bind all of their tariffs; a country is legally free to impose any tariff on an unbound product. For example, the U.S. tariff on crude oil is relatively low but is also unbound in the WTO. This means that the United States would be free in some future contingency to impose a high surcharge on oil imports (or at least on oil imported from countries with which it does not have free trade agreements).

Note that tariff negotiations may require that a mark-up be used in cases where countries do not have bound rates for certain products.

Tariff negotiations in the WTO are generally based on the bound rate. Depending on the amount of "water" in a country's bindings, this can sometimes mean that commitments that appear to be substantial have little or no impact on the applied rate.

See the PDF document on The A-B-C-Ds of Tariff Negotiations, which explains the relationship between applied rates, bound rates, commitments, and discrimination.


Bounty or Grant

The somewhat archaic phrase by which subsidies are referred to in U.S. countervailing duty law and repeated in GATT Article VI:3.



The categorization of domestic support programs and other government policies under Part IV and Annex 2 of the Uruguay Round Agreement on Agriculture. Although the word “box” appears nowhere in the agreement, which likewise makes no references to any colors, the terminology below is commonly employed to identify the different types of support that governments provide to their agricultural sectors:

  • Red Box: Prohibited policies that are illegal (no forms of domestic support to agriculture are currently in this box).

  • Amber Box: Non-exempt, trade-distorting policies that are subject to review and reduction over time, such as market price support, direct payments, and import subsidies.

  • Blue Box: Exempt forms of support, including payments made in conjunction with production-limiting programs (e.g., deficiency payments).

  • Green Box: Exempt policies that are not subject to limitations (and can be increased), such as decoupled payments and expenditures for research or training, pest and disease control programs, inspection services, marketing and promotion services, infrastructural services, domestic food aid, and humanitarian food aid. Developing countries receive special treatment for governmental stockholding programs for food security purposes, and for subsidized food prices for urban and rural poor.



A private form of sanction that is generally undertaken by consumers, trade unions, etc., as opposed to governmental actions such as embargoes (in peacetime) and blockades (in wartime). An exception to that general rule is the Arab League boycott of Israel, which has varying degrees of observance and legal force in the participating countries. Boycotts can be undertaken on a local, national, or international basis, and might variously target a given product, all of the goods produced by a specific company, or all goods imported from a specific country.



A section of an agreement under negotiation that is still being developed. One or more bracketed versions of that text will indicate the proposals put forward by parties to the negotiation. For example, consider a sentence that reads as follows: “The Parties agree that subsidies in this area will be limited to [$100 million] [0.05 percent of GDP].” The unbracketed text indicates that the negotiators have agreed in principle that the text will provide for some sort of limitation on permissible subsidies, but the two successive sets of bracketed text indicate that there are two competing alternatives that would define the scope of the limitation.

For some real-world examples of brackets and other means of proposing alternatives, see the successive texts of major documents of the Doha Ministerial Conference. When there is only one set of bracketed text, this indicates that the entire wording of the provision in question remains subject to dispute. An agreement that still has many unfinished sections is said to have “many brackets.” Other means by which a negotiating text might indicate differing proposals (and hence the lack of consensus) include ellipses (…), italics, bold text, underlining, the use of special fonts, or other formatting, as well as the presentation of alternative texts separated by the word “or.” See also chairman’s text.


Break Bulk

The importation of loose, noncontainerized cargo in bulk, usually because of size or weight considerations. These shipments are often separated into individual lots and routed to different destinations and/or importers.


Bretton Woods System

The post-war world economic system based on the Bretton Wood agreements. The United Nations Monetary and Financial Conference held at Bretton Woods, New Hampshire, in 1944 produced charters for the World Bank and the International Monetary Fund. It also proposed the establishment of the International Trade Organization, the terms of which were set at the Havana conference, but that institution never came into existence because the United States did not ratify the Havana Charter.



Article 1 of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions defines "bribery of a foreign public official" as "intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business," as well as "complicity in, including incitement, aiding and abetting, or authorisation of an act of bribery of a foreign public official."


Brussels Ministerial Conference

A GATT ministerial meeting held Brussels, December 3-7, 1990. The aim was to conclude the Uruguay Round of multilateral trade negotiations but the discussions failed.


Built-In Agenda

Many of the Uruguay Round agreements set timetables for future work. This agenda is pursued outside the structure of a formal round. See for example the work programs established under Article 20 of the Uruguay Round Agreement on Agriculture and the GATS 2000 mandate in GATS Article XIX, as supplemented by provisions in the Singapore Ministerial Declaration.

Elements of the built-in agenda were incorporated into the new round by the Doha Ministerial Declaration.


Buy American Act

This 1933 law, as amended, restricts the purchase of supplies and construction materials by government agencies to those defined as “domestic end-products.” This is based on a two-part test in which the article must be manufactured in the United States and the cost of domestic components must exceeds half the cost of all the components.The act does not apply to imports from countries that are signatories to the Government Procurement Agreement.


Byrd Amendment

A controversial amendment to the U.S. trade-remedy laws that is more properly known as the the Continued Dumping and Subsidy Offset Act of 2000. Enacted as a rider to the Fiscal Year agricultural appropriations bill, it provided that the revenue from antidumping and countervailing duties may be given to “affected domestic producers” to offset certain qualifying expenditures. The amendment was found to violate U.S. obligations in the WTO dispute-settlement mechanism, and was repealed in 2005. Click here to see the text of the law.



Coast-wise water transportation, navigation, or trade between the ports of a country. Cabotage laws generally reserve this traffic to flag carriers of the home country for reasons of national security. Beginning in the 20th Century, the term has also been applied to air travel within a country.

In the United States the Jones Act reserves cabotage traffic to U.S.-owned, -built, and –crewed ships. This is a restriction that the United States grandfathered into GATT 1947, and Article 3(a) of GATT 1994 ensures that this reservation remains in effect. Click here to see the text of the Jones Act.


CAFTA (also known as CAFTA-DR or DR-CAFTA)

The free trade agreement between the United States, the five Central American countries,and the Dominican Republic.


Cairns Group

Group of agricultural exporting countries that support agricultural trade liberalization. Formed in 1986 in Cairns, Australia just before the beginning of the Uruguay Round, its current membership consists of Australia, Argentina, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand, and Uruguay.



In the administration of textile import quotas, a call is a request for consultations from the importing country. When the growth in imports of a specific textile product or products causes serious damage or threat to the U.S. market, CITA may issue a call for consultations to countries contributing to that damage. The purpose of the consultation is to set an appropriate limit (also called a restraint or quota) on such imports.


Calvo Doctrine

Based on the view that a government is not obliged to indemnify aliens for losses that they sustain by reason of domestic disturbances or civil war, this doctrine holds that foreign states are not justified in intervening to secure the settlement of claims by their citizens (natural or juridical). The doctrine is named for the Argentine jurist Carlos Calvo. It was once common for Latin American countries to insist that contracts with multinational corporations include a Calvo Clause renouncing involvement by their home government in the event of a future dispute.


