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16.26: Glossary- International Trade

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    absolute advantage
    when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
    common market
    economic agreement between countries to allow free trade in goods, services, labor, and financial capital between members while having a common external trade policy
    comparative advantage
    when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production
    economic union
    economic agreement between countries to allow free trade between members, a common external trade policy, and coordinated monetary and fiscal policies
    free trade agreement
    economic agreement between countries to allow free trade between members
    gain from trade
    a country that can consume more than it can produce as a result of specialization and trade
    General Agreement on Tariffs and Trade (GATT)
    forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade; the precursor to the World Trade Organization
    import quotas
    numerical limits on the quantity of products that can be imported
    intra-industry trade
    international trade of goods within the same industry
    national interest argument
    the argument that there are compelling national interests against depending on key imports from other nations
    nontariff barriers
    ways a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
    protectionism
    government policies to reduce or block imports
    splitting up the value chain
    many of the different stages of producing a good happen in different geographic locations
    tariffs
    taxes that governments place on imported goods
    value chain
    how a good is produced in stages
    World Trade Organization (WTO)
    organization that seeks to negotiate reductions in barriers to trade and to adjudicate complaints about violations of international trade policy; successor to the General Agreement on Tariffs and Trade (GATT)
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