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International Trade

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Comparative advantage
The theory used to support the promotion of free trade. It refers to countries specialising in areas of relative strength and then engaging in trade and how this maximises prosperity for both parties.
Exchange Rate
The price of one currency in terms of another.
Free Trade Areas
Areas where protectionism between states has been removed e.g. the EU or the North Atlantic Free Trade Area (NAFTA)
Trade liberalisation
The removal of barriers to trade
A physical limit place on the numbers of goods that can be imported from other countries
A tax on imports which increases local prices, often with a view to protect domestic producters
Non-tariff barriers
Alternative ways of protecting domestic production e.g. by creating inflated health and safety standards for imports
Selling goods on international markets at a price less than the cost of production
The imposition of tariffs, quotas and non-tariff barriers to protect domestic producers from more competitive imports.
Grants given to local producers to make the more competitive compared with cheaper exports, in this sense a form of protectionism
Infant industries
Industries at an early stage in development yet to be competitive with other world suppliers
BRIC countries
The countries of Brazil, Russia, India and China which are becoming increasingly powerful in the world economy
Trading bloc
A group of countries which band together to promote free trade internally and to promote the bloc's interests externally e.g. NAFTA, EU etc.
The J curve effect
The temporary worsening of the current account as firms initially cannot respond to the relative change in prices of imports and exports being tied into contractual arrangements
The Marshall-Lerner condition
The law which states that if combined elasticities of imports and exports are less than one, a depreciation will worsen the current account
The terms of trade
The rates at which goods are exchanged between countries - the Prebisch-Singer hypothesis states that the terms of trade worsen between primary and manufactured products over time.