Cancún Ministerial

The fifth ministerial conference of the WTO, held in 2003. It ended in failure, due to disagreements between industrialized and developing countries over both agricultural trade and the Singapore issues.


Capacity Building

In its most narrow definition, training.This generally takes the form of technical assistance from international organizations, aid agencies, or schools, and is aimed at improving the knowledge and skills of policymakers, negotiators, legislators, and other professionals in trade policy and related fields. More broadly, it involves all manner of assistance necessary to establish institutions or enhance their ability to execute their tasks. It may thus involve such diverse activities as the drafting of news laws or regulations, the purchase and installation of new equipment (notably computers and other information technology), budgetary support, etc. See the provisions on technical cooperation and capacity building in the Doha Ministerial Declaration.


Capital Account

The portion of a country's balance of payments that includes the inward and outward flow of money for investment and international grants and loans.



The phenomenon in which a regulatory agency comes under the direct or virtual control of the industry that it was created to regulate (the proverbial “fox guarding the henhouse”). For example, an agency that is supposed to regulate the telecommunications industry may be said to have been captured if its principal administrators act in accordance with the expressed interests of that industry, to the detriment of its consumers. Capture is an example of rent-seeking activity, and is a real concern in the field of competition policy.


Caribbean Basin Economic Recovery Act

The original authorizing legislation of the Caribbean Basin Initiative. Click here to see the text of the law. See also Caribbean Basin Trade Partnership Act.


Caribbean Basin Initiative (CBI)

A U.S. program of non-reciprocal preferences extended to most countries in Central America and the Caribbean. The original preferences enacted in 1983 did not cover textiles, leather, and certain other products, but these were added when Congress approved a “NAFTA parity” provisions, known more formally as the Caribbean Basin Trade Partnership Act (part of the Trade and Development Act of 2000).


Caribbean Basin Trade Partnership Act

The 2000 amendments to the Caribbean Basin Initiative, providing inter alia for NAFTA parity. Click here to see the text of the law.


Caribbean Community (CARICOM)

A group of fifteen countries that agreed under the Treaty of Chaguaramas (1973) to promote ecnomic agreement, and later agreed in 2000 to establish the Caribbean Single Market and Economy. Its member states are Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Christopher and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago.


Carrying Trade

The business of transporting goods, often carried on by shipping firms that are unrelated to either the buyer or the seller (and are often of a different nationality altogether).



An arrangement or formal organization established for the purpose of restricting competition in an oligopolistic industry, especially by limiting production or supply. Cartels can be either national (in which case there may be problems with the national competition authorities) or international. The Organization of Petroleum Exporting Countries is often cited as the most economically consequential cartel. In order to be successful, a cartel must overcome a public-goods problem, in which both members and non-members will be tempted to free-ride by allowing others to restrict production while they enjoy monopoly rents by producing without restraint.

The original meaning of the term was an agreement reached between countries that were in a state of war. From this idea of an agreement between hostile or competing forces emerged the modern understanding of the term.

In the 1980s it became common in the United States to use this term in reference to organized crime in the narcotics business. That usage was in fact justified by the operations of the cocaine operations centered in Colombia, which were vertically organized groups that were capacle of controlling supply and, therefore, prices. Unfortunately, the term became so widely used that it is now misunderstood by many to mean “drug traffickers” in general (whether or not their organizational structure approximates that of the 1980s-era coqueros), and hence can lead to confusion if not used carefully.


Cause of Action

An act, incident, or set of facts that may give rise to a lawsuit or other claim under the law. In the infelicitous language of lawyers, these are said to be "actionable."



See Caribbean Basin Economic Recovery Act.



See U.S. Customs and Border Protection.


Central Product Classification

A system of nomenclature for both goods and services. It is often, but not universally, adopted by WTO members as the basis for classification of sectors in their GATS schedules of commitments.

Click here to see the document (large PDF file).


Ceteris Paribus

“All other things being equal.” Economic analysis is often based on comparative statics, in which the effect of changing one variable is measured by holding all other variables static. For example, restricting supply will ceteris paribus lead to an increase in prices.


Chairman’s Text

Also referred to as a chairman’s mark or a chairman's draft, this is a text proposed by the chairman of a negotiating group or working party. A chairman will sometimes resort to the preparation of such a text when the parties are deadlocked, progress is slow, or the existing text has too many brackets. For an example of a chairman’s text, see the first draft of the Doha Ministerial Declaration.


Change in Tariff Heading (CTH)

A principle employed in some rules of origin. Origin is conferred whenever the processing done to an item changes its classification in the tariff schedule. The degree of change that is required will vary from one system to another. Under a relatively liberal rule, the CTH criterion might be met by the change in the Harmonized System of tariff nomenclature from one eight- or even ten-digit classification to another, while stricter rules might require that the change be at the six-, four-, or even the two-digit (i.e., chapter) level. CTH rules might further specify for some products that changes to certain tariff items do or do not confer origin. See also substantial transformation.


Checks and Balances

The U.S. Constitution’s principle of the separation of powers is based upon the power of one branch of government to review, reverse, or block the actions of another. The Treaty Power is an example: The president makes treaties, but cannot ratify them without the approval of two-thirds of the Senate. Other congressional checks upon presidential power include the power to confirm his nominees and override his vetoes (which in turn is a presidential check upon a legislative power).


Chicken War

The first skirmish in the long-standing transAtlantic trade war occasioned by the European Economic Community’s adoption of the Common Agricultural Policy in the early 1960s. The European imposition of minimum import prices on imported chicken nullified the tariff concessions that had earlier been made to the United States, leading to U.S. retaliatory duties on light trucks and other products.



The value of imported or exported goods expressed as the cost (C) of the good plus insurance (I) and freight (F). Customs valuation based on CIF figures is more restrictive than valuation based on the ex-factory cost of the products, insofar as a tariff based on CIF value represents a tax on both the good itself and the services associated with its exportation. The EU uses this form of valuation.


Civil Society

The wide array of non-governmental actors that take an active part in the political sphere. The interest of civil society in the WTO has increased significantly with the expanded definition of trade in the 1980s, including topics such as services (thus implying that negotiations will deal with politically sensitive sectors such as health and education) and intellectual property rights. Starting in the 1990s, the proposed linkages between trade, labor rights, and environmental issues have further encouraged many non-governmental organizations to take part in debates over the scope and aims of trade policy.


Customs valuation depends upon the proper classification of goods, or the determination of what tariff item applies to a given products.



The Coordinating Committee of industrialized countries that jointly administered the restrictions on exports of militarily critical technology to the Soviet Union and its allies during the Cold War.



Another term for a treaty, often used to describe GATT agreements from the Tokyo Round (e.g., the Antidumping Code or the Subsidies Code).


