Lecture12.pdf

# Global institutions and trade liberalization This topic examines the historical development and roles of international trade organizations, focusing on the evolution from GATT to the WTO, and the process and trends of trade liberalization across various sectors and decades [16](#page=16) [2](#page=2). ### 1.1 Global trade institutions International trade has been shaped by key global institutions aimed at facilitating and liberalizing trade. The General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), are central to this process [3](#page=3). #### 1.1.1 General Agreements on Tariffs and Trade (GATT) The GATT was established in 1947 as a direct outcome of the Bretton Woods Conference, initially with 23 member countries. Its primary objective was to liberalize trade by reducing trade barriers [3](#page=3). #### 1.1.2 World Trade Organization (WTO) The WTO replaced GATT in 1995 and has since grown significantly. It began with 123 member countries and as of November 2025, it has 164 member countries, with an additional 20 to 25 observer countries. The WTO's aims are to liberalize trade, reduce trade barriers, facilitate trade, and handle trade disputes [3](#page=3). #### 1.1.3 GATT and WTO negotiation rounds Both GATT and the WTO have engaged in various negotiation rounds to advance trade liberalization. Notable WTO rounds include Singapore Geneva Seattle Doha (starting in 2001), Cancun Hong Kong Geneva (2009, 2011), Bali Nairobi and Buenos Aires with the Doha Development Agenda being a significant ongoing initiative since 2001 [4](#page=4). #### 1.1.4 Most favoured nation (MFN) principle A cornerstone principle of the WTO is the Most Favoured Nation (MFN) principle. This mandates that WTO member countries must apply the same trade conditions, including tariffs, equally to all other WTO members. This means member countries cannot discriminate against one another; any trade concession granted to one member must be extended to all other members. By becoming a WTO member, a country gains the right to benefit from the MFN tariffs applied by all other member countries and assumes the obligation to apply MFN tariffs to them [4](#page=4). ### 1.2 Trade liberalization in recent decades Trade liberalization has seen significant progress and shifts over the past several decades, with varying focuses across different sectors and periods [5](#page=5). #### 1.2.1 The post-war period (1950s - 1960s) Following the Great Depression, which was partly exacerbated by protectionist policies, the post-war era focused on economic recovery and global stability through open trade. High-income countries actively reduced tariffs on a wide range of products, with a primary emphasis on removing quotas and lowering tariffs for industrial goods [5](#page=5). #### 1.2.2 Expansion of trade liberalization (1970s - 1990s) This period witnessed an expansion of trade liberalization efforts, driven by ongoing trade negotiations under GATT and the WTO, as well as the establishment of free trade agreements among countries. While the focus remained on quota removal and tariff reduction for industrial products, agricultural tariffs generally remained high [5](#page=5). #### 1.2.3 Trade liberalization in the agri-food sector (since 1995) Since the establishment of the WTO in 1995, the agri-food sector has also experienced liberalization, although with distinct characteristics. Key developments include: * **Removal of import quotas:** High-income countries have removed import quotas on agri-food products. This process often involved "tariffication," which converted more trade-distorting quotas into less trade-distorting tariffs. The WTO also prohibits quotas [6](#page=6). * **Reduction of agricultural tariffs:** Tariffs on agri-food products have been reduced in high-income countries. However, these tariffs generally remain higher than those for industrial products. Specific sectors like sugar, dairy, and beef have seen persistently high tariffs [6](#page=6). * **Increase in free trade agreements:** The number of bilateral and regional free trade agreements has increased [6](#page=6). * **Emergence of non-tariff barriers:** Non-tariff barriers or non-tariff measures have become increasingly important [6](#page=6). **Trends in average import tariffs:** The period between 1995 and 2019 shows a general decline in average import tariffs for both agriculture and manufacturing in high-income countries. While agriculture tariffs have also decreased in low- and middle-income countries, they remain significantly higher than manufacturing tariffs in both country groups [7](#page=7). > **Tip:** The distinction between agricultural and industrial tariffs is crucial, as agriculture has historically faced higher protectionist measures. #### 1.2.4 Bilateral and regional free trade agreements In addition to