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Dictionary of Trade Policy

 A-D   E   F   G   H   I   J   K   L   M-R   S-Z


CENTRAL
WTR SUBSCRIBERS ONLY
TIMELINE OF TRADE POLICY
ANALYSES OF TRADE POLICY
POLITICAL ECONOMY CLASSICS
WTO AGREEMENTS
U.S. AGREEMENTS
U.S. LAWS
KEY U.S. DOCUMENTS
CALENDAR OF EVENTS

 


Early Harvest

The conclusion of agreements on one or more topics before the scheduled completion of a multi-issue round. An early harvest is comparable to a deliverable, the only difference being that a deliverable is expected to be produced at the next (or current) meeting and an early harvest might be planned in the medium term. This approach is radically different from the single undertaking, although it is possible for agreements to be produced provisionally in an early harvest and then definitively incorporated later into a single undertaking.

 

Economic and Monetary Union

A currency area that the European Union created in 1999. The common currency of this area is the euro.

 

Economy in Transition (EIT)

See non-market economy.

 

Economy of Scale

Scale economies are achieved in an industry where larger production runs are more efficient. For example, it is generally more efficient for a firm to have one automotive plant that produces 100,000 vehicles per year than ten plants producing 10,000 vehicles each. These are referred to as increasing returns to scale.

 

Effective Rate of Protection

The actual degree of protection afforded to a manufactured product, calculated from the perspective of one who must choose between domestic production and importation. Higher rates of effective protection are associated with the common practice of tariff escalation. For example, consider a case in which the price of a finished widget is $10, the tariff on finished widgets is $2, the tariff on widget parts is $1, and widget parts account for 80 percent of the cost of producing widgets. Labor and other costs of processing accounting for the remaining 20 percent. In this instance, the $2 tariff that the importer pays for a finished widget can be seen as an additional $1 tariff above the $1 tariff on the parts. That additional $1 tariff, however, is actually protecting the last 20 percent of the value in the final stage of production. It therefore amounts to an effective rate of protection of 50 percent upon that final $2 worth of production costs, which is much higher than the 20 percent nominal rate of protection.

 

Efficiency

The relative productivity of one process, allocation, person, firm, or country when compared with an alternative. One entity is more efficient than another if it can produce a larger number of end products using the same factors of production, or (in what is simply the same statement in reverse) it can produce the same number of end products using a smaller number of these factors. Firm 1 is twice as efficient as Firm 2, for example, if it can produce 20 widgets using the same land, labor, and capital that Firm 2 uses to produce 10 widgets. Advantages in efficiency will usually vary across sectors. The theory of comparative advantage is based upon the fact that the relative efficiency of countries will differ, such that Country A will be more efficient in the production of one good vis à vis its production of another good than will Country B.

 

Electronic Commerce (E-Commerce)

The marketing of goods and services through electronic means, especially the Internet. This can be done either by using the Internet as a marketing tool for things that are delivered through other means (e.g., catalog sales for goods), or as a means of delivery as well (e.g., paid access to digitized products such as music, databases, literature, etc.). See also the provisions on electronic commerce in the Doha Ministerial Declaration and the concept of convergence.

 

Embargo

A form of trade sanction that entails the partial or complete cut-off of trade (imports and/or exports) with a specific country. Not to be confused with a blockade or a boycott. Embargoes are sometimes restricted to militarily critical technologies, such as (according to Gibbon) the traditional Roman policy of “freedom of trade [under which] nothing was prohibited except the exportation of arms for the service of the barbarians” (Decline and Fall of the Roman Empire, Chapter 40 Section III). A similar rule prescribed the restrictions imposed by the United States and its COCOM partners on trade with the Warsaw Pact countries during the Cold War. These restrictions were not a significant GATT issue, insofar as Czechoslovakia was the only Communist country in the organization at the time they were imposed and the restrictions were easily justified under GATT Article XXI. Broader restrictions, such as the total trade embargo that the United States placed on Nicaragua in the 1980s, were more politically controversial but still fell within the rather elastic boundaries of Article XXI.

Trade sanctions can be as unpopular in the “sender” state as they are in the target country, especially in trade-dependent industries. The embargoes that the Madison administration imposed upon trade with France and Great Britain prior to the war of 1812 were highly unpopular in the Northeastern states, for example, where they were lampooned as a snapping turtle named the “ograbme” (embargo spelled backwards).

 

Enabling Clause

Common name of the 1979 declaration on Differential and More Favourable Treatment, Reciprocity, and Fuller Participation of Developing Countries. This product of the Tokyo Round allowed the contracting parties to “accord differential and more favorable treatment to developing countries, without according such treatment to other contracting parties.” It was an important step in the development of the Generalized System of Preferences, which would otherwise violate the terms of GATT Article I. See also special and differential treatment.

 

Energy Security

A policy or set of policies intended to reduce a country’s dependence on imported (and therefore potentially disrupted) supplies of energy, especially in the form of crude oil or refined petroleum products. The notion is directly analogous to food security, insofar as energy is for a modern economy what food is for the human body. Energy-security policies in the United States generally entail a combination of import restrictions (especially from countries or regions that are considered unfriendly or unstable), the encouragement of new production and exploitation at home and abroad, research and development of alternative sources of energy, and conservation.

 

Engagement

In the language of U.S. strategic planning, cooperation with a potential adversary that is intended to encourage peace and cooperation. Trade relations are an important component of engagement, based on the hope that the deliberate cultivation of interdependence will encourage changes within the other country and decrease the likelihood of military confrontation. This term emerged in the 1980s as an alternative to the imposition of sanctions (especially on South Africa), but carried the same sense as the earlier (1970s vintage) term détente. In the current global environment it is typically used in the context of U.S. economic relations with China. See also Jackson-Vanik, non-application, and permanent normal trade relations.

 

Enlargement

This term is usually employed to mean accession to the European Union or its predecessor, the European Economic Community. This enlargement has come in four waves of accessions: Denmark, Ireland, and the United Kingdom in 1973; Greece, Portugal, and Spain in the 1980s; Austria, Finland, Sweden in 1995; Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia in 2004; and Bulgaria and Romania in 2007. The reunification of Germany in 1990 also had the effect of enlarging the EU, but this was a purely sui generis event. Similarly, Greenland (a Danish territory with autonomy over its trade policy) offered a special case when it withdrew from the EU in 1985.

 

Enlightened Self-Interest

“Doing well by doing good.” The practice of advocating actions that are in the interest both of others and of the person making the proposal. For example, a firm that manufactures pollution-control equipment and takes a strong stand in favor of environmental protection can be said to be practicing enlightened self-interest. Similarly, one might perceive such enlightened self-interest in the positions adopted by labor unions in industrialized countries with respect to the rights of workers in other countries.

 

Entrepôt Trade

A trade activity in which merchandise from Country A is sold to Country C by a middleman in Country B. This is not merely a paper transaction; the goods physically reside in Country B for some period. Hong Kong and Panama are examples of entrepôt traders, as are other free ports. Entrepôt trade can also be conducted out of a foreign trade zone.

 

Environment

Together with labor rights, environmental concerns were the most controversial of the new issues to emerge in the last decade of the 20th century. Among the unsettled questions are whether environmental issues should be dealt with in trade negotiations, whether any disciplines in those agreements should be enforceable through sanctions, how any apparent conflicts between trade agreements and multilateral environmental agreements should be resolved, and how trade might contribute to a policy of sustainable development. Some had urged (without success) the environmental matters be included among the Singapore issues.

See also sustainable development, the provisions on the trade and the environment in the Doha Ministerial Declaration, the Decision on Trade in Services and the Environment, the NAFTA side agreement on the environment, and the Jordan standard.

See the CENTRAL guide to Labor and the Environment.

 

Equity

Fairness.

 

Equivalent Measurement of Support

The definition in Article 1(d) of the Uruguay Round Agreement on Agriculture reads in part, “the annual level of support, expressed in monetary terms, provided to producers of a basic agricultural product through the application of one or more measures, the calculation of which in accordance with the [Aggregate Measurement of Support] methodology is impracticable, other than support provided under programmes that qualify as exempt from reduction.”

 

Escape Clause

Generally, a clause in an agreement that states the conditions under which contracting parties are allowed to violate the terms of the agreement without punishment. In trade policy, it refers specifically to safeguard mechanisms.

See the global U.S. safeguard law and the WTO Safeguard Agreement.

 

Euroland (or Eurozone)

The EU member states that have adopted the euro as their currency. So far the countries involved are Austria, Belgium, Cyprus, Estonia, Finland, FranGermany, Greece, Ireland, Italy, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia, and Spain.

 

European Coal and Steel Community

The predecessor to the establishment of the European Economic Community, this arrangement provided for free trade in coal and steel.

 

European Economic Area (EEA)

The EEA is an economic agreement that brings together the EU and three-quarters of EFTA. The Agreement on the EEA, which came into effect in 1994, extended the single market of the fifteen EU member states to Iceland, Liechtenstein, and Norway; a Swiss referendum rejected EEA membership in 1992. Membership in the EEA constitutes something of a compromise between FTA and common market status. The arrangement includes some important attributes of a common market, such as the free movement of persons, but it does not entail adoption of the EU’s common external tariff.

 

European Economic Community (EEC)

Predecessor to the European Union. The Treaties of Rome entered into force on January 1, 1958, and just over a decade later (July 1, 1968) all customs duties in intra-Community trade were abolished. This achievement came 18 months ahead of schedule. The EEC made the transition to the single-market EU in 1993.

 

European Free Trade Association (EFTA)

This FTA was established in 1960 by Austria, Denmark, Great Britain, Norway, Portugal, Sweden, and Switzerland. Only two of these countries remain in the group; the current EFTA members are Iceland, Liechtenstein, Norway, and Switzerland. EFTA has always been defined by its status as an alternative. In the 1960s this group was known as the “outer seven” and was thus distinguished from the “inner six” members of the European Economic Community (now known as the European Union). The United Kingdom took the lead in organizing EFTA in response to the development of the EEC, but the British move from EFTA to the EEC in 1973 began a long process of transition. EFTA expanded slightly with the accession of a few relatively small economies — Iceland joined in 1970, Finland in 1986, and Liechtenstein in 1991 — but the principal trend has been in the opposite direction. Denmark also joined the EEC in 1973, at which time the newly expanded EEC reached a new trade agreement with the remaining members of EFTA. Portugal also “switched teams” in 1986, as did Austria, Finland, and Sweden in 1995.


