In Focus87 Janet Horner and Deirdre Kelly explain a few of the key terms used in discussions on trade.
Civil society: All civic and social organisations and movements that participate in a society, separate from the institutions of a government.
Duty-free goods: Goods that are bought or sold between countries with no additional import or export tax.
Economic Partnership Agreements (EPAs): Trade Deals being negotiated between European Union countries and 76 African, Caribbean and Pacific countries to promote a free trade ‘partnership’.
Foreign Direct Investment (FDI): Money invested by a private company from one country into another country.
Free trade: A trade model where goods and services can be traded across all borders and with no barriers. This is the trade model that is supported by many Western governments, although not always implemented by them. For example, the US advocates the free trade model but subsidises its cotton farmers to the disadvantage of other cotton producing countries.
Global South: A term used to describe the intangible geographic, political and economic world region also known as the developing world, the third world, underdeveloped countries.
Import tarriffs: A tax on imported goods which raises the price of that good therefore making it less competitive than local products in the country it is moving into.
International Monetary Fund (IMF): Set up as a partner organisation to the World Bank to encourage cooperation between governments in monetary policies. The fund demands that countries receiving financial aid adjust their economic policies according to the IMF’s free trade model.
Open market/ Open economy: An economic system resulting from following the free trade model.
Privatisation: Transferring control of state-run institutions and industries to private ownership. Examples of frequently privatised services include health services, transportation, water, energy.
Protectionism: An economic policy designed to ‘protect’ domestic businesses and industries by imposing barriers such as taxes and quotas on imported goods so as to limit their competitiveness with domestic goods. This policy is in opposition to free trade.
Structural Adjustment Programmes (SAPs): Policies to be implemented by developing countries who receive financial assistance from the IMF or World Bank. The policies often impose a free trade model including privatisation, deregulation and a reduction of trade barriers.
Subsidies: Financial assistance given (normally by the government) to domestic businesses and industries to help their products compete with imports. These subsidies can keep the cost of production low or allow the businesses involved to sell their products at an artificially low price. For example, in Italy tomato production is heavily subsidised by the Italian government allowing farmers to produce more than can be sold in Italy. The excess tomatoes are exported and can be sold at artificially cheap prices in countries such as Ghana, where local tomato farmers cannot compete.
World Bank: Originally known as the International Bank for Reconstruction and Development, the World Bank was set up after World War II to help with the reconstruction of European economies devastated by the war. In later years, it took on the role of providing loans to countries of the South for economic development. It is a sister organisation to the IMF. Both organisations are based in Washington.
World Trade Organisation (WTO): International trading organisation with 153 member countries. It is the key forum where multilateral trade rules (those involving multiple countries) are negotiated and trade disputes are adjudicated.