Code Reciprocity

During the 1940s through the 1970s, a country did not have to sign all of the agreements (or codes) reached under the auspices of GATT. This “cherry-picking” approach was last employed in the Tokyo Round, which produced many such instruments. Developing countries were especially prone to forego the adoption of certain codes, thus contributing to a free-rider problem in the multilateral system. By contrast, the Uruguay Round was conducted on the basis of a single undertaking in which all WTO members are obliged to adopt all of the multilateral trade agreements.


Codex Alimentarius

An international code of food standards developed and administered by the Codex Alimentarius Commission (a United Nations agency). See sanitary and phytosanitary measures.



A variable that is "plugged into" an equation. In tariff negotiations, the most frequent usage of this term is in discussions over the appropriate "a" coefficient (or "a" and "b" coefficients) to be employed in a Swiss formula. In the case of that formula, the lower the coefficient the greater the required reduction in tariffs.



See policy coherence.


Collective Goods

See public goods.


Column 1 and Column 2

In the two-column tariff schedule of the United States, the rates shown in Column 1 are the MFN rates (now referred to as the NTR rates). Column 1 is further divided between the general rate (the NTR rate) and any special rates that are established under the various FTAs to which the United States is a party and the non-reciprocal preferences that are extended to developing countries. The Column 2 rates are essentially the rates set by the Hawley-Smoot Tariff Act of 1930 (as modified by changes in the tariff nomenclature), and apply only to imports from those countries that are still denied NTR treatment. The two columns date from the negotiations that followed enactment of the Reciprocal Trade Agreements Act of 1934.



The committee procedure of the European Commission, which is required when implementing EU law to consult special advisory committees made up of experts from the EU countries.



A sense of productive cooperation among the branches of the U.S. government, especially the legislative and executive. Comity is variously portrayed as courtesy, respect, mutual convenience, or deference. While it is somewhat difficult to identify exactly what comity is, it is quite clear when this quality of inter-branch relations is absent. In the field of trade policy, the reluctance of the legislative branch to delegate power through grants of negotiating authority demonstrates an absence of comity; conversely, an executive's refusal to consult with Congress before making commitments would also demonstrate this problem.



Though often used interchangeably with the word "trade," in the United States "commerce" is generally used to mean domestic trade while "trade" is usually reserved for the international form of traffic. Matters are not made any less confusing by the tautological definition given in U.S. law (19 U.S.C. 2481) by which "commerce" is merely said to "includ[e] services associated with international trade."


Commerce Clause

Article I, Section 8, Clause 3 of the U.S. Constitution provides that Congress has the power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” This provision, coupled with the role of the Senate under the Treaty Power, ensures that the executive branch of the U.S. government must win the support of the legislature whenever it seeks to undertake new initiatives in trade policy. The most important procedural question is whether Congress is willing to delegate its powers under the Commerce Clause by making grants of negotiating authority to the president.


Commercial Presence

Mode 3 of four modes of delivering services under GATS. It is defined under Article XXVIII to mean “any type of business or professional establishment, including through … the constitution, acquisition or maintenance of a juridical person, or … the creation or maintenance of a branch or a representative office, within the territory of a Member for the purpose of supplying a service.” This mode corresponds to foreign direct investment. A service supplier establishes any type of business or professional establishment in the foreign market for the purpose of supplying a service. Commercial presence comprises entities such as corporate subsidiaries, trusts, joint ventures, partnerships, sole proprietorships, associations, representative offices, and branches.



See concession.


Committee for the Implementation of Textile Agreements (CITA)

An inter-agency committee of the U.S. government that administers the textile and apparel import control program and monitor imports of textile and apparel products. CITA is comprised of the following five agencies: State Department, Commerce Department, Office of the U.S. Trade Representative, Department of Treasury and Department of Labor. The Commerce Department chairs the committee.



The term is sometimes used to mean any traded goods (also known as merchandise), and sometimes to mean the narrower category of fungible goods. In some cases the term is employed in a pejorative sense, in order to distinguish those goods that are merely economic in nature from those that are in some sense special (e.g., cultural goods and services, medical services, etc.). See also raw materials.


Common Agricultural Policy (CAP)

The European Union’s system of agricultural price supports and associated instruments of trade policy. Two of the principal elements of the CAP are the variable levy and export restitutions (or subsidies). The CAP has long been a source of friction between the United States and the EU, leading for example to the chicken war and a series of confrontations under the U.S. reciprocity laws and the Dispute-Settlement Understanding.


Common External Tariff (CET)

Member countries in a customs union or common market have the same tariff rate for imports from third countries. A CET implies a greater degree of economic integration than does the negotiation of an FTA, where the members of the group each retain their own tariff schedules for imports from third countries. Thus the tariff rate on widgets imported into any European Union is identical no matter which country they enter, but each of the three NAFTA member countries are free to apply their own, separate tariffs on imports of third-country widgets.


Common Market

A step beyond a customs union. Members of a common market remove border restrictions on trade in goods among the member countries and eliminate barriers to the movement of factors of production, and can even have a common monetary policy. They may also act as a trade bloc by establishing a unified trade policy towards non-member countries. The only fully functioning common markets are the European Union and the United States (as guaranteed by key provisions of the Constitution). 


Commonwealth, The

An international organization composed of the United Kingdom and many of its former colonies. members include Antigua and Barbuda, Australia, the Bahamas, Bangladesh, Barbados, Belize, Botswana, Brunei Darussalam, Cameroon, Canada, Cyprus, Dominica, Fiji, The Gambia, Ghana, Grenada, Guyana, India, Jamaica, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius, Mozambique, Namibia, Nauru, New Zealand, Nigeria, Pakistan, Papua New Guinea, Saint Kitts And Nevis, Saint Lucia, Saint Vincent And the Grenadines, Samoa, Seychelles, Sierra Leone, Singapore, Solomon Islands, South Africa, Sri Lanka, Swaziland, Tanzania, Tonga, Trinidad And Tobago, Tuvalu, Uganda, United Kingdom, Vanuatu, Zambia, and Zimbabwe.


Comparative Advantage

The fundamental concept underlying arguments in favor of international trade as a means of improving productivity and welfare. As originally developed by David Ricardo in The Principles of Political Economy (1817), this is a more sophisticated and powerful concept than Adam Smith’s simple view of absolute advantage. A country has a comparative advantage in the production of an item if, compared to a trading partner, it is more efficient in the production of that good vis à vis another good. For example, suppose that Portugal has an absolute advantage over Britain in the production of both wine and cloth, but it is comparatively more efficient in the production of wine than of cloth when compared to Britain. Both countries will gain if Portugal exports wine to Britain, and Britain exports cloth to Portugal. Trade allows each country to devote more resources to the good that it produces most efficiently, and end up with more wine and cloth than it would have in the absence of trade.