European Union (EU)

The EU may be the only authentic common market, apart from the United States. Originally established as the European Economic Community (EEC) among Belgium, France, Germany, Italy, the Netherlands, and Luxemburg, that customs union has since grown as new issues have come within its jurisdiction and new countries have joined its ranks (a process known either as accession or enlargement). The countries that have acceded are Austria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Ireland, Latvia, Lithuania, Malta, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden, and the United Kingdom. The candidate countries are Croatia, the Former Yugoslav Republic of Macedonia, Iceland, Montenegro, and Turkey.

See also Acquis Communautaire.

See the EU website at http://europa.eu/index_en.htm.

 

Exceptions

Measures that are otherwise WTO-illegal can be justified under the regime’s exceptions. GATT Article XX provides exceptions for measures that are intended to achieve such objectives as the protection of public morals; the protection of human, animal, or plant life or health; the conservation of exhaustible natural resources; and so forth. The exceptions do not give an automatic “free pass” for countries to employ whatever restrictions they deem to be politically necessary. The article requires that that measures intended to achieve these objectives are not applied in a manner that arbitrarily or unjustifiably discriminates between countries, or comprise a disguised restriction on international trade. Moreover, the contention that a measure is justified by one or more of these exceptions can be decided by a dispute-settlement panel, based upon the arguments presented by both sides and the panel’s reading of the WTO’s laws and traditions. The security exception provided under GATT Article XXI generally offers greater leeway than do the Article XX exceptions; invocations of Article XXI have traditionally gone unchallenged before dispute-settlement panels. The general exceptions provided in GATS Article XIV are similar, but not identical, to those in GATT Article XX, while GATS Article XIV bis corresponds to GATT Article XXI.

 

Executive Agreement

An alternative to formal treaties (as that term is used in the United States), these binding agreements between states differ from treaties only in the means by which they are approved. Executive agreements come in a variety of forms. The most significant is the difference between true executive agreements, which can be put into effect without any further action by Congress, and congressional-executive agreements that require the legislature’s approval. Executive agreements are now the principal means by which the United States implements agreements on such diverse matters as military bases, foreign assistance, and the exchange of tax information, and are especially important in the field of trade policy. From the mid-1930s through the late 1960s, Congress allowed the president to negotiate and implement tariff-cutting pacts that went into effect with a stroke of the president’s pen. This negotiating authority was delegated under the terms of the Reciprocal Trade Agreements Act of 1934 and subsequent amendments. From the mid-1970s to the mid-1990s, tariff and non-tariff matters were dealt with under the special terms of the fast track. As provided under the Trade Act of 2002, the fast track is now known trade promotion authority. This is a form of congressional-executive agreement.

 

Ex-Factory

Refers to the price of a good at the factory gates (i.e., before any additional charges related to domestic or international transportation, taxes, etc.). It is thus identical to customs value in the United States, and generally lower than the FOB, FAS, or CIF price of a good. Similar terms include ex-dock, ex-mill, ex-mine, ex-plantation, and ex-warehouse. The term is generally used to quote prices between a buyer and a seller, rather than as a term of art in trade policy or in official statistics.

 

EximBank

The Export-Import Bank of the United States, an agency responsible for assisting the export financing of U.S. goods and services through loan, guarantee, insurance, and working capital programs.

 

Exon-Florio Provision

Section 721 of the Defense Production Act of 1950 (as amended in 1988), this law authorizes the president to suspend or prohibit proposed foreign mergers or acquisitions or divest completed transactions that constitute a threat to national security. Since enactment of the provision, only one transaction has actually been blocked.


Explicit Consensus

Consensus that is expressed affirmatively (e.g., by the approval of a formal decision), and not merely implied by the absence of a decision in the negative.

 

Export Competition

In WTO agricultural negotiations, export competition is one of the three pillars. It is under this rubric that negotiations are conducted with the aim of reducing or eliminatoring countries' export subsidies.

 

Export Enhancement Program (EEP)

One of the principal U.S. agricultural export subsidy programs, EEP is intended to “fight fire with fire” by targeting commodities and markets in which the European Union subsidizes its own exports. The U.S. Department of Agriculture pays cash bonuses to exporters, allowing them to sell agricultural products in targeted countries at prices below the exporter’s costs of acquisition. All EEP sales are made by the private sector. Eligible commodities include wheat, wheat flour, rice, frozen poultry, barley, barley malt, table eggs, and vegetable oil. See also Dairy Export Incentive Program.

 

Export-Import Bank

An independent U.S. Government agency that offers a variety of loan, guarantee, and insurance programs to support exports of goods and services.

 

Export Performance Requirement

This type of performance requirement will generally require that a foreign investor export some specified percentage or value of its output. Such requirements are generally banned under the Uruguay Round Agreement on Trade-Related Investment Measures.

 

Export Price

In antidumping law, the price at which particular merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the merchandise to an unaffiliated purchaser, or to an unaffiliated purchaser for exportation. Under U.S. antidumping law, dumping consists of sales of merchandise exported to the United States at "less than fair value," when such sales materially injure or threaten material injury to producers of like merchandise in the United States. The determination that sales have been made at less than fair value involves a comparison of "normal value" and the "U.S. price," and the latter may be derived either from the export price or the constructed export price. The price used to establish the export price can be adjusted to take into account certain costs, charges, taxes, duties, and expenses.

 

Export-Processing Zone

A special zone that is generally outside the customs territory of a country, and is intended to be used for the assembly or other processing of goods for export. A foreign trade zone, which is many ways similar to such a zone, can be used to process goods for importation and/or exportation. Mexican zones are known as maquilidoras.

 

Export Restitution

A form of subsidy employed by the European Union in its Common Agricultural Policy, under which payments are made to promote exports of farm goods that cannot be sold within the EU at the target prices.

 

Export Restrictions

Restrictions on exports fall into four general categories: (1) restrictions on the exportation of militarily critical technologies, (2) embargoes (politically motivated sanctions), (3) export taxes for revenue, and (4) restrictions intended to promote the processing of goods at home. The first two categories of restrictions fall under the general rubric of security policy, and may be permitted under GATT Article XXI (often under protest from the target state). The third type of restriction is common, especially in developing countries that are dependent on the exportation of raw materials, although not practiced by the United States because export tariffs are expressly forbidden by Article I, Section 9, Clause 5 of the Constitution.

The fourth type of export restriction, in which states seeks to encourage the processing of raw materials by domestic industries, is an artifact from the mercantilist era. The penalties for exporting unprocessed materials could be quite severe. Adam Smith reported that under a 1566 English statute “the exporter of sheep, lambs, or rams was for the first offence to forfeit all his goods for ever, to suffer a year’s imprisonment, and then to have his left hand cut off in a market town upon a market day, to be there nailed up; and for the second offence to be adjudged a felon, and to suffer death accordingly.”

 

Export Subsidy

A category of subsidies that is prohibited under the Agreement on Subsidies and Countervailing Measures. Annex I of the agreement provides an illustrative list of such subsidies. Article 9 of the Uruguay Round Agreement on Agriculture establishes the rules governing export subsidies for agricultural products.

 

Export Trading Company

A corporation or other business unit that is organized and operated principally for the purpose of exporting goods and services or of providing export-related services to other companies. More precisely, a provision in the Export Trading Company Act of 1982 defines the term to mean "a person, partnership, association, or similar organization, whether operated for profit or as a nonprofit organization, which does business under the laws of the United States or any State and which is organized and operated principally for purposes of - (A) exporting goods or services produced in the United States; or (B) facilitating the exportation of goods or services produced in the United States by unaffiliated persons by providing one or more export trade services." This law exempts authorized trading companies from certain provisions of U.S. antitrust laws.

 

Expropriation

The take-over of a foreign investment by the host government. When the appropriated assets are controlled by that government it is known as nationalization.

 

Expulsion

GATT does not explicitly provide for the expulsion of a country, but this nevertheless happened to Yugoslavia (Serbia and Montenegro) in June, 1993. The GATT Council decided in light of United Nations General Assembly Resolution 47/1 that “the Federal Republic of Yugoslavia (Serbia and Montenegro) cannot continue automatically the contracting party status of the former Socialist Federal Republic of Yugoslavia in the GATT, and [the GATT Council] therefore decides that the Federal Republic of Yugoslavia (Serbia and Montenegro) should apply for accession to the GATT and that it shall not participate in the work of the Council and its subsidiary bodies.” Yugoslavia’s application for accession to the WTO was not accepted until 2001.

 

Externality

An effect from some economic activity that is not reflected in its costs. Externalities can be either positive or negative. An example of a positive externality would be the oxygen produced from farming. That same activity may produce a negative externality if agricultural chemicals pollute the ground or water. Like public goods, considerations of externalities can offer a rationale for greater involvement by government in the economy.

 

Extraterritoriality

The application of one country’s laws to the nationals of another country that do not reside within its territory. Questions of extraterritoriality arise in both competition policy (e.g., European reviews of proposed mergers between U.S. firms) and in sanctions (e.g., U.S. sanctions on European firms that invest in certain Cuban properties).

 

Fabric

Textile materials ready for processing (through cutting, assembly, and other steps) into apparel. Fabrics can variously be made from natural or man-made yarn, and are generally either knit or woven.

 

Fabric-Forward

In the rules of origin governing trade in textiles and apparel, a fabric-forward rule requires that in order for a product to benefit from preferential treatment all of the processing from the fabric stage forward be performed in the country of origin. This approach is much less strict than a fiber-forward rule. See also yarn-forward.

This rule is also known as double transformation.

 

Facilitator

In a WTO ministerial conference, some ministers are designated to act as facilitators in the negotiations. Their task is to collect information on the positions and interests of specific countries through bilateral meetings (sometimes called “confessionals”), to report to the heads-of-delegation meetings, and to propose possible solutions. In the Cancún ministerial, for example, there were five such facilitators.

