The ability of a country or firm to produce a particularly good or service more efficiently than other goods or services, such that its resources are most efficiently employed in this activity. The comparison is to the efficiency of other economic activities the actor might undertake, not to the efficiency of other countries or firms

The ability of a country or firm to produce more of a particular good or service than other countries or firms using the same amount of effort and resources

The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor

The imposition of barriers to restrict imports. Commonly used protectionist devices include tariffs, quantitative restrictions (quotas), and other non tariff barriers

Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods, and health and safety standards that discriminate against foreign goods

A tax imported on imports; this raises the domestic price of the imported good and may be applied for the purpose of protecting domestic producers from foreign competition; most common trade barrier

Quantitative limit placed on the import of particular goods

Obstacles to imports other than tariffs (trade taxes). Examples include restrictions on the number of products that can be imported (quantitative restrictions, or quotas); regulations that favor domestic over imported products; and other measures that discriminate against foreign goods or services

The theory that protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin approach: if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization

A model of trade relations that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin approach, for which the nature of the factor - labor, land, capital - is the principal consideration

In international trade relations, a mutual agreement to lower tariffs and other barriers to trade. Reciprocity involves an implicit or explicit arrangement for one government to exchange trade policy concessions with another

A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties

An institution created in 1995 to succeed the GATT and to govern international trade relations. The WTO encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes

An international institution created in 1947 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. In 1994, the GATT was replaced by the WTO

Agreements among three or more countries in a region to reduce barriers to trade among themselves; the three most prominent RTAs are the European Union, NAFTA, and Mercosur

Investments in a foreign country via the purchase of stocks (equities), bonds, or other financial instruments. Portfolio investors do not exercise managerial control of the foreign operation

Loans from private financial institutions in one country to sovereign governments in other countries

Investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. Direct investors maintain managerial control of the foreign operation

An important international institution that provides loans at below-market interest rates to developing countries, typically to enable them to carry out development projects

A sharp slowdown in the rate of economic growth and economic activity

A severe downturn in the business cycle, typically associated with a major decline in economic activity, production, and investment; a severe contraction of credit; and sustained high unemployment

To fail to make payments on a debt

The application of policies to reduce consumption, typically by cutting government spending, raising taxes, and restricting wages

One of the oldest international financial organizations, created in 1930, its members include the world's principal central banks, and under its auspices they attempt to cooperate in the financial realm

A major international economic institution that was established in 1944 to manage international monetary relations and that has gradually reoriented itself to focus on the international financial system, especially debt and currency crises

An enterprise that operates in a number of countries, with production or service facilitates outside its country of origin

An agreement between two countries about the conditions for private investment across borders. Most BITs include provisions to protect an investment from government discrimination or expropriating without compensation, as well as establishing mechanisms to resolve disputes

The price at which one currency is exchanged for another

In terms of a currency, to increase in value in terms of other currencies

In terms of a currency, to decrease in value in terms of other currencies

To reduce the value of one currency in terms of other currencies

An important tool of national governments to influence broad macroeconomic conditions such as unemployment, inflation, and economic growth. Typically, governments alter their monetary policies by changing national interest rates or exchange rates

The institution that regulates monetary conditions in an economy, typically by affecting interest rates and the quantity of money in circulation

An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold

The monetary system that prevailed between about 1870 and 1914, in which countries tied their currencies to gold at a legally fixed price

An exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention

The monetary order negotiated among the World War II allied in 1944, which lasted until the 1970s and which was based on a US dollar tied to old. Other currencies were fixed to the dollar but were permitted to adjust their exchange rates

A monetary system of fixed but adjustable rates. Governments are expected to keep their currencies fixed for extensive periods but are permitted to adjust the exchange rate from time to time as economic conditions change

A formal or informal arrangement among governments to govern relations among their currencies; the agreement is shared by most countries in the world economy

Countries at a relatively low level of economic development

Basic structures necessary for social activity, such as transportation and telecommunications networks, and power and water supply

Raw materials and agricultural products, typically unprocessed or only slightly processed. The primary sectors are distinguished from secondary sectors (industry) and tertiary sectors (services)

Characterizing an industry whose markets are dominated by a few firms

The relationship between a country's export prices and its import prices

A set of policies, pursued by most developing countries from the 1930s through the 1980s, to reduce imports and encourage domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries

A set of policies, originally pursued starting in the late 1960s by several East Asian countries, to spur manufacturing for export, often through subsidies and incentives for export production

An array of policy recommendations generally advocated by developed-country economists and policy makers starting in the 1980s, including trade liberalization, privatization, openness to foreign investment, and restrictive monetary and fiscal policies

A coalition of developing countries in the United Nations, formed in 1964 with 77 members; it has grown to over 130 members but maintains the original name

Associations of producers of commodities (raw materials and agricultural products) that restrict world supply and thereby cause the price of the goods to rise

-Land; an essential input to agricultural production

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Allowed compensation through fiscal transfers, reflected in greater social spending by the government. In essence, as trade openness increased, winners compensated the losers

1) Cheaper labor

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1) Iterated game, negotiate trade treaties with the same states over and over. Since one must deal with the same state over and over, the incentive to to take one-time protect/liberalize strategy disappears

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