Trade Talk

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					Trade Talk
The following is a glossary of trade terms, many of which are used in relation to international
agricultural trade.


Ad valorem tariff: Tariff defined as a percentage of the value of an imported good.

Agenda 2000: The European Communities (EC’s) financial reform plans for 2000–06 aimed at
strengthening the union with a view to receiving new members. Includes reform of the CAP
(Common Agriculture Policy).

Agriculture Agreement: The WTO’s Agriculture Agreement was negotiated in the 1986–94
Uruguay Round and is a significant first step towards fairer competition and a less distorted
sector. It includes specific commitments by WTO member governments to improve market
access and reduce trade-distorting subsidies in agriculture. These commitments were
implemented over a six-year period (10 years for developing countries) that began in 1995.
Participants have agreed to initiate negotiations for continuing the reform process one year
before the end of the implementation period, i.e. by the end of 1999. These talks have now
been incorporated into the broader negotiating agenda set at the 2001 Ministerial Conference
in Doha, Qatar.

Amber box: All domestic support measures considered to distort production and trade (with
some exceptions) fall into the amber box, which is defined in Article 6 of the Agriculture
Agreement as all domestic supports except those in the blue and green boxes. These include
measures to support prices, or subsidies directly related to production quantities. These
supports are subject to limits: “de minimis” minimal supports are allowed (5% of agricultural
production for developed countries, 10% for developing countries).

AMS: Aggregate Measure of Support is used to measure the amount of trade distorting
support provided by WTO members. Countries notify their AMS for specific product support
programs and for more broadly available programs. Both the product specific AMS and the
more broadly available AMS were subject to cuts under the Uruguay Round Agreement.

Andean Community: Bolivia, Colombia, Ecuador, Peru and Venezuela.

Anti-dumping duties: Article VI of the GATT 1994 permits countries to apply duties against
imported goods if those imported goods are found to be priced lower in the destination market
than in the origin market, or if the prices have been found to be lower than the cost of
production.

APEC: Asia Pacific Economic Cooperation forum. APEC is a forum for facilitating economic
growth, trade and investment liberalisation, and cooperation amongst its membership of 21
countries (including Australia). The end result of APEC’s activities includes increased
employment opportunities and community development.

Appellate Body: An independent seven-person body that, upon request by one or more
parties to a WTO dispute, reviews findings in panel reports.

Applied / effective tariff rate: The actual tariff rate in effect at a country's border.

ASEAN: Association of Southeast Asian Nations. The seven ASEAN members of the WTO -
Brunei, Indonesia, Malaysia, Myanmar, the Philippines, Singapore and Thailand - often speak in
the WTO as one group on general issues. The other ASEAN members are Laos and Vietnam.

Article XX: GATT Article listing allowed “exceptions” to the trade rules.

Bilateral: Between two countries, in contrast to plurilateral and multilateral.
Bilateral trade: The trade between two countries; that is, the value or quantity of one
country's exports to the other, or the sum of exports and imports between them.

Bound tariff: Tariff is fixed at a certain level, permitting no increases only decreases (e.g.
tariff binding).

Blue box: This is the “amber box with conditions” - conditions designed to reduce distortion.
Any support that would normally be in the amber box is placed in the blue box if the support
also requires farmers to limit production.

Border protection: Any measure which acts to restrain imports at point of entry.

Box: A category of domestic support.
• Green box: supports considered not to distort trade and therefore permitted with no
   limits.
• Blue box: permitted supports linked to production, but subject to production limits and
   therefore minimally trade-distorting.
• Amber box: supports considered to distort trade and therefore subject to reduction
   commitments.

BSE: Bovine spongiform encephalopathy, or “mad cow disease”.

Cairns Group: Group of agricultural exporting nations lobbying for agricultural trade
liberalization. It was formed in 1986 in Cairns, Australia just before the beginning of the
Uruguay Round. Current membership: Argentina, Australia, Bolivia, Brazil, Canada, Chile,
Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines,
South Africa, Thailand and Uruguay.

CAP: Common Agricultural Policy. The European Union’s (EU) comprehensive system of
production targets and marketing mechanisms designed to manage agricultural trade within
the EU and with the rest of the world.