 

Factor Endowment

The availability of factors of production in a given country or region. Some endowments are fixed (land), while others (labor and capital) can be improved over time.

 

Fair Trade

Arguably the most elastic term used in trade policy, it means whatever the user intends it to mean. In most cases, however, the intention is to draw a distinction between unfettered free trade and some favored alternative that is alleged to be more just. The most common use of the term is in connection with the trade-remedy laws, most of which are based on the contention that a competitor is engaging in some form of unfair trade practice such as dumping or subsidies. For example, several of President Jimmy Carter’s predecessors and successors have used language very similar to a line in his 1978 State of the Union message, in which he declared that “we must firmly resist the demands for self-defeating protectionism,” but that “free trade must also be fair trade. And I am determined to protect American industry and American workers against foreign trade practices which are unfair or illegal.” This common formulation allows policymakers to straddle the fence that divides free trade from protectionism.

Alexander Hamilton used the term in an altogether different sense in The Federalist Number 35, in which he contrasted the “fair trader” with the smuggler.

Sometimes this term is used in a neo-mercantilist sense to suggest balanced trade, with the underlying assumption being that a country with a persistent trade surplus must be engaged in some form of unfair practice. The association between fair trade and protectionism is at least as old as the establishment in 1881 of the Fair Trade League. This British group fought against the prevailing policy of free trade.

Most recently, the term has been used by those in civil society who critique free trade from a social perspective. Free trade can easily be exploitative, according to this line of reasoning, but special channels of trade can ensure that more of the final price for a product is put in the hands of the original producer (e.g., coffee growers in developing countries). The meaning of the term is further complicated by the fact that it is also used in domestic trade, especially in the contexts of consumer-protection and labor laws.

 

Fair Use

In intellectual property law, the fair-use doctrine permits critics, scholars, and so forth to make brief quotations from literary works that are protected by copyright.

 

FAS

The Free Alongside Ship calculation of a product’s value. This includes the customs value plus the cost of moving the product to the point of exportation, but does not include the international shipping and insurance costs that are incorporated in a CIF value.

 

Fast Track

Known since enactment of the Trade Act of 2002 as trade promotion authority, the fast track is a form of negotiating authority. This new form of authority was necessitated by the transition in trade negotiations from simple tariff matters (which could be implemented as executive agreements under the RTAA authority) to non-tariff matters involving more complex changes in law and policy. The fast track is the most significant form of congressional-executive agreement authority in U.S. foreign economic policy. The rules provide two guarantees: (1) a vote on the implementing legislation within a fixed period of time, and (2) a yes-or-no vote, with no amendments to that legislation. Click here to see the 1974 provisions (as amended), or here to see the provisions of the 2002 law.

See also negotiating objectives and the reading entitled The Legislative Process and the Fast Track.

 

Federal Register

The official gazette of the executive branch of the U.S. Government. 
It is accessible at http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR. 

 

Federalism

A system of government that distinguishes between the central, national government and two or more subnational governments with responsibility over specific districts. Those districts might variously be identified as states (as in the United States), provinces (as in Canada), cantons (as in Switzerland), länder (as in Germany), etc. Federal governments sometimes face special difficulties in negotiating and/or implementing and enforcing commitment in trade agreements, especially when subnational governments have exclusive or shared jurisdiction in such matters as taxation, the sale of alcohol and tobacco, the regulation of financial services, etc.

 

Fiber

The basic textile material that is twisted into yarns and then used in the production of a fabric. Fiber may be either natural (e.g., cotton) or manufactured (e.g., polyester).

 

Fiber-Forward

In the rules of origin governing trade in textiles and apparel, a fiber-forward rule requires that in order for a product to benefit from preferential treatment all of the processing from the fiber stage forward be performed in the country of origin. It is the strictest of all such rules, essentially requiring (unless the rule specifies otherwise) that all of the material be from the country of origin. For example, a cotton shirt would have to be made from cotton fabric that is made in that country, and in turn the cotton fiber must have been grown there. The rule might alternatively be devised on a regional basis, thus allowing the use of cotton fiber that originated in the country that imports the finished product (e.g., cotton is grown in the United States, shipped to Mexico where it is processed into fabric and then a shirt, and the final product is imported into the United States). See for comparison the less stringent yarn-forward and fabric-forward rules.

This standard is also known as triple transformation.

 

Filibuster

In the rules of the U.S. Senate, a parliamentary maneuver by which one or more senators block action by refusing to yield the floor. A filibuster can be broken only by a cloture motion; this requires sixty of the one hundred votes. Filibusters can be employed to block consideration or enactment of ordinary bills or treaties, but are rendered ineffective by the fast-track rules.

In the 19th Century, the leader of a paramilitary expedition in Central America. The term has its origins in the Spanish filibustero, which in turn has the same roots as the English “freebooter” (i.e., pirate).

 

Final Act

A formal document recording the results of an international conference. Treaties adopted by the conference will be attached to it. Signing this instrument does not constitute consent to be bound by such treaties. See for example the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations. Similarly, the original GATT was annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment.

 

Finance Committee

The committee in the U.S. Senate that has jurisdiction over most trade-related issues. Like its counterpart in the House of Representatives (the Ways and Means Committee), this committee has jurisdiction over taxes. Tariffs were once the principal source of tax revenue in the United States. Although tariffs now account for only two percent of U.S. Government revenue, and are a diminishing issue in trade policy, the tax committees in Congress maintain control over this subject matter.

 

Finished Good

A good produced for the final user. See also raw material, intermediate good, and tariff escalation.

 

Florence Agreement on the Importation of Educational, Scientific and Cultural Materials

A GATT-negotiated, UNESCO-administered agreement that facilitates imports of educational, scientific and cultural materials. The contracting states agree to dismantle customs barriers for imported books, works of art, audiovisual material of educational, scientific and cultural nature, scientific equipment and appliances and materials for the blind. The instrument also states that convertible currencies and import licenses should be granted for the purchase of books to be used in public libraries. Originally reached in 1950, the agreement was updated by the Nairobi Protocol in 1976. This provides for the free circulation of other cultural products, such as audiovisual materials.

Click here for the text of the agreement.

 

FOB

The Free On Board calculation of a good’s value. It represents FAS value plus the costs of stevedoring (i.e., loading goods onto a ship). In addition to its common use in trade parlance and official statistics, this measure of value is often employed in negotiations between buyers and sellers. It may be qualified be references to specific points of departure (e.g., “FOB vessel Port of New York”), routes (e.g., “FOB Pittsburgh freight prepaid to Port of Philadelphia”), etc.

 

Food and Agriculture Organization

A specialized agency of the United Nations, the purpose of this Rome-based organization is (according to the preamble of its constitution) "to promote the common welfare by furthering separate and collective action on their part for the purpose of: raising levels of nutrition and standards of living of the peoples under their respective jurisdictions; securing improvements in the efficiency of the production and distribution of all food and agricultural products; bettering the condition of rural populations; and thus contributing towards an expanding world economy and ensuring humanity's freedom from hunger[.]" The FAO has observer status in the WTO.

 

Food Security

A policy based upon the need to maintain sufficient domestic production of foodstuffs in order to ensure that the population can be fed even if imports are unavailable. The underpinnings of this policy bear a closer resemblance to medieval concerns over siege warfare than to faith in the peace and prosperity that open markets are supposed to bring. Some countries pursue food security by prohibiting the exportation of staples, or by protecting domestic producers from import competition. Japan is an example of a country that has historically placed a high priority on food security, following an approach quite different from the British decision to repeal the corn laws in 1846. See also special products, the green box, and energy security.

 

Forced Labor

According to section 1307 of the (U.S.) Tariff Act of 1930, “all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.” This is virtually identical to the definition given in Article 2 of the International Labour Organization's Forced Labor Convention for "forced or compulsory labour," which means “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”

 

Foreign Agents Registration Act (FARA)

Intended to guard against undue foreign influence on U.S. policy, FARA requires that foreign agents report to the U.S. Department of Justice. Registration is required when engaging in certain political activities, including all attempts to influence U.S. policy or public opinion on behalf of, or even at the request of, a foreign individual or entity; for those acting as public relations agents or political consultants in the interests of a foreigner must register; for those soliciting or disbursing funds or contributions in the interest of a foreigner must register; or when representing the interests of a foreigner before the U.S. government.

 

Foreign Direct Investment (FDI)

Actual “bricks and mortar” investment in a country, as opposed to portfolio investment in stocks and bonds. See also commercial presence.

 

Foreign Relations of the United States (FRUS)

A State Department series that reproduces key documents in the diplomatic history of the United States, organized both chronologically and by region, country, or topic. Materials include items that were classified at the time the events took place. At present the lag time between actual events and the issuance of the corresponding FRUS volume is over thirty years.

 

Foreign Trade Zone (FTZ)

Often incorrectly termed a free trade zone (and thus confused with a free trade area), an FTZ is an instrument of national law rather than an international agreement. It is a special zone that is inside the physical territory of a country yet outside of its customs territory. This legal fiction permits products to enter an FTZ without paying duty. Foreign and domestic merchandise may be admitted into zones for storage, assembly, manufacture, and processing, and are not subject to entry procedures or payment of duties unless and until the merchandise enters the domestic customs territory for domestic consumption. At that time, the importer ordinarily has a choice of paying duties either at the rate applicable to the foreign material in its condition as admitted into a zone, or — if it is used in manufacturing or processing — to the finished product. FTZs are a particularly attractive option for industries that either export a considerable share of their output or that face a tariff inversion for inputs. Although FTZs are sometimes equated with export processing zones, many of the imported items are either not processed or not exported (and sometimes neither operation occurs). In the United States the products of an FTZ can either be exported or enter the domestic stream of commerce, and an FTZ can also be used as a warehouse to store goods that are either imported later or sold in entrepôt trade.