multilateral agreements, numerous bilateral and regional free trade agreements have been established, creating deeper integration between member countries [10](#page=10) [11](#page=11). Examples include: * **European Union (EU):** Evolved from earlier formations like the EEC and Benelux formally established in 1993 [10](#page=10) . * **North American Free Trade Agreement (NAFTA):** Established in 1993, later replaced by the USMCA (United States-Mexico-Canada Agreement) in 2018 [10](#page=10). * **Asian Pacific Trade Agreement (APTA):** Founded in 2005, emerging from the Bangkok Agreement of 1975, and includes countries like China, India, and South Korea [10](#page=10). * **ASEAN Free Trade Area (AFTA):** Established in 1967, encompassing Southeast Asian nations [10](#page=10). * **South Asian Free Trade Area (SAFTA):** Launched in 2004, involving South Asian countries [10](#page=10). * **MERCOSUR:** Formed in 1991, including South American countries like Brazil and Argentina [11](#page=11). * **Common Market for Eastern and Southern Africa (COMESA):** Established in 1994, covering a wide range of African nations [11](#page=11). * **Pan-Arab Free Trade Agreement (PAFTA):** Created in 1997, involving 18 Arab countries [11](#page=11). * **African Continental Free Trade Area (AfCFTA):** Aims to remove tariffs on 90% of goods over time, making it the largest free trade agreement by the number of participating countries until RCEP [11](#page=11). * **Regional Comprehensive Economic Partnership (RCEP):** Signed in November 2020, involving 15 Asian countries [11](#page=11). ### 1.3 Motives for protectionism Despite the trend towards liberalization, protectionist measures persist, driven by various economic, social, and political motives [13](#page=13). #### 1.3.1 Protecting domestic producers Trade liberalization, while beneficial overall, can lead to losses for domestic producers in importing countries who face foreign competition and potentially lower world market prices. For instance, the sharp increase in US tariffs since January 2025 aims to protect domestic companies and jobs. Similarly, the EU's agricultural sector has historically benefited from protectionist measures to support domestic farmers, though the EU has shifted towards less trade-distorting direct income support since 2000 [13](#page=13). #### 1.3.2 Infant industry argument The "infant industry" argument posits that young industries in developing countries may require temporary protection from established foreign competitors to develop and achieve economies of scale. This protection is intended to be temporary, with the goal of eventual integration into the global market. Countries like South Korea and Taiwan have historically utilized high tariffs on selected industries as part of their rapid industrialization and import substitution strategies [14](#page=14). #### 1.3.3 Environmental concerns Environmental considerations are increasingly cited as a justification for protectionist policies. The "pollution haven hypothesis" suggests that polluting industries might relocate to countries with less stringent environmental regulations. Protectionist measures, such as tariffs on products with a higher carbon footprint, could be employed to prevent the development of "pollution havens." For example, the EU's Green Deal includes provisions for tariffs on products manufactured with higher carbon emissions compared to those produced within the EU [15](#page=15). #### 1.3.4 National security and geopolitical motives National security and geopolitical considerations can also influence trade policies, leading to protectionist measures [15](#page=15). #### 1.3.5 Terms of trade gains for large countries Large countries may also implement trade policies, including tariffs, to influence world prices and potentially gain from terms of trade improvements [15](#page=15). ### 1.4 A new era of trade protectionism? Recent developments suggest a potential shift towards increased protectionism, particularly evident in the United States [12](#page=12). #### 1.4.1 Recent sharp increase in US tariffs Since January 2025, the US has announced general import tariffs of 10% to 15% on nearly all imported products. These tariffs are country-specific, with notably high rates applied to products from China and India, which conflicts with the WTO's Most Favoured Nation principle. The average effective tariff rate in the US is reported to have risen from approximately 2.2% in January 2025 to around 10.5% by August 2025 [12](#page=12). #### 1.4.2 Potential for a 'tariff war' This trend raises concerns about a potential escalation into a "tariff war," where countries retaliate with increased tariffs as countermeasures. Such a scenario could undermine the WTO's authority and lead to a move away from multilateralism in international trade [12](#page=12). --- # Trade