The “payment” that must be made to a trading partner for damage done by some action, especially as a result of either increasing a tariff above the bound rate or receiving an adverse finding in a dispute-settlement case. See the provisions on the modification of schedules in GATT Article XXVIII, as well as the Agreement on Interpretation of Article XXVIII. Compensation may also be owed if the establishment of, or accession to, a customs union leads to the raising of tariffs upon imports from third parties. Compensation usually takes the form of reduced tariffs on other products of interest to one’s trading partners. See also initial negotiating rights.



The central activity in a market, where firms and individuals compete in the exchange of goods, services, and capital. While liberal economists extol the benefits of competition among businesspersons, they also expect them to collude in anti-competitive activities. “People of the same trade seldom meet together, even for merriment and diversion,” Adam Smith wrote, “but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Rent-seeking efforts to restrict competition in the domestic market are the subject of competition policy, while protectionism is an effort to restrict import competition.


Competition Policy

The branch of public policy that is concerned with the potentially anti-competitive activities of private firms. The principles of competition laws are fundamentally more complex and controversial than those of trade policy, insofar as decisions regarding mergers, acquisitions, the regulation of oligopolies, and break-ups of monopolies involve more difficult calculations of whether the public interest is best served by allowing firms to achieve a more efficient economy of scale or by intervening to prevent the accumulation and abuse of market power. The United States opposes negotiations in this area out of concern that they could lead to restrictions on the use of the trade-remedy laws (especially the antidumping statute).

Competition policy is among the Singapore issues that were originally intended to be a part of Doha Round, but did not survive the Cancun Ministerial.

See the provisions on interaction between trade and competition policy in the Doha Ministerial Declaration.


Competitive Liberalization

A term associated with former U.S. Trade Representative Robert Zoellick, describing an approach to trade negotiations that the United States has employed since the mid-1980s. Agreements are negotiated with one partner or set of partners as a means of putting pressure on others to make equal or greater commitments. The U.S.-Canadian FTA negotiations of 1986-1988, for example, were intended to put pressure on recalcitrant partners in the Uruguay Round. More recently, the negotiation of FTAs with individual countries (e.g., Chile and Thailand) and subregional groups (e.g., Central America and the Southern African Customs Union) are intended to step up the pressure in regional and multilateral negotiations.


Competitive-Need Limits (CNLs)

The CNLs are an important element in the U.S. version of the Generalized System of Preferences, and are intended to prevent the extension of preferential treatment to countries that are already competitive in the production of an item. They set a ceiling on GSP benefits for each product and country. With certain exceptions and qualifications, a country will automatically lose its GSP eligibility for a given product the year after U.S. imports from that country account for either half or more of the value of total U.S. imports of that product or exceed a certain dollar value that is adjusted annually ($100 million in 2001). Click here to see the CNL provisions in the U.S. law.



The efficiency and productivity of a country vis à vis its trading partners (competitors). Although this term is of relatively recent vintage, the concern over competitiveness dates as far back as the mercantilist era. The principal thesis in Smith’s Inquiry into the Nature and Causes of the Wealth of Nations was that the real wealth of a country lay in its competitiveness and not in its store of specie.


Compound Tariff

A tariff that incorporates both a specific and an ad valorem component. For example, the tariff on widgets might be $1 each plus 10 percent ad valorem. Like ad valorem tariffs, compound tariffs can be translated at any given price level into ad valorem equivalent rates. Also known as a mixed tariff.


Compulsory Licensing

Under some countries’ intellectual property laws, foreign owners of patents are obliged to license their patent to domestic firms in order to receive protection. If the patent-owning firm fails or refuses to reach terms with a domestic firm, that firm may receive authorization from the government to produce the item. See Article 21 of the TRIPs Agreement.



The somewhat unfortunate term by which the binding obligations in a trade agreement are known, especially with respect to the reduction or elimination of tariffs. The term “commitments” is generally preferred today, insofar as it does not carry the same connotation of loss on the part of the country that undertakes the obligation. The package of tariff commitments that WTO members make under GATT Article II is referred to as the schedule of concessions.

There is some dispute as to how far a commitment must go in order to be considered a true, liberalizing concession. Some take the view that if a country has a lot of water in its tariffs (i.e., its bindings are well above the applied rates), and it merely agrees to reduces the bindings without affecting the applied rates, that does not amount to a real concession. Others argue that either biding at the applied rate, or even binding somewhere between the existing bound and applied rates, must nonetheless be considered a concession. That dispute is especially significant in the GATS negotiations, where the great majority of the commitments that countries made in the Uruguay Round were either at or above their applied practices. To an optimist, the GATS is half-full; to a pessimist, the GATS is half-empty.


Conditional MFN Treatment

The current meaning of the term refers to the conditioning of most favored nation (MFN) treatment (now known in the United States as normal trade relations or NTR) to a country upon its compliance with specific terms or conditions. The only major example of conditional MFN treatment is in the Jackson-Vanik provision of U.S. trade law, under which NTR for some countries continues to be conditioned upon their freedom-of-emigration practices. See also non-application.

This form of conditional MFN treatment was preceded by a much longer practice in U.S. trade law. Prior to the 1920s, the United States imposed a restriction on MFN treatment that had the practical effect of rendering the principle useless. The very first commercial agreement that the United States reached was the 1778 Treaty of Amity and Commerce with France, Article 2 of which provided that any commercial concession that either country granted to a third country would be extended to its partner “freely, if the Concession was freely made, or on allowing the same Compensation, if the Concession was Conditional.” For example, suppose that either country later made a concession in a treaty with Belgium to reduce its tariff on Product A in exchange for a Belgian commitment to reduce its tariff on Product B. Under the conditional MFN approach, that concession on Product A would then be extended to a partner receiving MFN treatment only if that partner reciprocated by making the same commitment that Belgium had made to obtain the concession. This principle theoretically undermined the liberalizing effect of U.S. trade treaties, but the significance of this point was reduced by the fact that the United States negotiated very few treaties with tariff concessions and the Senate consented to the ratification of even fewer. The United States adopted the unconditional MFN principle a decade before enactment of the Reciprocal Trade Agreements Act of 1934.


Confiscatory Tariff

A duty set at so high a level that it virtually confiscates the value of the imported product and thus acts as a prohibition on trade. Contrast with revenue tariff and nuisance tariff.


Congressional-Executive Agreement

A form of executive agreement in which the implementing legislation is subject to approval by Congress. The fast-track rules are based on this approach.


Congressional Oversight Group (COG)

Established by Section 2107 of the Trade Act of 2002, the COG is co-chaired by the chairmen of the Ways & Means and Finance Committees. The purpose of the COG is to provide the president and the U.S. Trade Representative with advice regarding the formulation of specific objectives, negotiating strategies and positions, the development of trade agreements, and compliance and enforcement of negotiated commitments under trade agreements. Each member of the COG is to be accredited as an official adviser to the U.S. delegation to trade negotiations.