Capacity building: The term used repeatedly in the Doha Declaration referring to the
assistance to be provided to developing countries in establishing and administering their trade
policies, conducting analysis, and identifying their interests in trade negotiations.

Caricom: The Caribbean Community and Common Market comprises 15 countries.

Circumvention: Measures taken by exporters to evade anti-dumping or countervailing duties.

Codex Alimentarius: FAO/World Health Organization commission that deals with
international standards on food safety.

Contracting party: A country that has signed the GATT. The term Contracting Parties with
both words capitalized means all Contracting Parties acting jointly.

Countervailing measures: Action taken by the importing country, usually in the form of
increased duties to offset subsidies given to producers or exporters in the exporting country.

CTD: The WTO Committee on Trade and Development.

Customs Union: In a Customs Union, all participating nations adopt a common external trade
policy (e.g. common external tariff regime).
De Minimis: Under the de minimis provisions of the Agriculture Agreement there is no
requirement to reduce trade-distorting domestic support in any year in which the aggregate
value of the product-specific support does not exceed 5 per cent of the total value of
production of the agricultural product in question. In addition, non-product specific support
which is less than 5 per cent of the value of total agricultural production is also exempt from
reduction. The 5 per cent threshold applies to developed countries whereas in the case of
developing countries the de minimis ceiling is 10 per cent.

Decouple: Refers to the provision of support to an enterprise, usually a farm, in a manner
that does not provide an incentive to increase production. Farm subsidies that are decoupled
are included in the green box and are therefore permitted by the WTO.

Deficiency payment: Paid by governments to producers of certain commodities and based on
the difference between a target price and the domestic market price or loan rate, whichever is
the less.

Distortion: When prices and production are higher or lower than levels that would usually
exist in a competitive market.

Doha Declaration: The document agreed upon by the trade ministers of the member
countries of the WTO at the Ministerial meeting 14 November 2001, in Doha, Qatar. It
initiated negotiations on 21 subjects.

Paragraph 13 of the Doha Declaration in relation to Agriculture states:

“…we commit ourselves to comprehensive negotiations aimed at: substantial improvements in
market access; reductions of, with a view to phasing out, all forms of export subsidies; and
substantial reductions in trade-distorting domestic support. We agree that special and
differential treatment for developing countries shall be an integral part of all elements of the
negotiations and shall be embodied in the schedules of concessions and commitments and as
appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and
to enable developing countries to effectively take account of their development needs,
including food security and rural development. We take note of the non-trade concerns
reflected in the negotiating proposals submitted by Members and confirm that non-trade
concerns will be taken into account in the negotiations as provided for in the Agreement on
Agriculture”.

Domestic support: Any policy that assists domestic industry, including a subsidy to
production, payment not to produce, price support and other means of increasing the income
of producers.

DSB: Dispute Settlement Body. Term used when the WTO General Council meets to settle
trade disputes.

DSU: The Uruguay Round Understanding on Rules and Procedures Governing the Settlement
of Disputes.

Dumping: Occurs when goods are exported at a price less than their normal value, generally
meaning they are exported for less than they are sold in the domestic market or third-country
markets, or at less than production cost.

EC: European Communities (official name of the European Union in the WTO).

EFTA: European Free Trade Association.

Ex ante, ex post: Before and after a measure is applied.
Export enhancement programme: A United States Government programme of export
subsidies given generally to compete with subsidised agricultural exports on certain export
markets.

Export subsidy: A subsidy to exports. That is, a payment to exporters of a good per unit of
the good exported.

FAO: Food and Agriculture Organization of the United Nations. FAO is one of the largest
specialized agencies in the United Nations system and the lead agency for agriculture, forestry,
fisheries and rural development. An intergovernmental organization, FAO has 183 member
countries and one member organization, the European Community.

Fast track: A procedure adopted by the United States (US) Congress, at the request of the US
President, committing it to consider trade agreements without amendment. In return, the
President must adhere to a specified timetable and other procedures.

FMD: Foot and mouth disease.

Food Security: Concept which discourages opening the domestic market to foreign
agricultural products on the principle that a country must be as self-sufficient as possible for its
basic dietary needs.

Free Trade Agreement / Area: A reciprocal arrangement whereby trade barriers (usually
tariffs) between participating nations are abolished. Trade within the group is therefore duty
free but members set own tariffs on imports from non-members.

