absolute advantage—the ability to produce a good at a lower cost, in terms of real resources than another country. Absolute Advantage is neither necessary nor sufficient for a country to export a good.

AFL-CIO—American Federation of Labor and Congress of Industrial Organizations; the nation’s largest labor organization

APEC—Asia Pacific Economic Cooperation

bilateral—involving two sides (or nations)

Cold War—a period after World War II (1945-89) marked by political tension and an arms race between the Soviet Union and the United States

comparative advantage—The ability to produce a good at a lower cost, relative to other goods, compared to another country. With perfect competition and undistorted markets, countries tend to export goods in which they have a Comparative Advantage.

computer chip—an integrated circuit containing many elements connected on a single unit, or chip; a basic component of many electronic devices

Council of Economic Advisers—a group of economists, appointed by the U.S. president, who study economic problems and recommend national economic policies

de facto—existing but not officially recognized or legally established

exports—goods or services the people of one country sell to another country

federalism—a political system that divides powers between the national and state governments

FTAA—Free Trade Area of the Americas. A trade agreement among the 34 countries in the Western Hemisphere in which they have agreed to eliminate trade and investing barriers on virtually all goods and services traded by member countries, reducing prices for consumers and creating new markets for producers throughout the Hemisphere.

freer trade—belief that barriers to trade hinder the workings of markets; thus, policymakers should erect as few trade barriers as possible

General Agreement on Tariffs and Trade (GATT)—an agreement, first negotiated in 1947, whereby the twenty-three founding trading nations hoped to increase world trade by lowering trade barriers; the eighth round—or Uruguay Round—of GATT talks established the World Trade Organization in 1994

globalization—the movement toward markets or policies that transcend national borders

global warming—heating that occurs when carbon dioxide traps the Sun’s heat near Earth’s surface, causing Earth’s temperature to rise

gross domestic product (GDP)—the total value of goods and services a nation produces in a given year

imports—goods and services the people of one country buy from other countries

Industrial Revolution—historical period, lasting throughout most of the 1800s, when the economy of the United States and many European nations shifted from an agricultural to a manufacturing base

interest—on a loan, this is the predetermined amount of money a borrower must pay for the use of borrowed funds

International Monetary Fund—The IMF is an international organization of 183 member countries, established 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.

managed trade—a trade policy in which the government sets numerical targets or market share goals on trade flow (i.e., a U.S. software producer should have 10 percent of the software market in France)

market—trade or traffic in a particular good or service; place where goods or services are bought and sold

multilateral—involving more than two sides (or nations)

multinational corporations—companies that have branches and operations in many countries

North American Free Trade Agreement (NAFTA)—agreement between the United States, Mexico, and Canada to gradually eliminate most barriers to trade and investment among these countries and to follow specified agreements to protect workers and the environment

ozone layer—layer of Earth’s atmosphere that shields the planet from the Sun’s harmful rays

process standard—a regulation outlining the way a product has to be made or prepared

PNTR—Permanent Normal Trade Relations

productivity—efficiency with which goods and services are produced, as measured by the quantity produced per person per hour

product standard—a regulation affecting the design or safety of a product or service

protectionism—policy reflecting the belief that domestic manufacturers and workers need to be shielded from foreign competition by placing trade barriers on foreign goods

quota—a restriction on the amount or number of a good that can be imported into the country

real average hourly earnings—the average wage per hour, adjusted for inflation

regressive tax—a tax such as a sales tax that applies equally to every purchaser but which results in taking a larger percentage of income from a low-income person than from a high-income person

service—action or activity for which a consumer is willing to pay; sometimes called in “invisible”(examples include health care, accounting, and legal work)

Adam Smith—a Scottish economist who argued that markets, not governments, should regulate the economic relationship among people; an early advocate of freer trade, he wrote An Inquiry into the Nature and Causes of Wealth of Nations

sovereignty—the status of a nation and its people whereby they are independent and free to make political and economic decisions for that nation

tariff—a tax on imports

TPA—Trade Promotion Authority. TPA is the trade negotiating authority the Congress has granted to each of the previous five presidents. It has been an integral part of U.S. trade policy since it was first granted in 1974

trade deficit—condition in which the value of a nation”s imports is greater than its exports

trade liberalization—elimination or reduction of trade barriers such as quotas and tariffs

World Bank—one of the world's largest sources of development assistance, the World Bank works in more than 100 developing economies with the primary focus of helping the poorest people and the poorest countries.

World Trade Organization (WTO)—created by the Uruguay Round of GATT to provide a permanent arena for member nations to address international trade issues and oversee implementation of trade agreements negotiated in the Uruguay Round

yen—the Japanese currency

Much of this glossary was extracted from Trade Is Everybody’s Business, courtesy of Susan Aaronson.