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Glossary

trade balance derived by computing the net exports (imports) in the mer- chandise accounts; also called mer- chandise trade balance

trading possibilities

line

a line

in a

production possibilities diagram repre-

senting ratio

the equilibrium

terms-of-trade

cuts for industrial countries averaged 40 percent

trade promotion authority

(also

transfer pricing

a technique where

V

known as fast-track authority) devised in 1974, this provision commits the U.S. Congress to consider trade agree- ments without amendment; in return, the president must adhere to a specified timetable and several other procedures

an MNE reports most of its profits in a low-tax country, even though the profits are earned in a high-tax country

transition economies

national econ-

omies making the transition from a centrally planned economy to a market

variable levies

an import tariff that

increases

or decreases

as domestic or

world

prices change to guarantee

that

the price of the imported product after

payment

of duty will equal a predeter-

mined price

trade remedy laws

laws designed to

produce a fair trading environment for all parties engaging in international business; these laws include the escape

clause, countervailing duties, anti- dumping duties, and unfair trading practices

economy

transplants

the assembly plants of

Japanese companies that produce automobiles in the United States

transportation costs

the costs of

moving goods from one nation to

vertical diversification

in the case of

an MNE, occurs when the parent MNE decides to establish foreign subsidiaries

to produce intermediate goods or inputs that go into the production of the finished good

trade triangle

an area in a produc-

another

tion possibilities diagram showing

a

countrys exports, imports, and librium terms of trade

equi-

trade-creation effect

a welfare gain

resulting

from increasing

trade caused

two-point

arbitrage

the simulta-

neous purchase and sale of a currency

in two foreign-exchange markets in order to profit from exchange-rate differentials in different locations

W

wage and price controls

intervention

by the government to set price and wage levels

by the formation of a regional trade bloc

trade-diversion effect

a welfare loss

resulting from the formation of a regional trade bloc; it occurs when imports from a low-cost supplier out- side the trade bloc are replaced by purchases from a higher-cost supplier

U

uncovered interest arbitrage

when

an investor does not obtain exchange-

market cover to protect investment proceeds from foreign-currency fluctuations

wage insurance

after finding new

jobs, a temporary government subsidy

of wages granted

to domestic workers

displaced by foreign trade and increased imports

World

Bank

an international

orga-

nization that provides loans to devel-

oping countries

aimed toward poverty

within the trade bloc

trade-weighted dollar

a weighted

average of the exchange rates between a domestic currency and the currencies of the nations most important trading partners, with weights given by relative

importance of the nations trade with each trade partner

unilateral transfers include transfers of goods and services (gifts in kind) or financial assets (money gifts) between the United States and the rest of the world

Uruguay Round round of talks between GATT members from 19861993 in which across-the-board tariff

reduction

and economic development

World Trade Organization (WTO) organization that embodies the main provisions of GATT, but its role was expanded to include a mechanism intended to improve GATTs process for resolving trade disputes among member nations

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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