Free Trade Area of the Americas (FTAA): A preferential trading arrangement being
negotiated among most of the countries (all but Cuba) of the western hemisphere.

Free-Rider: A casual term used to infer that a country which does not make any trade
concessions, profits, nonetheless, from tariff cuts and concessions made by other countries in
negotiations under the most-favoured-nation principle.

G15: Group of 15 developing countries acting as the main political organ for the Non-Aligned
Movement.

G7: Group of seven leading industrial countries: Canada, France, Germany, Italy, Japan,
United Kingdom, and the United States.

G77: Group of developing countries set up in 1964 (originally 77, but now more than 130
countries).

GATT: General Agreement on Tariffs and Trade, which has been superseded as an
international organization by the World Trade Organization (WTO).

GATT 1994: The version of the General Agreement on Tariffs and Trade, incorporated into the
WTO, which governs trade in goods (sometimes called the Uruguay Round GATT).

Geographical indications: Place names (or words associated with a place) used to identify
products (for example, “Champagne”, “Tequila” or “Roquefort”) which have a particular
quality, reputation or other characteristic because they come from that place.
Green box: The green box is a category of programs on which spending is not limited by the
Agriculture Agreement. Programs in the green box category are protected from countervailing
duty challenges. Green box subsidies must not distort trade, or at most cause minimal
distortion. They have to be government-funded (not by charging consumers higher prices) and
must not involve price support. They tend to be programmes that are not targeted at
particular products, and include direct income supports for farmers that are not related to (are
“decoupled” from) current production levels or prices. They also include environmental
protection and regional development programs.

GSP: Generalized System of Preferences - programmes by developed countries granting
preferential tariffs to imports from developing countries.

Harmonized System: An international nomenclature (classification) developed by the World
Customs Organization, which is a numeric system that assigns a 6-digit code to all
products/traded goods. There are also more finely defined 8-digit export and 10 digit import
codes.

Internal support: Any measure which acts to maintain producer prices at levels above those
prevailing in international trade; including direct payments to producers, including deficiency
payments, and input and marketing cost reduction measures available only for agricultural
production.

International Office of Epizootics: Deals with international standards concerning animal
health.

Least Developed Country (LDC): A country designated by the United Nations as least
developed based on criteria of low per capita GDP, weak human resources (life expectancy,
calorie intake, etc.), and a low level of economic diversification (share of manufacturing and
other measures).

Level playing field: The objective of those who advocate protection on the grounds the
foreign firms have an unfair advantage. A level playing field would remove such advantages,
although it is not usually clear what sorts of advantage (including comparative advantage)
would be permitted to remain.

Market access: The ability of firms from one country to sell in another country.

Market price support: Any support measures which raise internal prices above world prices.

MERCOSUR: Argentina, Brazil, Paraguay and Uruguay.

MFN: Most-favoured-nation treatment. The principle of not discriminating between one’s
trading partners. It means that if a concession (e.g. a lower tariff) is provided to one WTO
member country, it must also be provided to all other WTO member countries.

Modalities: Targets for achieving the objectives of the WTO agriculture negotiations (e.g.
elimination of export subsidies, or increase of minimum access by 20% in 5 years).

Multifunctionality: Idea that agriculture has many functions in addition to producing food
and fibre, e.g. environmental protection, landscape preservation, rural employment, etc.
Some WTO members contend that high domestic support and protectionism can be justified
because of the “multifunctional” nature of agriculture (in other words high subsidies and tariffs
are required to protect the environment, the landscape and rural health). (Also see non-trade
concerns.)

Multilateral: Among a large number of countries.

Multilateral agreement: An agreement among a large number of countries.
NAFTA: North American Free Trade Agreement. A 1994 agreement reached by the United
States, Canada, and Mexico that instituted a schedule for the phasing out of tariffs and
eliminated a variety of fees and other hindrances to encourage free trade between the three
North American countries.

Non-trade concerns: Similar to multifunctionality. The preamble of the Agriculture
Agreement specifies food security and environmental protection as examples. Also cited by
members are rural development and employment, and poverty alleviation.

Non-violation: In WTO terminology, this is shorthand for a complaint that a country's action,
though not a violation of WTO rules, has nullified or impaired a member's expected benefits
from the agreement.