FTZs are a significant element in the U.S. trade regime. According to Department of Commerce data, FTZs are now in every U.S. state, employ some 340,000 people, and handle $170 billion in merchandise. Although they were originally intended to act as export platforms, only one-tenth of what is now produced in FTZs is exported. They are especially useful for automotive producers and petroleum refiners.

 

Form A

The form that in many countries must be filed with imports that seek preferential treatment under the Generalized System of Preferences. The United States no longer requires that Form A be filed, but as an artifact of this earlier requirement the letter “A” is still used in the U.S. tariff schedule to identify products that are eligible for GSP treatment.

 

Formula Cuts

The formula approach to tariff-cutting, in which tariffs are reduced according to a mathematical formula, is a more efficient modality than the request-offer method. The simplest type of formula cut is the horizontal reduction, also known as a linear reduction or a linear cut (e.g., a 10%, or 20%, or 50%, etc. cut acorss-the-board). First used in the Kennedy Round of GATT negotiations, formulas facilitate matters by starting from the assumption that all countries should cut all of their tariffs by some agreed amount. Once such a principle is adopted, the only questions are how the formula should be devised and what means might be established for either accelerating or (more often) decelerating or exempting specific products from the basic formula. During the Kennedy Round, the basic formula was a linear reduction that was based on a 50% cut for industrial products that allowed for negotiated exceptions, aiming for an overall average reduction of 30%. The principal method adopted for the Tokyo Round (1974-1979) was the Swiss formula, which concentrated particularly on tariff peaks. Formula cuts are also commonly employed in negotiations for regional trade arrangements. Formulas can also have various levels; see tiered formula. See also GATT Article XXVIII bis.

 

Forum-Shopping

The practice of seeking the most favorable forum in which to pursue a matter. From the perspective of a demandeur, the WTO is often seen as a preferable forum because of its strong dispute-settlement rules. This is why, for example, demands were made in the 1980s to bring intellectual property rights within the within the scope of the Uruguay Round negotiations (the GATT having better enforcement powers than World Intellectual Property Organization), and why some forum-shoppers today would prefer that labor rights be brought within the scope of the WTO (where rules are more enforceable than they are in the International Labor Organization).

 

Fourteen Points

President Woodrow Wilson laid out his fourteen-point peace plan in a January 8, 1917 address to Congress. Wilson saw open markets as an essential ingredient for peace. His second point called for, “Absolute freedom of navigation upon the seas, outside territorial waters, alike in peace and in war, except as the seas may be closed in whole or in part by international action for the enforcement of international covenants,” while his third point demanded, “The removal, as far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.” Coupled with other principles such as “Open covenants of peace, openly arrived at” (Point I) and “A free, open-minded, and absolutely impartial adjustment of all colonial claims” (Point V), Wilson’s idealistic declaration set the tone for U.S. participation in the war and the peace negotiations.

 

Francophonie

More properly l'Organisation internationale de la Francophonie, this is the Paris-based organization to which fifty governments from are represented. Most are countries where French is the official language (or one of them), but some members merely share a cultural affinity or historical tie to France. Its members include Albania, Belgium, Benin, Bulgaria, Burkina Faso, Burundi, Cambodia, Cameroon, Canada, Canada New-Brunswick, Canada Québec, Cape Verde, the Central African Republic, Chad, Comoros, Congo, Côte d'Ivoire, the Democratic Republic of Congo, Djibouti, Dominica, Egypt, France, Gabon, Guinea, Guinea Bissau, Equatorial Guinea, Haiti, Laos, Lebanon, Luxembourg, Macedonia, Madagascar, Mali, Morocco, Mauritius, Mauritania, Moldova, Monaco, Niger, Romania, Rwanda, St. Lucia, Sao Tomé et Principe, Senegal, Seychelles, Switzerland, Togo, Tunisia, Vanuatu, and Vietnam.

 

Free List

In a tariff schedule, the list of products that receive duty-free treatment. There is no longer a formal free list in modern tariff schedules that are based on the Harmonized System; all products are listed in that schedule according to their place in the nomenclature, and not by their free or dutiable status.

 

Free Port

A port that is exempted from some of the usual tariffs or other restrictions imposed upon imports. Countries will sometimes establish free ports on islands or other areas where they wish to encourage tourism and shopping by their own nationals. A free port is similar in some respects to a foreign trade zone.

 

Free Rider

An important consequence of the public-goods problem. A free rider is a person or other entity that permits another party to provide a public good and then benefits from it at no cost. For example, a person who allows others to pay for sidewalks and then enjoys their use can be deemed a free rider (or, in this case, a free pedestrian). In the context of trade policy, a country that benefits from the liberalizing actions of others without reducing its own barriers, or without adopting disciplines, is a free rider. Prior to the adoption of the single undertaking in the Uruguay Round, free-riding was a common phenomenon even for GATT contracting parties.

 

Free Trade

The term can mean either the actual condition of free trade (low or nonexistent tariff and non-tariff barriers to trade) or support for the process of removing barriers to trade. It is the opposite of protectionism.

The derivation and evolution of this term, as well as “trade” in general, exhibits a surprisingly slow recognition of distinctions between domestic and international exchanges. As originally employed in the eighteenth cntury, the term commonly meant “the freedom of trade” for workmen (i.e., the absence of high barriers to entry in a profession, such as guilds and apprenticeships) and hence referred to domestic rather than foreign trade. The term “free trader” was also used in some cases to refer to those who either enjoyed special privileges on an official basis or, in the case of smugglers, on an unofficial basis. In Adam Smith’s time the term had not yet acquired a doctrinal sense, and hence he used the indefinite article (“a free trade”) to describe the state of open markets between countries. That same construction can be found in the early writings of American statesmen, but died out in the early nineteenth century. By 1832 James Madison could draw the following distinction in his private correspondence: “Free trade, in its most familiar sense, is the phrase for the freedom of foreign commerce; and the internal interchanges between the towns and the country are as often expressed by the term commerce as by the term trade.” That distinction remains largely true in American political discourse: The terms “free trade” and “protection” are now always understood to refer to foreign trade, the term “commerce” almost always means domestic commerce (as in the Senate Commerce Committee), and the term “trade” requires clarifying adjectives (e.g., the Federal Trade Commission deals with domestic trade, and the U.S. International Trade Commission deals with foreign trade).

See also liberalism.

 

Free Trader

One who advocates the policy of free trade.
 

Free Trade Area (or Agreement)

The shallowest form of regional trade arrangement. Two or more countries agree to remove border restrictions on goods (such as eliminating all tariff barriers to one another), but each party to the agreement maintains its own external trade policies towards non-member countries, such as tariffs on third-country imports. Both EFTA and the European Union have negotiated numerous FTAs with their trading partners. Among the more notable FTAs are the European Free Trade Association, the North American Free Trade Agreement, and (prospectively) the Free Trade Area of the Americas. See also regionalism.

 

Free Trade Area of the Americas (FTAA)

This failed negotiation envisioned the creation of a comprehensive hemispheric FTA made up of the 34 countries of South, Central, and North America and the Caribbean (Cuba excepted) by 2005. The FTAA objectives were agreed upon and a preparatory process was initiated at the First Summit of the Americas, held in Miami (1994). Agreement was reached to launch formal FTAA negotiations at the Second Summit of the Americas, held in Santiago (1998), while the Third Summit of the Americas in Quebec City (2001) served as a mid-term review for the negotiations. The negotiations subsequently languished, however, and then evaporated.

 

Free Trade Zone

A common but incorrect term for what is more properly termed a foreign trade zone. Not to be confused with an FTA.

 

Freedom of Transit

See transshipment and GATT Article V.

 

Friends Group

An informal group of WTO diplomats whose countries have shared interests in a given issue or sectoral area. For example, countries that export widgets may form a Friends of Widgets group. Friends groups will gather on a semi-regular basis to exchange information and devise strategy. These groups are ad hoc, temporary, and unofficial.

 

Friends of the Chairman

A variation of the friends group, these groups are often established to organize activity around a specific negotiation (or to promote a certain direction in those negotiations).

 

Friendship, Commerce, and Navigation (FCN) Treaties

Most of the trade treaties that the United States negotiated from the mid-19th to the late 20th centuries bore this title, although the content of the treaties changed significantly over time. In the mid-20th Century the FCN treaties were negotiated according to a more or less standard model that was adapted to specific circumstances, but generally provided for unconditional MFN treatment, protection for the rights of investors, and other matters of both an economic and a political nature (e.g., consular rights). In a few cases, treaties that did not include all of the standard FCN provisions bore other, deliberately antiquated titles that hearkened back to earlier treaties and thus indicated their less comprehensive status (e.g., the Treaty of Amity, Economic Relations, and Consular Rights reached with Iran in 1955). FCN treaties were bilateral pacts that coexisted with the multilateral obligations established under GATT and other instruments, and many of them remain in effect to this day. The FCN series gave way in the late 1970s to the Bilateral Investment Treaty approach, which focuses more precisely on investment issues.

 

Fundamental Conventions of International Labour Organization

Among the dozens of conventions that the International Labour Organization has adopted in decades of existence, the following seven -- together with the ILO Constitution -- are considered to be "fundamental":

See also internationally recognized worker rights, the Jordan standard, and labor rights.

 

Fungible Good

A raw material or other commodity that is not highly differentiated. Fungible goods are generally not distinguished by features or qualities (apart from grading standards). For example, oil and wheat are fungible, but computers and jewelry are not. As defined in NAFTA Article 415, “goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical.”

 

Gains from Trade

The benefits that accrue to producers and consumers from trade. The benefits to society as a whole are best understood by comparing an open market with a closed one, with the latter producing a deadweight loss.

 

GATS

See General Agreement on Trade in Services.

 

GATS 2000

The negotiations under the General Agreement on Trade in Services that were part of the built-in agenda and later became folded into the Doha Round. The reference to 2000 indicates only the year in which the preliminary discussions were to take place; substantive negotiations began in 2002.

 

Government Accountability Office

The investigative arm of the U.S. Congress, charged with examining all matters relating to the receipt and disbursement of public funds. It frequently issues reports on trade-related issues. Its website is at http://www.gao.gov/.

