Terminologies in international trade

TERMINOLOGIES IN INTERNATIONAL TRADE. Freetrader Free trade refers to non-restriction on international trade. Buying and selling can take place between different countries without the imposition of artificial barriers such as the absence of customs duties quotas, or embargoes. There is perfect mobility of commodities and factors of production between countries.

Infant industries: Industries are newly established industries. They are still in their tutelage and must be protected from foreign competition, to safeguard their survival.

Devaluation: Devaluation is the lowering of the exchange value of a country’s currency via-a-vis other currencies. This makes import to be expensive and export to be more attractive.

Depreciation: Depreciation refers to the fall in the value of a country’s currency against other currencies as a result of the interplay of the forces of demand and supply.

Dumping: Dumping is the practice of selling goods in foreign countries at lower prices than what are obtainable in the exporting country.

International trade involves various terminologies that are commonly used in the field. Here are some key terminologies related to international trade:

Import: The process of bringing goods or services into a country from abroad.

Export: The process of sending goods or services to another country for sale or trade.

Tariff: A tax or duty imposed on imported or exported goods, often used to protect domestic industries or generate revenue for the government.

Free Trade: A policy that promotes unrestricted trade between countries without barriers such as tariffs or quotas.

Quota: A limit on the quantity or value of goods that can be imported or exported within a specified period, usually imposed to protect domestic industries or control trade balance.

Trade Balance: The difference between the value of a country’s exports and its imports. A positive trade balance indicates a trade surplus, while a negative trade balance indicates a trade deficit.

Trade Agreement: A formal agreement between two or more countries that outlines the terms and conditions of trade, including tariffs, quotas, and other trade-related policies.

World Trade Organization (WTO): An international organization that deals with the global rules of trade between nations, promotes free trade, and provides a forum for negotiating trade agreements.

Dumping: The practice of exporting goods to another country at a price lower than their normal value, often to gain a competitive advantage or disrupt the market of the importing country.

Trade Barrier: Any policy or measure that restricts or hinders international trade, such as tariffs, quotas, subsidies, or technical barriers.

Trade Liberalization: The process of reducing trade barriers and promoting free trade through measures like tariff reductions, removal of quotas, and deregulation.

Incoterms: A set of standardized international trade terms published by the International Chamber of Commerce (ICC) that define the rights and obligations of buyers and sellers in international contracts, including aspects like delivery, risk transfer, and transportation costs.

FOB (Free on Board): An Incoterm that indicates the seller’s responsibility for delivering the goods to the port of shipment and loading them onto the vessel. The buyer bears the costs and risks from that point onward.

CIF (Cost, Insurance, and Freight): An Incoterm that indicates the seller’s responsibility for delivering the goods to the port of destination, covering the cost, insurance, and freight charges. The buyer takes over the risks and responsibilities upon arrival.

Letter of Credit: A financial document issued by a bank on behalf of a buyer, guaranteeing payment to the seller upon meeting specified conditions, usually related to the shipment of goods.


10 more terminologies commonly used in international trade along with their explanations:

Balance of Trade: The difference between the value of a country’s exports and its imports during a specific period. A positive balance of trade indicates a trade surplus (exports exceed imports), while a negative balance of trade indicates a trade deficit (imports exceed exports).

Trade Barrier: Any policy, measure, or practice that hinders or restricts international trade. Examples include tariffs, quotas, subsidies, technical regulations, and customs procedures. Trade barriers can be imposed for various reasons, such as protecting domestic industries, ensuring safety standards, or addressing unfair trade practices.

Dumping: The practice of exporting goods to another country at a price lower than their domestic price or production cost. Dumping can harm domestic industries by undercutting prices and distorting competition. Anti-dumping measures may be imposed by importing countries to counteract the effects of dumping.

Intellectual Property Rights (IPR): Legal rights that protect creations of the human intellect, such as inventions, literary and artistic works, trademarks, and industrial designs. In international trade, protecting and enforcing IPR is crucial to encourage innovation and ensure fair competition.

Foreign Direct Investment (FDI): Investment made by a company or individual from one country into another country. FDI involves establishing operations or acquiring assets in the foreign country, such as setting up a subsidiary or acquiring shares in a company. FDI contributes to economic growth and development and plays a significant role in international trade.

Preferential Trade Agreement (PTA): A trade agreement between two or more countries that grants preferential treatment to each other’s goods or services. PTAs aim to reduce trade barriers and promote closer economic cooperation among participating countries. Examples include free trade agreements, customs unions, and regional trade agreements.

Trade Deficit: A situation where the value of a country’s imports exceeds the value of its exports. A trade deficit can occur when a country relies heavily on imports or has a trade imbalance with specific trading partners. Persistent trade deficits can have economic implications, including currency depreciation and debt accumulation.

WTO (World Trade Organization): An international organization that deals with global rules of trade between nations. The WTO promotes free trade, resolves trade disputes, and provides a platform for negotiating trade agreements. Its primary goal is to ensure a smooth and predictable international trading system.

Non-Tariff Barrier (NTB): Any barrier to trade other than a tariff. NTBs include various measures and regulations that can hinder or restrict international trade, such as import quotas, licensing requirements, technical standards, sanitary and phytosanitary measures, and customs procedures. Addressing NTBs is essential for facilitating trade flows.

Market Access: The opportunity and conditions for companies to enter and operate in foreign markets. Market access includes factors such as tariffs, quotas, regulatory requirements, and administrative procedures. Ensuring fair and transparent market access is crucial for promoting international trade and attracting foreign investment.


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