Non-tariff barriers: NTBs are measures such as quotas, import licensing systems, sanitary
regulations, prohibitions, etc that may restrict trade.

Nuisance tariff: A tariff so low that it costs the government more to collect it than the
revenue it generates.

OECD: Organization for Economic Cooperation and Development. An international
organization helping governments tackle the economic, social and governance challenges of a
globalised economy.

Offer: A country’s proposal for further trade liberalisation.

Panel: Consisting of three experts, this independent body is established by the Dispute
Settlement Body (DSB) to examine and issue recommendations on a particular dispute in the
light of WTO provisions.

Peace Clause: Provision in Article 13 of the Agriculture Agreement says agricultural subsidies
committed under the Agreement cannot be challenged under other WTO agreements, in
particular the Subsidies Agreement and GATT. Expires at the end of 2003.

Plurilateral: Among several countries - more than two, which would be bilateral, but not a
great many, which would be multilateral.

Precautionary principle: The view that when science has not yet determined whether a new
product or process is safe or unsafe, policy should prohibit or restrict its use until it is known to
be safe. Applied to trade, this has been used as the basis for prohibiting imports of Genetically
Modified Organisms (GMOs), for example.

Preferential trading agreements: PTAs lower trade barriers among members. Such
preferential trade is usually limited to a portion of actual trade flows, and is often non-
reciprocal. While some PTAs are a political expression of desired closer economic relations,
they can act as a catalyst to eventual free trade amongst participants. PTAs are also
employed to help developing nations gain access to a larger export market, and therefore
greater economic development. An example of such an agreement is the Papua New Guinea –
Australia Trade and Commercial Relations Agreement (PATCRA II), and has been in effect since
1977.

Price undertaking: Undertaking by an exporter to raise the export price of the product to
avoid the possibility of an anti-dumping duty.
Producer support estimate (PSE): Introduced by the OECD to quantify support in
agriculture. It is an indicator of the annual monetary value of support from taxpayers and
consumers to producers, measured at farm gate level. It is a nominal assistance measure.
That is, it refers only to assistance provided to the product and does not take into account any
assistance or taxes on inputs to production. The percentage PSE is the ratio, expressed as a
percentage of the PSE to the value of gross farm receipts, which includes the value of total
production at farm gate prices plus budgetary support. Also called producer subsidy
equivalent.

Prohibitive tariff: A tariff that reduces imports to zero.

Quad: Canada, EC, Japan and the United States.

Quantitative restrictions: Specific limits on the quantity or value of goods that can be
imported (or exported) during a specific time period.

Quota: A government-imposed restriction on quantity, or sometimes on total value. An
import quota specifies the maximum amount of an import per year that may be sold or directly
allocated, to individuals or firms, domestic or foreign. May be global, bilateral, or by country.

Reciprocity: A principle that underlies GATT negotiations, that countries exchange
comparable concessions.

Retaliation: The use of an increased trade barrier in response to another country increasing
its trade barrier, either as a way of undoing the adverse effects of the latter's action or of
punishing it. The formal procedure permitted under the GATT whereby a country may raise
discriminatory tariffs above bound levels against a GATT member that has violated GATT rules
and not provided compensation.

Rules Of Origin: Laws, regulations and administrative procedures which determine a
product’s country of origin. A decision by a customs authority on origin can determine whether
a shipment falls within a quota limitation, qualifies for a tariff preference or is affected by an
anti-dumping duty. These rules can vary from country to country.

SACU: Southern African Customs Union comprising Botswana, Lesotho, Namibia, South Africa
and Swaziland.

Safeguard measures: Action taken to protect a specific industry from an unexpected build-
up of imports - governed by Article XIX of the GATT 1994. The Agreement on Safeguards
allows countries to provide safeguard measures which may be necessary to protect local
industries from injury or threat of injury directly attributable to the increased importation of
any article subject to the obligations, including tariff concessions, made under the WTO.

Schedule: “Schedule of Specific Commitments”. A WTO member’s list of commitments
regarding market access and bindings.

Schedule of concessions: A list of bound tariff rates.