 

General Agreement on Tariffs and Trade (GATT)

The term is used to refer both to the agreement (which remains the central legal instrument of the global trading system) and the body that, before establishment of the WTO, used to administer this agreement. GATT 1947 is the original agreement that the contracting parties reached in 1947, as supplemented and amended. Its core provisions are articles I and III, which provide for most favored nation treatment and national treatment. GATT 1994 incorporates this text, as well as other instruments and understandings of the WTO. Unlike the WTO, the GATT was not a bona fide international organization. It was instead an agreement to which countries were contracting parties rather than members, and was applied on a provisional rather than a definitive basis. GATT nevertheless had many of the trappings of an international organization, such as a headquarters and a secretariat. See also grandfathering.

 

General Agreement on Trade in Services (GATS)

The WTO agreement dealing with trade in services. GATS rules apply to all services other than governmental services, but WTO members have negotiated relatively few commitments thus far in specific sectoral areas. The GATS consists of three major elements. The first is a framework that lays out the general obligations for trade in services, which it does in much the same way as the GATT does for trade in goods. It provides for most-favored-nation treatment, market access, and national treatment. Second, the GATS includes annexes on specific services sectors (air transport, financial services, maritime, and telecommunications) as well as the movement of natural persons. The third element consists of the schedules of commitments for each signatory, according to four modes and modified by any horizontal commitments. See also GATS 2000, none, and unbound.

 

General Availability

In countervailing duty law, a subsidy that is generally available throughout an economy is generally not actionable. For example, a foreign widget industry would not be subject to countervailing duties if it received the benefits of low electricity rates, provided that those low rates were generally available throughout the economy. Things would be different if that one industry received a special, low rate.

 

General Council

The highest governing body of the WTO for day-to-day operations, comparable to the General Assembly of the United Nations. All member countries are represented on the council, which — according to Article IV of the Agreement Establishing the WTO — conducts the functions of the Ministerial Conference during the periods between conferences. That same article provides the that the council “shall convene as appropriate to discharge the responsibilities of the Dispute Settlement Body provided for in the Dispute Settlement Understanding,” and “shall convene as appropriate to discharge the responsibilities of the Trade Policy Review Body.”

 

General Exception

GATT Article XX provides a series of exceptions that countries may invoke in support of otherwise GATT-illegal measures that they might impose. These exceptions are not automatically granted; they are often invoked in dispute-settlement cases, and are subject to the rulings of panels. The term “general” distinguishes these exceptions from the security exception of GATT Article XXI.

 

General Imports

The value of merchandise that physically arrives in a country, which may or may not then proceed into the customs territory of the country (thus being classified as imports for consumption). General imports will often be larger than imports for consumption, with the difference between the two values being accounted for by re-exports and by products consumed in free trade zones.

 

Generalized System of Preferences (GSP)

The GSP is a major manifestation of special and differential treatment for developing countries. It provides non-reciprocal preferences in the form of reduced-duty or duty-free entry for numerous products imported into industrialized countries from designated beneficiary countries and territories. Most industrialized countries adopted GSP programs in the 1970s, each of which varies according to the beneficiaries, products covered, and type of preferences granted. See competitive-need limits, Form A, internationally recognized worker rights, and graduation.

The U.S. version of this program has undergone a series of changes over the decades. Click here to see the 1974 law (as amended), or here to see the renewal provisions in the 2002 law.

 

Generally Accepted Accounting Principles

Defined in a provision of the Agreement on the Implementation of Article VII of GATT 1994 as “the recognized consensus or substantial authoritative support within a country at a particular time as to which economic resources and obligations should be recorded as assets and liabilities, which changes in assets and liabilities should be recorded, how the assets and liabilities and changes in them should be measured, what information should be disclosed and how it should be disclosed, and which financial statements should be prepared.”

 

Geneva Rounds

The first (1947) and fourth (1955-1956) rounds of GATT negotiations.

 

Geographical Indications

As defined in Article 22 of the TRIPs Agreement, these are indications that identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin. These appellations have same function as a trademark or brand name, and are protected as a form of intellectual property right under articles 22 and 23 of the TRIPs Agreement. See appellations of origin.

 

Good Cop, Bad Cop

Derived from an interrogation technique used by the police, the term is generally applied to negotiations or other processes in which two parties cooperate (tacitly or explicitly) to induce cooperation from a third party. In its classic usage, the stratagem has one police officer pretend to be a near-homicidal character so that his partner can tell the prisoner, “You’d better cooperate with me; I can’t control my maniac partner.” It is sometimes observed that the executive and legislative branches of the U.S. Government take such an approach to dealing with other countries.

 

Good Offices, Conciliation, and Mediation

Alternatives to formal dispute-settlement proceedings that are provided for under Article 5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes.

 

Government Procurement

The purchase of goods or services by the government, which might be provided by domestic or foreign firms. This is not the same as state trading. The WTO Government Procurement Agreement (GPA), which built on an earlier 1979 code, is among the two surviving plurilateral arrangements of the old GATT system and hence does not fall within the scope of the single undertaking. The GPA requires central government agencies in member countries to observe non-discriminatory, fair, and transparent procedures in the procurement of goods and services, including construction services. The agreement also applies to sub-central governments and to government-owned enterprises. The GPA requires the establishment of a domestic bid challenge system and introduces added flexibility to accommodate advances in procurement techniques. It also allows each signatory to negotiate coverage on a reciprocal, bilateral basis with other signatories. For services, the government procurement provisions are in GATS Article XIII. See also Buy American Act.

Click here to see the Agreement on Government Procurement. See also the provisions in the Doha Ministerial Declaration calling for new negotiations on transparency in government procurement.

 

Graduation

The removal of a country or product from the terms of a program or agreement. The term usually refers to the loss of duty-free privileges under the Generalized System of Preferences, but can also be used for other distinctions such as the Jackson-Vanik law. See also special and differential treatment.

 

Grandfathering

The practice of allowing a country to retain preexisting measures that are inconsistent with the terms of a new agreement. Many such derogations were allowed under GATT, which was intended to be a provisional agreement, but the WTO is definitively applied and takes a stricter with respect to grandfathering. See also reservation.

The origins of the term are unfortunate. “Grandfather clauses” were among the means employed by Southern states after the U.S. Civil War to deny civil rights to freed slaves and their descendants. The so-called Jim Crow laws established extremely rigorous educational or property qualifications in order to vote, but also excused anyone from compliance with the these provisions if they either (a) had been legal voter in 1866 or (b) were lineal descendants of such a voter (i.e., their “grandfather” would could vote in 1866). These laws ensured that only whites could meet the necessary qualifications. While this version of grandfathering fell out of favor after the Supreme Court declared it unconstitutional in 1915, the general concept of grandfathering rights came to be applied to many other fields of public policy (e.g., zoning laws, tax codes, etc.).

 

Green Box

See boxes.

 

Green Room

An informal term used to describe the closed-door meetings held by the most influential members of the WTO. The two most important green-room participants are the United States and the European Union. Prior to the late 1990s, the other participants were largely restricted to major industrialized countries such as Canada, Japan, and Australia, although other countries joined on a case-by-case basis. The green-room process is criticized by many countries that are outside of this room, especially developing countries. By the time of the Cancún Ministerial Conference (2003), green-room participation had been broadened to include several developing countries.
See also Quad and G-7.

The origin of this term is in some dispute, with old hands telling at least four different stories about which was the original green room and where it was located. One story holds that the there was a green room in the Villa la Bocage, a charming building in Geneva that was the original headquarters of GATT in the 1950s (and now houses administrative offices for UNCTAD). Others hold that at one point in the late 1980s or early 1990s the office of the GATT Director General was painted green. The term is nevertheless easily confused with its use in the theater, where for centuries is has been employed to describe the room where actors prepare themselves (see for example the references to theatrical green rooms in Rousseau’s Confessions [1766-1770] and in Boswell’s Life of Samuel Johnson [1791]). It is not clear whether the theatrical term has somehow been transposed to the trade-policy context, or if it was indeed inspired simply by a real and verdant room.

 

Group of Eight

The Group of Seven plus Russia. G-8 meetings at the summit level are usually held just before or just after G-7 meetings, allowing Russia to participate in some but not all of the deliberations. G-8 meetings are also held at the ministerial level .

 

Group of Fifteen

A group composed of relatively large developing countries such as Argentina, Egypt, and Malaysia.

 

Group of Seven

A semi-formal group comprised of the United States, the United Kingdom, Germany, Italy, France, Japan, and Canada. In addition to an annual summit meeting of the G-7 presidents and prime ministers, these countries also hold irregular meetings at the ministerial or deputy level to coordinate policy or develop common positions. See also green room and Quad.

 

Group of Seventy-Seven

A group of developing countries, originally 77 in number (and now nearly twice that number), that first met at UNCTAD I in 1964.

 

Group of Ten

Comparable to the like-minded group, this association of ten developing countries in the mid-1980s opposed the launch of the Uruguay Round. It was led by Brazil and India.

 

Group of Three

Colombia, Mexico, and Venezuela. They negotiated a tariff phase-out agreement in 1995.

 

Group of Twenty (G-20)

This term has had two meaning in recent years.

The current meaning is for a group of "major economies" that dates back to 1999 but took on greater importance with the outbreak of the financial crisis in 2008. It now meets at the summit level annually, and at the level of finance ministers and central bank governors. Its members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States, plus the European Union.

It had earlier meant a coalition of developing countries that opposed the position of the United States and the European Union in Cancún Ministerial Conference of 2003. The original twenty members of the group were Argentina, Brazil, Bolivia, Chile, China, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, India, Mexico, Pakistan, Paraguay, Philippines, Peru, Thailand, South Africa, and Venezuela. When Egypt later joined the group, it became known as the G-21. Still other countries later joined the group’s ranks. By the end of the ministerial, commentators variously referred to the group as the G-21, the G-22, or the G-20-Plus.

 

Guaranteed Access Levels (GALs)

Under the special treatment that the United States extends to beneficiary countries of Caribbean Basin Initiative, the GALs provide virtually quota-free access to the U.S. textile and apparel market for qualifying products.