Article IX of the Agreement Establishing the WTO provides that, “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947.” Although the word appears nowhere in GATT 1947, and despite the fact that the agreement provides rules in several places for voting on various types of issues (e.g., GATT articles XXV and XXVIII and WTO Article IX), most decisions in GATT and WTO are made by consensus. This means that formal votes generally are not taken, and indeed the very notion of a vote on an initiative is usually taken as a sign of political failure. The consequence of the consensus principle is that all members theoretically have a veto, and thus a decision by consensus is functionally the equivalent of unanimous approval, although in actual practice the veto is rarely employed (or threatened) by countries that are outside of the Green Room.

Various paragraphs of the Doha Ministerial Declaration provided that the launch of negotiations on the Singapore issues required explicit consensus on the modalities for these negotiations. In this context, the qualifying term “explicit” indicated that a formal decision was required; the absence of a formal decision not to launch negotiations thus could not be taken as an implicit form of consensus. No such consensus was reached in the Cancún Ministerial.



The core law of a country, in which such fundamental matters as the form of government (e.g., monarchy or democracy) and the institutional structure (e.g., parliamentary or presidential) are specified. the term is also used by some international organizations to entitle their central charter; see for example the Constitution of the International Labour Organization and the Constitution of the United Nations Educational, Scientific and Cultural Organization.

The Constitution of the United States of America has several important implications for the conduct of U.S. trade policy. It ensures that the United States is a common market by establishing a common external tariff (Article I, Section 8, Clause 1) and prohibiting internal tariffs (Article I, Section 9, Clause 6), giving Congress the authority to establish uniform commercial regulations for interstate and international commerce (the Commerce Clause), providing for a uniform rule of naturalization (Article I, Section 8, Clause 4), and prohibiting the states from taxing imports or exports (Article I, Section 10, Clause 2). The Treaty Power of the Constitution (Article II, Section 2, Clause 2) ensures that the president must win the Senate’s approval for any treaties that he wishes to ratify, but the terms of this power and the Commerce Clause have been modified by delegations of negotiating authority from Congress to the president. Ratification of Amendment XVI in 1913, which authorized the imposition of income taxes, had extremely important consequences insofar as it ensured that the Federal government would no longer be dependent upon tariff revenue for its existence. Significantly, the Constitution prevents the United States from imposing export taxes (Article I, Section 9, Clause 5); see the Harbor Maintenance Tax. Other trade-related provisions in the Constitution deal with coinage (Article I, Section 8, clauses 5 and 6), postal services (Article I, Section 8, Clause 7), intellectual property rights (Article I, Section 8, Clause 8), and the continued authority of state governments to regulate domestic and international trade in alcoholic beverages (Amendment XXI).

The philosophical basis of the U.S. Constitution is Liberalism, coupled with a distrust of concentrated power. This concern is expressed through the concepts of checks and balances (thus ensuring that state power is not concentrated in any one branch), federalism (thus ensuring that state power is not concentrated at any one level of government), and pluralism (thus ensuring that private power is not concentrated in any one sector of society). Each of these principles has affected the ability of the United States to make, approve, and enforce commitments in trade agreements.


Constructed Value

The U.S. Department of Commerce uses constructed value as the basis for normal value in antidumping cases involving market economies when there are no sales of the foreign like product in the comparison market suitable for matching to the subject merchandise (including, for example, when the Department disregards sales because they are below the cost of production), The constructed value is the sum of (1) the cost of materials and fabrication of the subject merchandise, (2) selling, general, and administrative expenses and profit of the foreign like product in the comparison market, and (3) the cost of packing for exportation to the United States.



Discussions between trading partners, usually over one partner’s measures that — in view of the other party — have a trade-restricting effect. Consultations are often the last resort before the institution of formal dispute-settlement procedures. Under various WTO agreements and GATT articles, a country may request consultations with another when it believes that its trade interests have been adversely affected by changes in that country’s trade policy, or by its failure to live up to its obligations. GATT Article XXII requires that members “accord sympathetic consideration to, and shall afford adequate opportunity for consultation regarding” the operation of GATT. If consultations do not resolve the matter, it may then be pursued through the Dispute-Settlement Understanding. See also the various consultation provisions of WTO agreements that are listed in a footnote to the DSU.


Consumer Surplus

The difference between what consumers would be willing to pay for something and what they actually do pay for it.



Those who purchase and use the goods or services that are supplied by producers. Individual consumers have an economic interest in opposing protectionism, but the public-goods problem generally prevents them from acting upon these interests. Although the term is normally used to define the end-users of consumer goods such as food or clothing, it can also mean the industrial consumers of raw materials or intermediate goods.


Consumption Abroad

Mode 2 of four modes by which services can be delivered under GATS. The consumer, or the consumer’s property, receives a service outside the territory of the consumer’s country, either by moving or being situated abroad. There is no real equivalent for Mode 2 in goods trade, except for the consumption of goods by visiting foreigners.


Contingent Protection

See trade-remedy laws.



Goods that are considered to be of military use to a belligerent, and thus are subject to special restrictions even when trade by a neutral state.


Contracting Party

Because GATT was not a formal international organization, this term was used in place of “member.” Countries were parties to the contract that was GATT. The WTO is a formal international organization in which countries are indeed members. The term is still used in agreements that predate the Uruguay Round, notably GATT 1947 itself, but those references can now be read as “member” or “members” where appropriate. When written all in capital letters (CONTRACTING PARTIES), the term refers to the totality of contracting parties or, today, the full membership of the WTO.



When used to describe a treaty, this term usually means an agreement to which a large number of countries are parties.

The term is also used to describe customary practices or styles. For example, it is a convention to use capitalization when referring to Members in the WTO.



A term that is now commonly used to connote the blurring of the lines that once separated various aspects of communications and culture. New technologies allow previously distinct entities such as television, radio, books, audio recordings, and so forth to blend together into a multimedia potpourri, and permit a single mode of transmission to carry such diverse content as voice, text, data, sounds, and images. Convergence has led in GATS negotiations to the principle of technological neutrality. See also electronic commerce.


Convict Labor

See prison labor.



A form of intellectual property right, copyrights are exclusive rights conferred by a government for a specified period to the creator of literary or artistic works such as books, maps, articles, drawings, charts, photographs, musical compositions, motion pictures, recordings, or computer programs. The Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights incorporates all substantive trade-related protection afforded under the Berne Convention for the International Protection of Copyrights, clarifying that computer programs are protected as literary works and compilation of databases as intellectual creation. Protection extends for the duration of the life of the author plus 50 years, and includes rights of translation, reproduction, public performance, broadcasting, adaptation and arrangement, and rental. See also fair use.