Special and differential treatment (S&D): The GATT principle that developing countries be
accorded special privileges, exempting them from some requirements of developed countries.
It also permits tariff preferences among developing countries and by developed countries in
favour of developing countries. Contained in several WTO agreements.
Special agricultural safeguard: Article 5 of the Agreement on Agriculture states that for
products, the non-tariff restrictions of which have been converted to tariffs, governments can
impose additional duties if the volume of imports of that product increases above a certain
threshold, or if the price of imports of that product falls below a trigger price. Article 5 also
specifies that the special safeguard can only be used where countries concerned have explicitly
reserved the right to invoke this clause by designating the products in their schedules. This
special safeguard cannot be applied to in-quota imports. Unlike the Article XIX safeguard
mechanism, the Special Agricultural Safeguard does not require the complainant to show that
imports caused injury.

SPS regulations: Sanitary and Phytosanitary regulations, which are government standards to
protect human, animal and plant life and health, to help ensure that food is safe for
consumption.

Subsidy: There are two general types of subsidies: export and domestic. An export subsidy is
a benefit conferred on a firm by the government that is contingent on exports. A domestic
subsidy is a benefit not directly linked to exports.

Swiss formula: A formula used for tariff reductions (i.e. by the Cairns Group). The Swiss
formula ensures deep cuts to high tariffs and is represented as: final tariff = (initial tariff x a) /
(initial tariff + a) where a = 25 for developed countries and is variable for developing countries
depending on the level of initial tariff.

Tariff binding: Commitment not to increase a rate of duty beyond an agreed level. Once a
rate of duty is bound, it may not be raised without compensating the affected parties.

Tariff escalation: Higher import duties on semi-processed products than on raw materials,
and higher still on finished products. This practice protects domestic processing industries and
discourages the development of processing activity in the countries where raw materials
originate.

Tariff line: A single item in a country's tariff schedule.

Tariff peaks: Relatively high tariffs, usually on “sensitive” products, amidst generally low tariff
levels. For industrialized countries, tariffs of 15% and above are generally recognized as “tariff
peaks”.

Tariff rate quota (TRQ): A combination of an import tariff and an import quota in which
imports below a specified quantity enter at a low (or zero) tariff and imports above that
quantity enter at a higher tariff. Also called a tariff quota.

Tariffication: Procedures relating to the agricultural market access provision in which all non-
tariff measures are converted into tariffs.

Tariffs: Customs duties on merchandise imports. Levied either on an ad valorem basis
(percentage of value) or on a specific basis (e.g. $7 per 100 kgs.). Tariffs give price
advantage to similar locally produced goods and raise revenues for the government.

Tariff schedule: The list of all of a country's tariffs, organised by product.

Technical barrier to trade: A technical regulation or other requirement (for testing, labelling,
packaging, marketing, certification, etc.) applied to imports in a way that restricts trade.

TBT: The WTO Agreement on Technical Barriers to Trade.

TPRB, TPRM: The Trade Policy Review Body is General Council operating under special
procedures for meetings to review trade policies and practices of individual WTO members
under the Trade Policy Review Mechanism.
Trade facilitation: Removing obstacles to the movement of goods across borders (e.g.
simplification of customs procedures).

Transparency: Degree to which trade policies and practices, and the process by which they
are established, are open and predictable.

TRIMS: Trade-related investment measures.

TRIPS: Trade-Related Aspects of Intellectual Property Rights.

UNCITRAL: United Nations Centre for International Trade Law. Drafts model laws such as
those on government procurement.

UNCTAD: The United Nations Conference on Trade and Development.

Uruguay Round: Multilateral trade negotiations launched at Punta del Este, Uruguay in
September 1986 and concluded in Geneva in December 1993. Signed by Ministers in
Marrakesh, Morocco, in April 1994.

Variable levy: Customs duty rate which varies in response to domestic price criterion.

VRA: A voluntary restraint arrangement is a bilateral arrangement whereby an exporting
country (government or industry) agrees to reduce or restrict exports without the importing
country having to make use of quotas, tariffs or other import controls.

Waiver: Permission granted by WTO members allowing a WTO member not to comply with
normal commitments. Waivers have time limits and extensions have to be justified.

WCO: World Customs Organization. A multilateral body located in Brussels through which
participating countries seek to simplify and rationalize customs procedures.

WTO: World Trade Organization. The WTO is the international organization that deals with the
rules governing trade between countries. It also resolves disputes between trading partners.


Source: WTO / MLA

				
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