Trade

appreciation

an increase in the value of a currency in a floating exchange rate system

balance of payments

a record of all financial transactions between a country and the rest of the world

balance of trade in goods

the difference in value between goods a country exports and imports

capital account

part of BoP, showing capital transfers and acquisition of assets

capital flight

the rapid flow of assets or money out of a country due to instability

common market

a trade bloc allowing free movement of goods, services, capital and labour

comparative advantage

when a country produces a good at a lower opportunity cost than others

current account

part of BoP, involving trade in goods, services, income and transfers

current account deficit

when a country’s import > export

current account surplus

when a country’s export > import

current transfers

transfers of money with nothing received in return e.g. foreign aid

custom union

a trade bloc where members trade freely and adopt a common external tariff

depreciation

a fall in value of a currency in a floating exchange rate

devaluation

a reduction in a currency’s value in a fixed exchange rate

exchange rate

the price of a currency expressed in terms of another

export

goods and services sold to other countries

external balance

when a country’s current account is in equilibrium

fair trade

a certification system that ensures fair wages for producers

financial account

part of BoP, track investments and assets between countries

fixed exchange rate

a currency value pegged to another currency

floating exchange rate

a currency value determined by supply and demand in foreign exchange markets

foreign direct investment (FDI)

investment by a firm in a foreign country’s business assets; set up shop abroad

free trade

trade without tariffs, quotas, barriers

free trade agreement (FTA)

an agreement to reduce or remove trade barriers among member countries

import substitution

replacing foreign goods with domestically made ones

imports

goods and services purchased from other countries

infant industry

a new industry needing protection to become competitive, has not taken advantage of economies of scale

international trade

the exchange of goods and services across countries

managed exchange rate

a system where currency is mostly market-driven but occasionally adjusted by the central bank

monetary union

a group of countries using a common currency and central bank

portfolio investment

buying stocks, bonds or other financial assets in another country; investing abroad without owning a factory

preferential trade agreement (PTA)

a deal giving special trade advantages to partner countries

primary sector

economic activities like farming, fishing and mining

privitisation

transferring ownership from government to private lands

quota

a limit on the number or value of imports

revaluation

an increase in a currency’s value in a fixed exchange rate system

subsidy (international)

government support to domestic firms competing internationally

tariff

tax on imported goods

trade liberalisation

removing barriers to free international trade

trade protection

policies that restrict imports to protect domestic industries

World Trade Organisation (WTO)

an international body that governs trade rules and settles disputes

environmental sustainability

the responsible use and management of natural resources to maintain their viability over time

sustainable development

Development that meets the current needs and will not compromise the ability of future generations to meet their needs.