International Trade Glossary

International Trade

The exchange of capital, goods, and services across international borders.

Balance of Trade

The difference between visible exports and visible imports.

Balance of Payments

A statement of the trade which takes place between a country’s residents and the residents of all foreign countries. It shows a record of the financial transactions between countries.

Balance of Invisible Trade/Invisible Balance

The difference between the value of services imported and exported.

Current Account

This account shows the difference between the import of goods and services and the export of goods and services.

Official Financing Account

This account shows how the balance of payment is financed. That is, what is done with the surplus or deficit on the balance of payment.

Capital Account

This account records the flows of loans and grants to and from other countries, and investments bought and sold.

Import Trade

The purchase of goods and services from other countries.

Export Trade

The sale of goods and services to other countries.

Trade Barriers

A variety of techniques used by countries in order to restrict free trade, sometimes in an attempt to correct an adverse balance of payment.

Tariffs

Imposing importing duties on goods to make them more expensive than the goods produced within the country.

Quota

The quantity of a specific good that a country permits to be imported without restriction.

Subsidies

An allocation provided by the government to local producers to lower the cost of production.

Dumping

An act of charging cheaper prices in overseas markets compared to the domestic market. Or, selling goods at a loss abroad.

Free Trade

Trade among countries without any restrictions.

Trade Embargo

A ban implemented by a government on a particular product such that it cannot be imported into a country, or a straightforward ban on trading between one country and another.

Trading Bloc

A type of inter-government agreement often part of a regional inter-government agreement where regional barriers to trade are reduced or eliminated among participating states or countries.

Deficit

Where the value of imports exceeds the value of exports.

Surplus

Where the value of exports exceeds the value of imports.

Exchange Control

Limiting the amount of currency that can leave the country.

Protectionism

A practice used by governments to protect domestic industries from global competition.

Merchant

A middleman who trades on his own account and therefore owns the goods and earns a profit from his trading activities.

Forwarding Agent

A middleman in international trade who specializes in moving goods from country to country.

Broker

A middle man who finds buyers for the seller, does not take possession of the goods, and receives a commission for his services.

Factor #1

A middleman who finds his buyers for the seller, takes possession of the goods, can sell in his own name, can sell at his own price, and makes a profit out of sale.

Factor #2

A financial business that buys a company’s on-paid invoices (Accounts Receivables) for cash at a discount.

Bill of Lading

Used when sending goods by sea. An evidence of contract between the shipper of the goods and the carrier. The customer usually needs the original as proof of ownership to take possession of the goods.

Bill of Exchange

An unconditional written order, in which the importer agrees to pay the sum involved by the date (which is sometime in the future) shown on the bill. This is legally binding.

Airway Bill

Used for carriage of goods by air. A document which evidences the contract between the shipper and airline(s). This serves as a receipt of goods for delivery and states the condition of carriage.

Manifest

Transport document that serves as a tally-sheet, and gives a detailed summary of all bills of lading (or air waybills) issued by a carrier (or its agent) for a particular voyage of a particular vessel of vehicle.

Certificate of Origin

This certifies the place of manufacture of the exported goods to meet the requirements of the importing authorities.

Documentary Bills

These documents vary according to the requirements of the importing country but include the bill of lading, export invoice, and insurance certificate.

Insurance Certificate

This certifies that the shipment has been insured under a given open policy and is to cover loss or damage to the cargo while in transit.

Foreign Direct Investment

An investment in the form of a controlling ownership in a business in one country by an entity based in another country.