 

Harbor Maintenance Tax

Introduced in 1986, this U.S. user fee is a 0.125 percent ad valorem levy collected on the value of imports and domestic cargo shipped through U.S. ports. The tax has not been collected on exports since 1998, when the Supreme Court ruled that the portion of the tax levied on exports violated the clause of the Constitution that bans taxes on exports (Article I, Section 9, Clause 5). Click here to see the law.

 

Harmonization

In general, the adoption of comparable or identical regulatory measures by countries. In the Agreement on the Application of Sanitary and Phytosanitary Measures, defined in Annex A as “The establishment, recognition and application of common sanitary and phytosanitary measures by different Members.”

 

Harmonized System

A standardized system of nomenclature for tariff schedules. Nearly all countries use this system, which entered into force in 1988. It is organized into 99 chapters, and allows for the logical division of goods at various levels of abstraction. The broadest categories are the two-digit chapters, while the most precise distinctions are at the ten-digit level. Products can also be isolated, whether for purposes of analysis or the imposition of tariffs and other controls, at the four-, six-, and eight-digit levels. In the United States, tariffs are determined at the eight-digit level but many products are further distinguished at the ten-digit level for statistical purposes. The U.S. version of the schedule consists of 10,187 tariff lines at the eight-digit level in chapters 1-97. Additional classifications are made in Chapter 98 (e.g., special classification provisions for specific institutions and articles admitted free of duty under bond) and Chapter 99 (e.g., temporary duty suspensions, sanctions, and safeguard measures). The HS system is further identified by the years in which specific versions came into operation, such as HS2002, HS2007, etc.

 

Havana Charter

The charter of the International Trade Organization negotiated at the Havana Conference of 1948. It never entered into effect. See the full text.

 

Hawley-Smoot Tariff Act of 1930

This U.S. tariff law is often presented as the quintessential example of protectionism, although some tariff acts of the 19th Century set even higher rates. It shortened the free list and raised the average rate of tariffs collected on dutiable products from 40.1 percent (in 1929) to 53.2 percent (in 1931). This law was the last exercise in unhindered congressional tariff-making. The rates that it set are still provided in Column 2 of the U.S. Harmonized Tariff Schedule, which applies to countries that are denied MFN (or NTR) treatment. Column 1 lists the NTR rates that have been negotiated downward in the decades since Congress delegated negotiating authority to the president in 1934. The law is frequently, but not properly, referred to as the Smoot-Hawley Tariff Act; it may also be cited as the Tariff Act of 1930.

Among the major provisions of the law are the following:


Hazard Analysis and Critical Control Points (HACCP)

A multi-stage approach to monitoring meat, fish, and other perishable agricultural products to prevent food-safety risks. It is usually pronounced out as "hassup."

 

Hegemon

As used in contemporary political science, the term means a single, powerful country that has the means to persuade or compel the cooperation of others. Examples of hegemonic powers (regionally or globally) include Athens before the Peloponnesian War, Rome, the Netherlands in the 17th century, Great Britain in the 19th Century, and the United States since the Second World War.

Although this term is meant to be value-neutral when employed in academic discourse, where its roots date back to the Greek term for “leadership,” it generally implies opprobrium when used in political discussions. It has been in common use among Marxists since the 1930s, and is often employed in the People’s Republic of China in denunciations of U.S. foreign policy.

 

Hegemonic Stability Theory

A paradigm that is widely (though not universally) accepted among political scientists who concentrate on international political economy. The theory holds that the openness of world markets is a function of the power relations among states, such that markets tend to be open when there is a hegemon and closed when there is not. The hegemon will generally have both the motive and the means to promote an open economy, insofar as its power rests upon efficient industries that will do well in open competition, and its power (military and otherwise) can be employed to persuade or even compel the cooperation of other countries. Supporters of this theory argue that it is no mere coincidence that markets were relatively open at the height of British hegemony in the 19th Century, were relatively closed in the 1920s and 1930s (following the decline of British power and before the United States was willing to exercise leadership), and markets began to open once again after the United States adopted a hegemonic role during and after the Second World War. Hegemonic stability theory contains both realist and liberal elements.

 

Helms-Burton Act

A sanctions law more properly known as the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 that provides inter alia the right to U.S. nationals to file suit against persons that are “trafficking” in confiscated property in Cuba, and directs the State Department to deny visas to executives and controlling shareholders (as well as their spouses and minor children) of the companies determined to be involved in this “traffic.” It is widely criticized as an example of the extraterritorial application of U.S. law. Click here to see the law.

 

Hemispheric Cooperation Program

Part of the FTAA process, the HCP was a technical assistance and capacity-building program that aims to assist Latin American and Caribbean countries in identifying and prioritizing their needs and finding assistance from the donor community.

 

Home Market

Those who take a protectionist approach to trade policy often stress the ability of the home market to absorb the goods produced by the country’s industries. For countries with small home markets, the problem is sometimes addressed by entering into regional trade arrangements with neighboring countries in order to establish a shared “home” market among several countries. Such an approach was common when the import-substitution industrialization strategy was still widely in use among developing countries.

 

Homeland Security

Following the terror attacks of September 11, 2001, the pursuit of homeland security has received high priority in the United States. See also Department of Homeland Security.

 

Hong Kong Ministerial Conference

A WTO ministerial meeting held in 2005 that was notable chiefly for avoiding the same kinds of disasters that plagued the Seattle (1999) and Cancún (2003) meetings. The ministerial declaration made incremental progress on agriculture, non-agricultural market access, and services.

 

Horizontal Commitments

Under GATS, a commitment that applies to international trade in multiple service sectors. Horizontal commitments are typically not commitments per se but rather are limitations on market access or national treatment.

 

Horizontal Reduction

In tariff negotiations, the most simple type of formula cut. Tariffs are cut across-the-board by a certain percentage; for example, a country might agree to cut all of its tariffs in half, or by 20 percent, by 17.3 percent, etc. A horizontal reduction might also allow for some exceptions, such that a country cuts most of its tariffs by a certain percentage, but certain items are either exempted altogether or subject to a greater or lesser cut. Also known as a linear reduction.
 

 

Hothouse Grapes

A metaphorical reference to inefficient industries that are established and maintained only through substantial government intervention, including trade protection. It comes from a passage in The Wealth of Nations in which Smith observed that through the use of “glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries.”

 

Hub-and-Spoke

A system of regional liberalization based upon a series of discrete trade agreements, rather than the negotiation of a single agreement from the start. In such a system, one country serves as the hub, and negotiates agreements with countries at the spokes. For example, the G.W. Bush administration declared the objective of establishing a U.S.-Middle East FTA by 2013, but is pursuing this objective through a hub-and-spoke process by negotiating separate agreements with Israel, Jordan, Morocco, Bahrain, etc. The plan was for most or all of these discrete arrangements to be tied together sometime before 2013; that has not happened. See also competitive liberalization.

 

Immoral Articles

A provision of the (U.S.) Trade Act of 1930 prohibits imports on this category of goods, which is broadly and anachronistically defined to include “any book, pamphlet, paper, writing, advertisement, circular, print, picture, or drawing containing any matter advocating or urging treason or insurrection against the United States, or forcible resistance to any law of the United States, or containing any threat to take the life of or inflict bodily harm upon any person in the United States, or any obscene book, pamphlet, paper, writing, advertisement, circular, print, picture, drawing, or other representation, figure, or image on or of paper or other material, or any cast, instrument, or other article which is obscene or immoral, or any drug or medicine or any article whatever for causing unlawful abortion, or any lottery ticket, or any printed paper that may be used as a lottery ticket, or any advertisement of any lottery.” Such restrictions are permitted under GATT Article XX(a), which generally permits restrictions on imports that are deemed “necessary to protect public morals.”

 

Implementation

In general, the steps taken to execute the commitments that countries make in an agreement. See in this context implementing legislation. More specifically, the post-Uruguay Round period has seen significant debate over the implementation of developing countries’ obligations under such instruments as the TRIPs Agreement. There is general agreement that implementation is a problem, but the nature of the problem and the implied solutions are a matter of spirited debate. Many developing countries argue that the commitments reached in the Uruguay Round were too onerous and need to be reconsidered, while some industrialized countries see these demands as an attempt to “backslide” on commitments. One compromise position is to stress the need for capacity-building and technical assistance in order to facilitate countries' compliance with both the established commitments and any new ones that might be undertaken.

See the Decision on Implementation-Related Issues and Concerns, which is among the key documents by which the Doha Ministerial Conference defined the scope of the new round.

 

Implementation Period

The period of time specified by an agreement for the entry into force of its provisions. A set of commitments might variously enter into effect all at once and at the beginning, or in phases. Those phases may, in turn, be equally distributed (e.g., tariff cuts that are made in equal annual stages), or be done largely or entirely at the end of the implementation period (known as "back loading").

 

Implementing Legislation

Legislation that makes all of the changes in a country’s laws that are necessary in order to bring it into compliance with the commitments made in a treaty or other international agreement. Such legislation is needed for any agreement that is not self-executing. In the United States the purpose of the special fast-track rules is to facilitate the enactment of implementing legislation. For examples, see the U.S. implementing bills for the free trade agreements with North America and Chile, or the Uruguay Round Agreements Act of 1994. See also negotiating authority.

 

Import Licensing

Defined in Article 1 of the Agreement on Import Licensing Procedures as “administrative procedures used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing Member.”

 

Import Substitution Industrialization (ISI)

A policy based on the assumption that a developing country, where infant industries predominate, cannot be expected to compete in an open market with other, more advanced countries. Domestic industries were to be protected from competition with tariff and other barriers. The ISI approach was part of the proposed New International Economic Order, but later fell out of favor with the spread of the Washington consensus. It may nevertheless be making a comeback in some countries and regions.

For historical examples, see Hamilton's Report on Manufactures (1791) and Prebisch's Towards a New Trade Policy for Development (1964).

 

Imports for Consumption

A measure of the merchandise that has physically cleared customs and enters consumption channels either immediately or after withdrawal from bonded warehouses under customs custody or from free trade zones. It is to be distinguished from general imports.

