Dictionary of Trade Policy Terms ——————————————————————————————————– Dictionary of Trade Policy Terms Fourth Edition July 2003 ___________________________________________________________________ 1 Dictionary of Trade Policy Terms ——————————————————————————————————– Disclaimer: Dr Walter Goode is an officer of the Australian Department of Foreign Affairs and Trade (DFAT). The explanations, definitions and comments expressed in this volume do not reflect the views of DFAT or those of the Australian Government. These may be found in departmental and Autralian Government statements and publications. Any views given in this dictionary on WTO agreements, provisions, panel and Appellate Body reports, or any other information provided by the WTO, are the sole responsibility of the author, and do not necessarily represent the views of WTO Members, the WTO Secretariat, or the Appellate Body Secretariat. As such, the definitions in this dictionary do not constitute authoritative interpretations of the legal texts of the WTO and are presented for illustrative purposes only. ___________________________________________________________________ 2 Dictionary of Trade Policy Terms ——————————————————————————————————– Preface This is the fourth edition of the Dictionary of Trade Policy Terms. With each edition it has grown. The number of entries is now close to double that in the first edition. Apart from adding words, I have used this opportunity to update and otherwise revise many of the entries in the third edition. The previous three editions were published by the Centre for International Economic Studies at the University of Adelaide. Professor Kym Anderson, the head of the Centre, first suggested to me that there would be a market for a dictionary of this kind. His judgement was sound. Earlier versions of the dictionary have now also been published in Chinese, Korean and Vietnamese. Professor Anderson remains closely associated with this project. This edition appears under the combined imprint of Cambridge University Press, the World Trade Organization (WTO) and the Centre for International Economic Studies. I am rather pleased about this. I cannot compete with the trade policy expertise residing in the WTO. Still, I take satisfaction from having been able to contribute to making the world of trade policy more accessible to a broad public. I would like to thank the WTO for permission to use in its entirety a glossary prepared by its officers for the Doha Ministerial Conference. Though I have benefited from the work being done by the WTO, the contents of this dictionary are of course independent of it. This is a dictionary of trade policy terms. It lists topics routinely dealt with by trade officials in trade negotiations. It is not a dictionary of international economics. The areas of the two disciplines overlap in some cases, but the distinction between them is clear. Trade policy consists of a mixture of economics, law and politics, with the latter two often the dominating influences. International economics in comparison is much more rigorous. Even a brief look at textbooks of international economics suggests that economists are not always convinced of the validity of concepts used by trade negotiators. The trade policy agenda continues to widen. Tariffs and non-tariff measures remain central to international negotiations. Their reduction or elimination remains a goal for many. The well-established trade rules, such as trade remedies, also continue to require attention. What is striking, however, is the extent to which the debate about the content of trade negotiations has shifted to the problems developing countries ___________________________________________________________________ 3 Dictionary of Trade Policy Terms ——————————————————————————————————– encounter in implementing existing commitments and, more broadly, the desirable balance between the obligations of developed and developing countries. The Doha Development Agenda is a clear symbol of this shift. On a broader scale, some suggest that new rules will be needed to clarify the relationship between trade rules and environmental measures. Others question whether the existing framework of intellectual property rules is adequate for a truly globalising age, and whether broader rules might be necessary to recognize the creative abilities of societies in development. This edition of the dictionary takes account of these and other debates in the trade arena. It now contains many entries that only a decade ago would have been considered the preserve of different spheres of activity. Entries are in alphabetical order, usually in their most common form. Examples are GATS for General Agreement on Trade in Services, Kyoto Convention for the International Convention on the Simplification and Harmonization of Customs Procedures, UNCTAD for the United Nations Conference on Trade and Development and CITES for the Convention on International Trade in Endangered Species of Wild Fauna and Flora. In each case I have also included the formal version of the entry, with a referral to the main entry. Entries are mostly self-contained, but in a few cases I thought it useful to duplicate partly an explanation under a different entry. Many entries contain referrals in italic bold to other entries. Readers should use these referrals as they like. Occasionally they may find something in this way that they had forgotten or didn’t know. References to the WTO are so frequent that there seemed little need to provide a cross-reference when they occur. Some entries are longer than is customary in dictionaries. Some are unquestionably longer than they should be. Still, I think that the reader should be offered, for example, a small historical survey of important concepts like the most-favoured-nation principle, the place of developing countries in the multilateral trading system or major events like the Kennedy or the Tokyo Rounds. Some entries are idiosyncratic, or at least the reader will think, with a deal of justification no doubt, that they are. That, I am afraid, is in the nature of books. Other entries are purely or largely historical. Among these are the Atlantic Charter, the Havana Charter, the Global Negotiations, the Marshall Plan, the Haberler Report and the United Nations Conference on Trade and Employment. One thing these entries do, however, is to show how persistent some of the problems of international trade policy are, and how hard it can be to find solutions for them. ___________________________________________________________________ 4 Dictionary of Trade Policy Terms ——————————————————————————————————– This dictionary contains some greatly abbreviated accounts of disputes brought before the GATT, and one or two before heard before the WTO. No dictionary of trade policy could be complete without a mention of hatters’ fur or Belgian family allowances. Those seeking further details on these and other disputes should consult the Basic Instruments and Selected Documents (the BISD) for GATT disputes and, for example, the Dispute Settlement Reports published by Cambridge University Press or the relevant WTO documents on www.wto.org for more recent disputes. I am greatly indebted to John Croome, formerly a senior officer with the GATT Secretariat, who read the entire text. He commented on many entries and suggested some new ones. His long experience with the multilateral trading system and his willingness to share his knowledge have made the dictionary a better book. He has also saved me from several embarrassing mistakes. I am of course solely responsible for any remaining mistakes. I would also like to thank two anonymous referees. Their comments have pointed out gaps and inaccuracies in the text. I have dealt with these to the best of my ability. Jean-Guy Carrier of the World Trade Organization has done everything to bring this edition out on time. I would like to thank him for that. I again would like to acknowledge the support I have had from my colleagues. John McCarthy, Australian Ambassador in Tokyo, and Peter Grey, Deputy Secretary in the Department of Foreign Affairs and Trade, have encouraged me in various ways to keep the selection of terms relevant and up to date. Justin Brown, James Baxter, Simon Twisk, Lisa Filipetto and Elizabeth Young all have engaged me in debates about trade policy and its language. I am grateful for their interest in this book. I am also grateful to Wendy Zweck of the Centre for International Economic Studies for her administrative support for this project. It is obvious that I have benefited from the efforts of many, but the responsibility for any errors of fact, inadequate interpretation or infelicitous expressions is entirely mine. WG November 2002 ___________________________________________________________________ 5 Dictionary of Trade Policy Terms ——————————————————————————————————– A Absolute advantage: an idea described by Adam Smith in his Inquiry into the Nature and Causes of the Wealth of Nations, and developed further by others, that countries engage in international trade to obtain goods more cheaply from abroad than they could make them themselves at home. Smith argued that international trade allows a greater specialization than would be possible in an autarkic system, thereby permitting resources to be used more efficiently. Writing about the reasons why families buy things rather than making them themselves, he said: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country