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Trade Terms Cheat Sheet – Produced by: @DmitryOpines (Comments welcome, DMs Open

CUSTOMS UNION Multiple countries agree to charge no tariffs on goods trade with one another, and maintain
a single unified set of tariffs on imports from other sources.
CUSTOMS UNION A more integrated customs union which also harmonizes many regulations and allows
(SINGLE MARKET) freedom of movement for workers and capital.
MOST FAVOURED A core rule of the World Trade Organisation, which means governments have to provide
NATION (MFN) equal treatment to imports from any source. The big exception is Free Trade Agreement,
which under WTO rules have to cover almost all of your two way trade in order to be legal.

Explanation: The economies founding the WTO didn't want countries doing sweetheart
deals on one or two tariff lines. They therefore decided that unless do a comprehensive Free
Trade Agreement covering almost everything, you have to treat everyone the same way.
QUOTA A volume (usually in tonnes) of a certain product a country has agreed it will import at a
lower tariff rate (the in-quota rate). Anyone attempting to export this product beyond this
volume will need to pay a much higher rate (the out of quota rate).

Example: First 10,000 tonnes of imported beef pay 10% tax, any beyond that pay 400%.
QUOTA (COUNTRY Ordinarily, quotas are called 'TRQs' and they are open to imports from any source. However,
SPECIFIC) some governments maintain quotas which can only be filled by imports from a specific

Example: The first 5,000 tonnes of New Zealand lamb pay 15% tax, the rest pay 400%.
RULES OF ORIGIN A set of conditions written into a free trade agreement which sets out how much of a
(ROOS) product has to be made in the country in order to qualify for the discount tariff. There to
prevent countries shipping almost finished goods into a country and then using that
countries free trade agreements to avoid tariffs.

Example: In order to qualify for a lower tariff, 60% of a car's components have to be
produced locally.
SANITARY PHYTO- The regulations and checks a country puts in place to ensure plant and animal imports are
SANITARY (SPS) safe, and not a threat to the local ecosystem.
TARIFF A tax on imports. Usually a percentage of the import value and normally paid by the

Example: A 10% tariff on jeans means an importer bringing in a pair costing $100 has to pay
TARIFF (APPLIED) The actual import tax a country imposes on a type of product.
TARIFF (BOUND) The maximum import tax a country has agreed it is allowed to impose on a type of product.
Often higher than the 'Applied Tariff'. A government can raise its tariff up to the 'Bound' rate
at any time without breaching its commitments under the World Trade Organisation.
TARIFF (SCHEDULE) A formal document submitted to the World Trade Organisation (WTO) which lists your
bound and applied tariff rates on every product.
TECHNICAL BARRIERS These refer to any regulations, formalities or conditions on importing which aren't tariffs.
TO TRADE (TBT) AKA. This can include labeling requirements (such as nutritional information on food) and
NON TARIFF environmental standards.
WORLD TRADE Internaitonal organisation where governments negotiate, monitor compliance with, and
ORGANISATION legally settle disputes on mutually agreed trade rules. All decisions on new rules are made
(WTO) by consensus, with even the smallest economy able to block a decision. When a WTO
Member feels another is breaching the rules, they can take a case against them in the WTO's
dispute settlement system (a legal panel, like a court). If they win, the court may allow them
to impose tariffs equal to the value of the damage their trade has suffered.