 

Incoterms

"INternational COmmercial TERMS." A uniform set of international rules, promulgated by the International Chamber of Commerce in Paris, for the interpretation of the terms most commonly used in international contracts for the sale of goods. Incoterms define the obligations of buyer and seller at every stage of an international sale of goods transaction. The Incoterms were first issued in 1953 and are periodically revised.

Click here to see the eleven principal Incoterms and their definitions.

The official Incoterms website is at http://www.iccwbo.org/incoterms/.

 

Industrial Policy

A policy that encompasses the use of various state instruments to provide a favorable economic climate for the development of industry in general or specific industrial sectors. Instruments of industrial policy may include tax incentives to promote investments or exports, direct or indirect subsidies, special financing arrangements, protection against foreign competition, worker training programs, regional development programs, assistance for research and development, and measures to help small business firms. The critics of this approach argue instead for a laissez faire approach, based on the contention that the market is better at “picking winners and losers” than is the state. Industrial policy is generally incompatible with free trade. See also mercantilism and strategic trade.

 

Industrial Products

All goods that are not identified as agricultural products under the Uruguay Round Agreement on Agriculture. The more common term today is non-agricultural products, as in non-agricultural market access.

 

Industrial Property

A category of intellectual property rights that encompasses patents, trademarks, and trade secrets.

 

Industry

For the meaning of this term in the context of U.S. antidumping and countervailing duty law, see the definition given in section 1677(4) of Title 19 of the U.S. Code.

 

Infant Industry

A form of special and differential treatment that was both passive and unilateral. It is based on the assertion that, in the early stages of a country’s development, there may be a case for protecting new industries before subjecting them to competition. This early approach to industrial policy was argued by Alexander Hamilton (18th century) and Friedrich List (19th century) and is the basis for the policy of import substitution industrialization.

See Hamilton's Report on Manufactures (1791) and List's National System of Political Economy (1841).

The doctrine is generally out of vogue in the United States. Consider the terms that Ronald Reagan employed in 1982 when he opposed renewal of “manufacturing clause” protection for the U.S. printing industry: “The clause was written into law nearly a century ago, in an effort to strengthen our relatively new printing industry by limiting foreign competition. However, the ‘infant industry’ justification for protecting our printing industry is no longer valid; our industry is now one of the most modern and efficient in the world.”

 

Inferior good

A good that is consumed in decreasing quantities as income rises, and is substituted by costlier items. Potatoes and bus rides fall into this category.

 

Informal Communications

Another term for non-papers.

 

Informal Entry

Goods that are imported into a country without the usual customs formalities, especially in the baggage of returning nationals and foreign visitors. This is not the same as smuggling.

 

Information Technology Agreement (ITA)

A zero-for-zero agreement that eliminates tariffs on a wide range of information and communication technology products (e.g., fax machines and semiconductors). Initiated in 1995 by the U.S. and European private sectors through the TransAtlantic Business Dialogue, the talks were later taken over in APEC. Once the APEC members had reached agreement among themselves, they passed it along to the WTO. All countries are free to make commitments under this agreement, which are then multilateralized through the MFN principle. When completed in March, 1997, the ITA included commitments from 40 countries accounting for more than 92 percent of world trade in information technology products. The countries agreed to eliminate import duties and other charges on these products by 2000 (or by 2005 for a few countries).

Click here to see the agreement.

 

Initial Negotiating Rights (INRs)

Rights accruing to countries that either negotiated a specific tariff concession with a country or that claimed INRs at the time such a concession was negotiated even if the country was not the principal supplier. A country with an INR is entitled to compensation in the event that a country does not honor its obligation. See GATT Article XXVIII.

 

Initialing

In diplomacy, the initialing of a treaty or other agreement signifies only provisional assent to the text by delegates to a negotiation. It precedes ratification. See also ad referendum.

 

Injury Test

The trade-remedy laws generally require that imports be found to be injurious in order to be remedied through the imposition of antidumping duties, countervailing duties, safeguard actions, etc. In the United States these determinations are made by the U.S. International Trade Commission, while in most other countries the injury test is applied by the same agency that is tasked with determining whether the alleged dumping, subsidization, etc. has taken place.

 

Instructions

Diplomats sometimes operate on the basis of explicit instructions from their home governments, and sometimes act on their own best judgment. When making a statement at a meeting it is common for a diplomat to specify that he or she is acting without specific instructions. This is a useful device that gives the speaker plausible deniability; a statement that encounters strong resistance can later be dismissed as something that was said without direction from the home government. See also non-paper.

 

Integration

The process of developing closer economic ties between the private and public sectors of two or more countries. Integration is especially important in regions that are undertaking deeper forms of regional trade arrangements, such as a common market.

 

Intellectual Property Rights

Capital in the form of ideas. The most common forms of intellectual property are patents, trademarks, and copyrights, but the category also encompasses more arcane subjects such as appellations of origin, mask works for semiconductors, trade secrets, and so forth.

Intellectual property is protected by a variety of national laws and international agreements, some of which date to the 19th Century (notably the Berne and Paris conventions). The GATT/WTO system initially provided only passive coverage to this topic. Among the exceptions provided for in GATT were measures “necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to … the protection of patents, trademarks and copyrights” (Article XX[d]). The issue was raised briefly in the Tokyo Round, but was not definitively addressed until negotiation of the Uruguay Round Agreement on Trade-Related Intellectual Property Rights. See also industrial property.

 

Interested Party

For the meaning of this term in the context of U.S. antidumping and countervailing duty law, see the definition given in section 1677(9) of Title 19 of the U.S. Code.

 

Intermediate Good

A stage in processing that comes between raw materials and finished goods. For example, fabric is an intermediate good between fibers and apparel.

 

International Bank for Reconstruction and Development

See World Bank.

 

International Commodity Agreement

Agreements that attempt to stabilize commodity prices for fungible products such as coffee, cocoa, rubber, and tin. Such agreements were a part of the proposed New International Economic Order, but most of the agreements that were established in the 1960s and 1970s have fallen into disuse.

 

International Labour Organization (ILO)

This specialized agency of the United Nations was founded in 1919, and is the only surviving major creation of the League of Nations. The ILO formulates international labor standards in the form of conventions and recommendations, provides technical assistance, and promotes the development of independent employers’ and workers’ organizations and provides training and advisory services to those organizations. The ILO has a unique tripartite structure with workers and employers participating as equal partners with governments in the work of its governing organs. See labor rights. Click here to see the ILO Constitution.

Note that in British English the word “labour” has a stray “u” in it (“labour”), and that this spelling is used in the ILO and most other international organizations.

See also Fundamental Conventions of the International Labour Organization, the text of the ILO Constitution, and the CENTRAL guide to Labor and the Environment.

 

International Monetary Fund (IMF)

A multilateral financial institution created at the 1944 United Nations Monetary and Financial Conference held at Bretton Woods to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. See the Articles of Agreement of the IMF and the text of the Declaration on the Relationship of the World Trade Organization with the International Monetary Fund.

The IMF has observer status in the WTO.

 

International Trade Administration (ITA)

One of the administering authorities of the trade-remedy laws in the United States, this section of the Department of Commerce (and more specifically the Import Administration of the ITA) is responsible inter alia for conducting antidumping and countervailing duty investigations.

 

International Trade Centre (ITC)

A quasi-autonomous, Geneva-based organization within the United Nations system that reports to both the WTO and UNCTAD. It provides a wide range of technical assistance to developing countries seeking to develop and promote their export potential. It is the recognized United Nations Development Program executing agency in the field of trade promotion.

 

International Trade Organization (ITO)

An international organization that never actually came into being. It was one of the three institutions envisioned in the post-war Bretton Woods system, together with the International Monetary Fund and the World Bank. The scope of issues to be covered by this organization was comparable to that of the WTO, including such matters as intellectual property rights and services. The U.S. Congress never approved the Havana Charter of the ITO, and other countries would not establish the organization without U.S. participation. With the ITO defeated, the less ambitious GATT — which was intended to be a temporary arrangement — instead became the centerpiece of the multilateral trading system from 1947 through 1994.

 

Internationally Recognized Worker Rights

Defined in the U.S. authorizing statute for the Generalized System of Preferences (19 USC 2467(4)) to include (A) the right of association; (B) the right to organize and bargain collectively; (C) a prohibition on the use of any form of forced or compulsory labor; (D) a minimum age for the employment of children; and (E) acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. Failure to meet these standards provides grounds for a country to lose some or all of its GSP privileges.

 

Investment

See Trade-Related Investment Measures.

 

Invisible Hand

Imagery often used to suggest the mechanism by which the market transforms the self-interest of individuals into a more efficient and productive economy for society as a whole. Smith noted in a famous passage from The Wealth of Nations (Book IV) that while the man who “direct[s an] industry in such a manner as its produce may be of the greatest value, he intends only his own gain” he is nevertheless “led by an invisible hand to promote an end which was no part of his intention.” Thus by “pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

 

Iran and Libya Sanctions Act (ILSA)

A 1996 law (renewed in 2001) that requires the president to take action against companies, U.S. or foreign, that make certain investments in the petroleum sectors of Iran or Libya. Like the Helms-Burton Act, it is criticized as an example of extraterritoriality.

 

Jackson-Vanik Amendment

A provision in the Trade Act of 1974 that conditions the extension of MFN treatment to certain countries upon freedom-of-emigration requirements. The law applies only to those countries that were denied MFN treatment when the law entered into force on January 3, 1975. All of those countries were Communist, but not all current or former Communist countries are subject to the law. It is a well-established U.S. policy to invoke non-application upon the GATT or WTO accession of any country that is subject to the Jackson-Vanik law, unless Congress votes to graduate the country from the law. Click here to see the law.

 

Japan External Trade Organization (JETRO)

An organization responsible for the management and operation of Japan's Ministry of International Trade and Industry's (MITI) import promotion programs. Established in 1958 to help Japanese firms export overseas, JETRO now assists foreign firms seeking to export or invest in Japan.

 

Jones Act

A 1920 U.S. law providing for a strict rule of cabotage. Click here to see the text of the law.