Corn Laws

Protectionist regulation introduced in 1804 to protect wheat farmers in Britain. The repeal of the Corn Laws in 1846 was the first major victory of free-trade interests.


Cotonou Agreement

Agreement reached in 2000 under which the European Union extends preferential treatment to the ACP countries. This agreement replaced the Lomé Convention of 1975 and the Yaounde conventions of 1963 and 1969. Click here to the see the text of the agreement.


Council of Economic Advisors

A body within the Executive Office of the President in the United States, the primary purpose of the Council of Economic Advisers is to perform analyses and appraisals of the national economy in order to provide policy recommendations to the president. It writes an annual Economic Report of the President.


Counterfeit Trademark Goods

Defined in a footnote to the TRIPs Agreement to mean "any goods, including packaging, bearing without authorization a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the rights of the owner of the trademark in question under the law of the country of importation."


Countervailing Duty (CVD)

A special duty levied for the purpose of offsetting any actionable subsidy bestowed directly or indirectly upon the manufacture, production, or export of any merchandise. CVDs are permitted under Part V of the Agreement on Subsidies and Countervailing Measures. See also trade-remedy laws. Click here to see the U.S. law.


Country of Origin

The nationality of a product, as determined by rules of origin. National laws often require that the country of origin be marked on imported products. A provision in Annex D.1 of the Kyoto Convention defines the term "country of origin of goods" to mean "the country in which the goods have been produced or manufactured, according to the criteria laid down for the purposes of application of the Customs tariff, of quantitative restrictions or of any other measure related to trade."

Click here to see the U.S. law.


Court of Appeals for the Federal Circuit (CAFC)

In the hierarchy of appellate bodies in the U.S. judicial system, the CAFC is above the Court of International Trade and below the Supreme Court.


Court of International Trade (CIT)

The U.S. court with original jurisdiction over most cases involving trade law. Many of the decisions and opinions of the Customs Service, the International Trade Administration, and the U.S. International Trade Commission can be appealed to the CIT. Such cases include challenges to classification rates and duties charged, antidumping and countervailing duty determinations, and embargoes or other quantitative restrictions. Generally, in the review of administrative determinations of record, the court will uphold an agency decision unless it is found to be unsupported by substantial evidence or otherwise not in accordance with law. A party can appeal a decision by the CIT to the Court of Appeals for the Federal Circuit, which will apply the same standard of review. A party can appeal a decision of the Court of Appeals for the Federal Circuit by filing a writ of certiorari with the Supreme Court.


Creative Destruction

Joseph Schumpeter believed that a combination of entrepreneurial innovation and periodic depressions provided an engine of progress by which inefficient firms are destroyed and replaced by new entrepreneurial undertakings. This process of creative destruction was, he thought, the essential fact about capitalism. Compare with Vernon’s notion of the product cycle.


Cross-Border Supply

Mode 1 of four modes of delivering services under GATS. This mode is analogous to the export of goods. The service is delivered within the territory of the consumer from the territory of the service supplier. Cross-border supply may entail transportation by mail, telecommunication, or the physical movement of merchandise embodying a service (e.g., a diskette storing information) from one country to another. The service supplier is not present within the territory where the service is delivered. It is not clear whether services traded through electronic commerce, which was largely developed after the original GATS negotiations, fall under this mode of supply.


Cultural Exception

A proposed principle under which culturally significant goods and services would be exempt from the rules that apply to other articles of commerce. It is most frequently at issue for the audiovisual sector (i.e., motion pictures, television, sound recordings, etc.). France, Canada, and other countries have often proposed such provisions or asserted the validity of the general principle, and the United States has just as frequently declared its opposition. A few GATT articles provide limited exceptions for cultural-related matters, such as screen quotas for motion pictures (Article IV) and for measures that are “imposed for the protection of national treasures of artistic, historic or archaeological value” (Article XX[f]). The Uruguay Round was the last time that a broader cultural exception was proposed for the trading system. While this effort failed, it might be argued that countries have the option under GATS of establishing de facto exceptions for cultural services simply by choosing not to undertake commitments. See also the Multilateral Agreement on Investment.


Cultural Property

Defined in Article 1 of the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export, and Transfer of Ownership of Cultural Property to be “property which, on religious or secular grounds, is specifically designated by each State as being of importance for archaeology, prehistory, history, literature, art or science. (See the original for an enumeration of the types of goods covered.)



In trade-remedy law, cumulation concerns the grouping together of imports from more than one country for purposes of making an injury determination. Cumulation acts to the benefit of the petitioner, by increasing the magnitude of the imports under investigation and hence the likelihood of an affirmative injury determination.

In rules of origin, cumulation allows more than one country to contribute to a specified minimum content level in order for a product to receive preferential treatment (e.g., under the GSP). Cumulation acts to the benefit of the exporter, by increasing the percentage value of the imports that will be found to originate in the beneficiary countries and hence the likelihood of meeting the requisite origin criteria.



Another and more generic term for duties or tariffs, the word can also refer generally to regulations affecting imports and exports.

The origin of this term dates back to the Latin terms employed in medieval England to describe trade taxes, most of which fell upon exports rather than imports. In his Commentaries on the Laws of England (1765) Blackstone noted that, “Some have imagined they are called with us customs, because they were the inheritance of the king by immemorial usage and the common law, and not granted him by any statute.” He instead explained that these taxes “were denominated in the barbarous Latin of our antient records, custuma; not consuetudines, which is the language of our law whenever it means merely usages. The duties on wool, sheep-skins, or woolsells, and leather, exported, were called custuma antiqua sive magna; and were payable by every merchant, as well native as stranger; with this difference, that merchant-strangers paid an additional toll, viz. half as much again as was paid by natives. The custuma parva et nova were an impost of 3d. in the pound due from merchant-strangers only, for all commodities as well imported as exported; which was usually called the alien’s duty.” From custuma then developed the modern term “customs.”


Customs Broker

A professional who assists importers in determining the classification of a product in the Harmonized System, preparing documents, and completing other steps necessary to import products. In the United States this profession is regulated and licensed by the Federal government.


Customs Cooperation Council

The former title of the World Customs Organization.


Customs Territory

In national laws, the geographical area in which a customs authority enforces ordinary controls upon foreign merchandise entering the territory. The customs territory may be smaller than the sovereign territory of a country. Free trade zones are outside the customs territory for purposes of assessing tariffs; goods that enter an FTZ are counted in the general imports statistics, but not in imports for consumption. The customs territory of the United States includes the fifty states, the District of Columbia, and Puerto Rico; it does not include Guam, the trust territories, or the Virgin Islands.

In GATT/WTO law, a customs territory is a trading entity that does not possess full sovereignty but does control its trade regime. It is defined in GATT Article XXIV:2 to mean “any territory with respect to which separate tariffs or other regulations of commerce are maintained for a substantial part of the trade of such territory with other territories.” GATT Article XXVI(5)(c) provides for WTO membership of any customs territory that “possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement.” This is the basis for the WTO membership of Hong Kong (China) and Macao.