 

Jordan Standard

In labor and environmental issues, the standard set by the U.S.-Jordan Free Trade Agreement of 2000. The standard generally requires that countries enforce their own laws. Article 5 of the agreement provides with respect to environmental matters that inter alia “each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws as an encouragement for trade with the other Party.” On labor rights, Article 6 provides inter alia that “it is inappropriate to encourage trade by relaxing domestic labor laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws as an encouragement or trade with the other Party.”

 

July Package

A set of interim agreements reached by the WTO members in July, 2004 in order to rescue the Doha Round from the failure of the Cancún ministerial. These documents build upon the terms of the Doha Ministerial Declaration.

 

Juridical Person

Also known as a legal person. As distinct from a natural person, any legal entity that is duly constituted or otherwise organized under applicable law, whether for profit or otherwise and whether privately or governmentally owned. Juridical persons include any corporation, trust, partnership, joint venture, sole proprietorship, or association.

 

Kennedy Round

The sixth round of GATT negotiations (1963-1967). This was the first of the multi-year, multi-issue GATT negotiations. Like the later Tokyo and Uruguay rounds, it focused on system-wide rules and non-tariff barriers as well as simple exchanges of concessions on border measures. That round also saw the adoption of a formula approach to tariff negotiations.

 

Knit Fabrics

Fabrics that are made from only one set of yarns that all run in the same direction. Knit fabrics are held together by looping the yarns around each other, thus creating ridges in the resulting fabric. See also woven fabrics.

 

Kyoto Convention

The 1973 International Convention on the Simplification and Harmonization of Customs Procedures. Its goal is the development of compatible national customs procedures in different countries as a means of encouraging and facilitating international trade. Click here to see the treaty.

 

Labor Rights

Arguably the most contentious issue in trade negotiations today. The contention that trade agreements should include standards related to the protection of workers’ rights is the newest and most politically contentious of the new issues in trade policy. While some WTO members have called for closer links between trade agreements and labor rights, the members agreed in a provision of the Singapore Ministerial Declaration that the International Labour Organization “is the competent body to set and deal with these standards” and “reject[ing] the use of labour standards for protectionist purposes.” A provision in the Doha Ministerial Declaration reaffirmed this statement. See also International Labour Organization, internationally recognized worker rights, and the Jordan standard.

 

Laissez Faire

From the French laissez nous faire, literally “leave us alone,” the doctrine that the government should not intervene in the market. Synonymous with free trade and liberalism, and antithetical to industrial policy, managed trade, mercantilism, protectionism, and strategic trade.

 

Latin American Economic System (SELA)

A Caracas-based international organization of Latin American and Caribbean countries. SELA’s principal function is to act as a sort of think tank for the region on matters of trade and related international economic issues.

 

Launch

The formal initiation of a new round of negotiations. This is generally done by issuing a ministerial declaration that defines the scope, timetable, and institutional arrangements for the negotiations.

 

Least Developed Country (LDC)

The term LDC is sometimes loosely used to refer to the entire group of less developed countries (i.e., developing countries), but is more properly and strictly meant to identify the smaller group of 49 least developed countries. The term “least developed developing country” (LDDC) is also sometimes used to distinguish between LDCs and LDDCs.
The United Nations designates countries as LDCs on the basis of objective criteria. While the specific benchmarks have evolved over the past generation, these criteria are based on three tests: a low income, as measured by the gross domestic product per capita; weak human resources, as measured by a composite index; and a low level of economic diversification, as measure by another composite index. The criteria are periodically examined to "graduate" countries from this status or, more commonly, to add new countries. As approved by the U.N. General Assembly in 1971, the original list of LDCs identified 24 countries. Following numerous additions, one graduation, and one merger, there are now 51 LDCs.

The original list of LDCs approved by the United Nations in 1971 included Afghanistan, Benin, Bhutan, Botswana, Burundi, Chad, Ethiopia, Guinea, Haiti, the Lao People’s Democratic Republic, Lesotho, Malawi, Maldives, Mali, Nepal, Niger, Rwanda, Somalia, Sudan, Uganda, United Republic of Tanzania, Upper Volta (now Burkina Faso), Samoa, and the Yemen Arab Republic. Additions included Bangladesh, Central African Republic, Democratic Yemen, and the Gambia in 1975; Cape Verde and the Comoros in 1977; Guinea-Bissau in 1981; Djibouti, Equatorial Guinea, Sao Tomé and Principe, Sierra Leone, and Togo in 1982; Vanuatu in 1985; Kiribati, Mauritania, and Tuvalu in 1986; Myanmar in 1987; Mozambique in 1988; Liberia in 1990; Cambodia, Madagascar, Solomon Islands, Zaire, and Zambia in 1991; Eritrea and Angola in 1994; Senegal in 2001; and East Timor in 2003. Botswana was graduated from the list of LDCs in 1994.

See also small and vulnerable economies and special and differential treatment.

See the Decision on Measures in Favour of Least-Developed Countries, the Decision on Accession of Least-Developed Countries, the Comprehensive and Integrated WTO Plan of Action for the Least-Developed Countries, the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries, the Millenium Development Goals, and the provisions on LDCs in the Doha Ministerial Declaration.

 

Legal Person

See juridical person.

 

Less Than Fair Value

The principal standard under which dumping is determined. Note that this is the terminolgy used in U.S. law; in WTO law, the reference is to less than normal value. This may be a distincion without a difference, insofar as a provision of U.S. law (19 USC 1677b) provides that in making determinations of "whether subject merchandise is being, or is likely to be, sold at less than fair value, a fair comparison shall be made between the export price or constructed export price and normal value."

 

Less Than Normal Value

The principal standard under which dumping is determined. Generally, an imported product can be found to be sold at less than fair value if the price is below either the cost of production or the cost at which that product is sold in the home market. This is expressed by the definition given under GATT Article VI, which provides that less-than-normal-value sales occur whenever “the price of the product exported from one country to another” —
  
(a)  is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or,
  
(b)  in the absence of such domestic price, is less than either

       
(i)   the highest comparable price for the like product for export to any third country in the ordinary course of trade, or
        (ii)  the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit.
From this fairly straightforward calculation there develop a great many alternative calculations. See also less than fair value.

 

Liberalism

A philosophy based primarily upon faith in individuals and the decisions that they make in pursuit of their own interests (voluntarism). The political manifestation of liberalism is democracy; the economic expression of this philosophy is the market economy, including free trade between countries. While democracy and open markets thus stem from the same philosophical roots, they can have an uneasy coexistence. One might discern a paradox of liberalism in which the more democratic a country may be, and hence the more opportunities that it offers for interest groups to pursue their objectives, the more difficult it may be to maintain an open market in the face of particularistic demands.

John Stuart Mill addressed the similarities and differences between the two manifestations of liberalism in his classic On Liberty,where he wrote that “the so-called doctrine of Free Trade … rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil: but the restraints in question affect only that part of conduct which society is competent to restrain, and are wrong solely because they do not really produce the results which it is desired to produce by them.”

The term “liberal” was also defined indirectly by Ambrose Bierce, who defined a conservative as a “statesman who is enamored of existing evils, as distinguished from the Liberal, who wishes to replace them with others.”

 

Like Product

A term used to define both the MFN obligations in WTO law and the scope of trade-remedy laws. Under GATT Article I, countries that make a concession to one WTO member are required to accord that same concession “immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.” See also GATT Article III.

Trade-remedy law requires a more precise definition. Under GATT Article VI, antidumping duties can be applied when (among other requirements) “the price of the product exported from one country to another … is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country,” while the same term is used throughout the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994. Article 2.6 of that agreement defines “like product” to mean “a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.” This term is given further definition in national law and cases. In the United States, for example, producers of raw agricultural products have sought long, but with little success, to acquire standing in cases involving processed products. Grape growers, for example, do not have standing to file petitions in cases involving wine.

 

Like-Minded Group

In the present context, a group of developing countries that generally opposed the launch of a new round of multilateral trade negotiations in the WTO. Other groupings have had similar designations in the past, sometimes with very different intentions. When the Allies in the Second World War were planning the post-war economic order, for example, countries such as Great Britain that favored an international economic regime aimed at full employment were known as the “like-minded countries.” Similarly, some older coalitions had different names but comparable aims to the like-minded group. See for example the Group of Ten.

 

Linear Reduction

Also known as a horizontal reduction, this is the most simple approach to making formula cuts in tariffs. A linear reduction simply specifies the percentage that tariffs will be cut (but may also allow for negotiated or declared exceptions to the formula).

 

List

See negative list and positive list.

 

Literary Works

One of the categories of works that are eligible for copyright protection. Article 2 of the Berne Convention defines “literary and artistic works” to include “every production in the literary, scientific and artistic domain, whatever may be the mode or form of its expression, such as books, pamphlets and other writings; lectures, addresses, sermons and other works of the same nature; dramatic or dramatico-musical works; choreographic works and entertainments in dumb show; musical compositions with or without words; cinematographic works to which are assimilated works expressed by a process analogous to cinematography; works of drawing, painting, architecture, sculpture, engraving and lithography; photographic works to which are assimilated works expressed by a process analogous to photography; works of applied art; illustrations, maps, plans, sketches and three-dimensional works relative to geography, topography, architecture or science.” Article X of the TRIPs Agreement provides that computer programs and compilations of data will be treated as literary works for purposes of copyright protection.

 

Lobbying

Seeking to persuade a public official to adopt a particular approach to public policy. The term is usually, but not exclusively, employed to mean efforts that seek to promote or undermine a specific bill or amendment in the legislative process. Although the term is sometimes used in a pejorative sense, and can carry the connotation of special interests acting in illegal or unethical ways to promote their own interests, this need not be the case. In the United States, lobbying is considered to be an act of free speech and a necessary part of the policymaking process in a representative democracy. 

 

Local Content

The inputs in a finished good that are sourced in the country of manufacture. Local-content laws establish minimum levels that must be reached.

 

Lomé Convention

An association agreement among African, Caribbean, and Pacific (ACP) states with the European Union. First negotiated in 1975, it has since been replaced by the Cotonou Agreement.