Customs Union

A form of regional trade arrangement in which the members go beyond the elimination of barriers on substantially all internal trade (as in an FTA) to take the additional step of establishing a common external tariff (CET) among the members. From that one point can spring various consequences. Establishing a CET is a first step towards closer integration of the members’ trade policies, which may lead to operating as a bloc in negotiations with third parties. The CET may also generate a common source of revenue, which in turn may be used to fund common projects and establish common administrative structures. Establishing a customs union is a necessary step towards the creation of a true common market; see the transition from the European Economic Community to the European Union.


Customs Valuation

The method by which the classification and value of a good is determined both for statistical purposes and for assessing any ad valorem tariffs that may be owed. The U.S. approach to customs valuation is based on the customs value of a product, unlike the CIF-based approach used by the European Union. See GATT Article VII, the Agreement on the Implementation of GATT Article VII, the Decision Regarding Cases Where Customs Administrations Have Reasons To Doubt The Truth or Accuracy of The Declared Value, and the Decision on Texts Relating To Minimum Values And Imports Notification By Sole Agents, Sole Distributors And Sole Concessionaires. See also transaction value and American selling price.
Click here to see the customs valuation provisions of U.S. trade law.



Customs Value

Defined in WTO law as transaction value. Customs value is the basis for customs valuation in the United States. The price actually paid or payable for merchandise, excluding import duties, freight, insurance, and other charges. Thus defined, the customs value of merchandise will always be lower than the CIF value. In most other countries, however, customs value is CIF value. This means that any ad valorem tariffs will be assessed not only on the costs of the goods, but also on the services associated with the shipment of those goods (i.e., insurance and freight).


Dairy Export Incentive Program (DEIP)

A U.S. agricultural export subsidy that is similar in design and intent to the Export Enhancement Program, but applies only to dairy products (milk powder, butterfat, and various types of cheese).


The plural of anecdote.


De Facto

A circumstance that obtains in fact but not in law (de jure). A government that takes power illegally may, for example, be considered the de facto leadership of a country, while many consider Miami to be the de facto capital of Latin America. In the GATT system some countries that were former colonies of contracting parties had the option of maintaining de facto status as a contracting party, pending determination of their trade policies. The country could then join the GATT through the process of succession, which was less exacting than ordinary accession. This option is not available in the WTO.


De Minimis

Both the trade-remedy laws and the Generalized System of Preferences have special provisions for de minimis levels. Under the antidumping and countervailing duty laws, very low margins are not subject to imposition of duties. In the GSP, de minimis waivers allow imports to retain preferential status if imports from one country exceed the percentage component of the competitive-need limits, but total imports from all sources are below a de minimis level. (Properly spelled de minimus, but trade specialists are not known for their extensive knowledge of Latin.)


Deadweight Loss

The net loss to society for a given measure, such as trade protection. Calculated as the losses suffered by those whose welfare is undercut by some action minus the gains enjoyed by those whose welfare is improved.



A decision is said to be taken in the WTO when consensus is reached on a proposal. Decisions often take the form of a written document.


Decoupled Support

In the context of domestic support to agricultural producers, these are direct payments to producers and are not linked to production decisions. See boxes.


Deficiency Payment

In agricultural economics, a payment used to make up the difference between the administered price and the market price for a commodity. Note however that in actual practice deficiency payments may exceed this difference, as farmers may have the option of registering for the payment before they actually sell their commodity. The deficiency payment will be based on the market price at the time of registration, and market prices at the time of sale may be higher (and might even exceed the administered price).


Definitive Application

The supposedly “temporary” GATT was applied on a provisional basis; this was originally done in the expectation that the International Trade Organization would come into being. One consequence of the provisional nature of the GATT was that many non-conforming aspects of contracting parties’ trade laws were grandfathered. The WTO agreements are applied definitively.



In diplomacy, the accredited representatives of a country to a negotiation.

In U.S. constitutional law, the temporary or permanent transfer of authority from one branch of government to another. Grants of negotiating authority are delegations of a legislative power (as provided by the commerce clause) to the executive branch. See also comity.



Agreements that can be implemented or delivered at an upcoming meeting (e.g., a Group of Seven summit or a WTO ministerial). An agreement may be so considered because it is relatively easy to negotiate, the negotiations have already been largely or entirely completed, or both. A deliverable agreement, like an early harvest, is generally outside the scope of a single undertaking (but can be included retroactively when such a grouping of commitments is made at a later date).



In textile and apparel, a measure of the weight of a continuous filament fiber. This measurement is used in the United States to number all manufactured fibers and silk. Lower numbers indicate finer fiber. A denier is the equivalent to the weight in grams of 9,000 meters of continuous filament fiber.


Department of Homeland Security

Established in 2002, this U.S. government agency incorporates several bodies that have trade-related functions. These include the Bureau of Customs and Border Protection (formerly the U.S. Customs Service) and the Coast Guard. See also homeland security.


Deputy Level

In the hierarchy of diplomacy, the deputy level is above the working level but below the ministerial level. The people in this stratum hold titles such as Deputy Minister of Commerce (sometimes known as a vice minister) and Deputy U.S. Trade Representative.


Developing Country

There is no formal definition in the WTO for this term, where developing countries are self-identified. This is to be distinguished from the case of least-developed countries, for which there is a formal list based upon objective criteria. See also graduation, Group of 77, OECD, special and differential treatment, and UNCTAD.


Differential and More Favorable Treatment

Another way of referring to special and differential treatment.


Dillon Round

The fifth round of GATT negotiations (1960-1961). This was the last of the early and relatively brief rounds that focused principally on tariff negotiations, and preceded the much longer and more complex Kennedy Round.



In European Union law, a legal instrument that requires the member states to adopt legislation that conforms to its terms within a certain period of time.


Director General

The title held by the head of WTO and, before that, the GATT. The Director General leads the WTO Secretariat.


Discrimination and Non-Discrimination

A discriminatory trade policy treats one or more trading partners differently — better or worse — than the rest. The term is normally used in the sense of positive discrimination, such as the granting of extension of preferential tariff treatment (i.e., reduced-duty or duty-free access) to one partner or set of partners.

One of the stated objectives in the preamble to GATT 1947 is “the elimination of discriminatory treatment in international commerce.” Non-discrimination is provided through most-favored-nation treatment and national treatment. MFN treatment prevents a country from discriminating between one trading partner and another, while national treatment prevents a country from discriminating between its own nationals and firms from another country. For example, the United States extends both MFN and national treatment to Germany. The MFN principle means that the United States must apply the same tariffs to German imports that it applies to imports from Japan. The national treatment principle means that the United States cannot apply taxes or other barriers to Brazilian products that are more restrictive than those applied to goods of U.S. firms. Although GATT Article I makes no explicit reference to non-discrimination, it establishes this principle by requiring that in general “any advantage, favour, privilege or immunity granted … to any product originating in or destined for any other country [be] accorded immediately and unconditionally” to all other members. GATT Article XIII provides for the non-discriminatory administration of quantitative restrictions, while GATT Article XIV provides exceptions to these rules. The GATT/WTO regime also allows various forms of discriminatory treatment through regional trade arrangements (as permitted under GATT Article XXIV) and non-reciprocal preferences (provided for under the Enabling Clause and through waivers). See also tiering.


Dispute-Settlement Body (DSB)

The institution within the WTO that administers the Dispute Settlement Understanding. See also the Appellate Body.


Dispute Settlement Understanding (DSU)

Known more formally as the Understanding on Rules and Procedures Governing the Settlement of Disputes, this Uruguay Round agreement elaborates upon and reforms the rather scanty dispute-settlement provisions of GATT Article XXIII. One of the principal differences between the GATT and the WTO is that the dispute-settlement rules of the latter are much more enforceable. See also good offices, conciliation, and mediation and the provisions on the DSU in the Doha Ministerial Declaration.


Division of Labor

The basis of Adam Smith’s argument in favor of open markets, as presented in the very first sentence of The Wealth of Nations. By allowing all persons or countries to specialize in those things that they are most skilled at producing (see absolute advantage), and then trading these goods with others, the resulting division of labor encourages greater productivity. See also comparative advantage.

Although the division of labor was (together with the law of supply and demand) the foundation upon which Smith built his analysis, he cannot be credited with discovering this phenomenon. Appreciation of the principle is at least as old as Plato’s Republic, in which he quoted Socrates’ observation that “there are diversities of natures among us which are adapted to different occupations” and that therefore “all things are produced more plentifully and easily and of a better quality when one man does one thing which is natural to him and does it at the right time, and leaves other things” (Book II). St. Augustine made a similar observation in The City of God (Book VII, Chapter 4). In the decades before The Wealth of Nations, authors such as William Petty and Bernard Mandeville covered the topic.


Doha Development Agenda

The somewhat controversial and only semi-official title given to the round of multilateral trade negotiations launched at the Doha Ministerial. The underlying concept of this title is that this is to be the “development round” of negotiations (i.e., one that stresses the interests of developing countries). The title appears nowhere in the Doha Ministerial Declaration that launched the round. Many commentators have argued that this is a misleading title that has the unfortunate effect of creating unrealistic expectation, and is more in the nature of a public relations ploy than a serious statement. The term Doha Round is therefore preferred in some circles.


Doha Ministerial

The fourth ministerial meeting of the WTO held in Doha, Qatar in November, 2001. It launched a new round of WTO negotiations. See the evolving texts of the ministerial declaration and other Major Documents of the Doha Ministerial Conference. See also the Cancun Ministerial of 2003 and the July Package of 2004.


Doha Round

The round of multilateral trade negotiations launched at the Doha Ministerial, also known as the Doha Development Agenda.


Domestic Content

The percentage of national origin in a given product. Domestic content may be calculated for purposes of implementing rules of origin, for marking requirements, or for the enforcement of protectionist laws. During the early 1980s, for example, several failed attempts were made to require that automobiles sold in the United States contain certain levels of U.S. content.


Domestic Exports

Exports that are actually products of the country of export. They are to be distinguished from re-exports. See also total exports.


Domestic Industry

Defined in Article IV of the Agreement on the Implementation of GATT Article VI of GATT 1994 as, in general, “the domestic producers as a whole of the like products or to those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products.”


Domestic Support

Programs under which countries provide subsidies or other forms of assistance to domestic agricultural producers. The Uruguay Round Agreement on Agriculture distinguished between three general categories of support in a series of boxes. All WTO members must notify the extent of their domestic support measures to the Committee on Agriculture. Domestic support is one of the three pillars of WTO agricultural negotiations.


Double-Column Tariff Schedule

See two-column tariff schedule.


Double Transformation

A rule of origin that is also known as fabric-forward.


Downstream Dumping

The practice of exporting a product containing an input that has been purchased at less than normal value. Under U.S. antidumping law, downstream dumping can be monitored where the input is already the subject of an antidumping duty order. If monitoring reveals that imports of the end-product increase as a result of the diversion of the input product into the end-product, an antidumping investigation of the end-product may be initiated. Also known as input dumping.



Also known as duty drawback, this is a holdover from mercantilism that is intended to encourage the processing of goods for export. An importer that pays duties will receive a refund of those duties, in whole or in part, when the imported goods are either re-exported or goods that are manufactured from those imports are exported. For example, a producer of automobiles may claim drawback for the duties paid on car parts when the finished vehicles are exported. Drawback operations are similar in some respects to free trade zones, but where an FTZ is limited to a specific area the drawback program can operate inside the customs territory of a country.

Click here to see the U.S. statute.

NAFTA Article 303 phased out drawback programs among the three North American partners.



Dual Use

Goods that are deemed to have both a military and a non-military use, and hence pose special problems for countries that seek both to promote trade and to restrict sales of strategically important goods. See also strategic trade and contraband.



An unfair trade practice by which goods are sold at less than normal value (the terminology used in GATT Article VI) or less than fair value (the terminology used in U.S. law), and can lead the to the imposition of antidumping duties. Under U.S. law, sales of merchandise exported to the United States are at less than fair value when such sales materially injure or threaten material injury to U.S. producers of like merchandise. The determination that sales have been made at less than fair value involves a comparison of normal value (the price at which the merchandise is sold within the exporting country or to third countries) or a constructed value and the U.S. price (the price at which the merchandise is sold in the U.S. market). Antidumping laws are provided for under GATT Article VI, the Agreement on the Implementation of GATT Article VI, and the Declaration On Dispute Settlement Pursuant To The Agreement On Implementation Of Article VI.


Dumping Margin

The difference between the dumped price and the fair value of an imported item. In a dumping case, antidumping duties are imposed to make up this difference.


Dutiable Products

Imported products that are subject to tariffs. Historically, these were distinguished from items on the free list.



Also known as a customs duty. While the term is often used interchangeably with tariff (as is the case throughout GATT 1947), the charges imposed under the trade-remedy laws are exclusively referred to as duties (e.g., antidumping duties).


Duty Suspension

The unilateral non-application of a customs duty, or its application at a reduced level, usually on a temporary basis. In the United States duty suspensions are approved by Congress for limited periods of time, and generally cannot exceed $500,000 in foregone tariff revenue.


Duty Drawback

See drawback.


Duty Suspension

Temporary duty-free treatment for a product. In the United States these suspensions are usually enacted by Congress for specified periods of time (e.g., two or three years). Products subject to special duty-suspension provisions are an exception to the general rule that in the United States there is no difference between the applied rate and the bound rate for products.