and economic development International trade is a significant driver of economic growth and development, particularly for lower and middle-income countries (LMICs), with important distributional implications and specific objectives within international negotiations [17](#page=17). ### 2.1 Gains from trade and economic growth Trade can foster economic growth in LMICs by increasing efficiency. The magnitude of these gains is contingent upon the terms of trade [17](#page=17). #### 2.1.1 Comparative advantage and terms of trade * Low-income countries typically possess a comparative advantage in agriculture and industries reliant on unskilled labor, leading to lower-value production [17](#page=17). * High-income countries, conversely, excel in production intensive in capital, technology, and skilled labor, resulting in higher-value outputs [17](#page=17). * Consequently, LMICs often face lower, and potentially declining, terms of trade [17](#page=17). #### 2.1.2 Impact of trade policies LMICs that have adopted open trade policies have generally experienced faster economic growth compared to those with inward-oriented strategies [17](#page=17). > **Tip:** Open trade policies are often associated with enhanced economic performance in developing nations, though the specific benefits depend on a country's comparative advantages and global market dynamics. ### 2.2 Distributional consequences of trade While trade can boost national economies, it also has significant distributional effects within a country [18](#page=18). #### 2.2.1 Distributional impacts in agri-food exporting countries In countries that export agricultural products: * Farmers, often among the poorest segments of the population in LMICs, tend to benefit from trade [18](#page=18). * However, consumers of food, which encompasses the entire population including the poor, may experience losses due to trade [18](#page=18). #### 2.2.2 Trade as a stabilizer International trade can help stabilize domestic prices by mitigating the effects of temporary shortages or surpluses. Furthermore, trade can offer a partial solution to food availability issues and hunger caused by events like climate change [18](#page=18). > **Example:** If a country experiences a poor harvest due to drought, importing food through international trade can prevent widespread hunger and stabilize domestic food prices for consumers. ### 2.3 WTO development round negotiations The World Trade Organization (WTO) has engaged in negotiation rounds that explicitly link trade liberalization with development objectives for LMICs. #### 2.3.1 The Doha Round The Doha Round of WTO trade negotiations, initiated in Doha in 2001, was designed with a primary focus on development [19](#page=19). * **Objectives:** Its main goals were to foster free trade and improve the trading prospects of LMICs, aiming for a more inclusive globalization and poverty reduction through trade [19](#page=19). #### 2.3.2 Linkages between trade and development There is a recognized connection between trade and development, leading to international attention on trade-related development concerns [19](#page=19). * **Impact of developed country policies:** Trade policies implemented by high-income countries can significantly influence, and potentially constrain, the growth of LMICs [19](#page=19). * **Importance of liberalization:** Trade liberalization, particularly in the agri-food sectors, is considered crucial for economic growth in LMICs [19](#page=19). * **Market access:** Tariff reductions and preferential market access agreements for LMICs are important instruments to facilitate their growth [19](#page=19). --- # Trade policies and their impact This topic analyzes the economic consequences of trade policies, particularly tariffs, enacted by large countries on themselves and on exporting nations, including the potential for trade wars and shifts in terms of trade. ### 3.1 Tariffs in large countries: importing country perspective When a large country imposes a tariff, several effects are observed within that country. The domestic price of the imported good increases. This price rise leads to a decrease in consumer surplus, as consumers now pay more for the good. Conversely, the producer surplus increases because domestic producers can now sell their goods at a higher price. The quantity of imports is reduced [24](#page=24) [26](#page=26) [31](#page=31). #### 3.1.1 Impact on the world market As a large country's imports decrease due to the tariff, this reduction in demand also affects the global market. The overall demand in the world market shifts inwards, leading to a decrease in the world market price for the traded good [26](#page=26) [31](#page=31) [34](#page=34). #### 3.1.2 Terms of trade gains The decrease in the world market price caused by a large importing country's tariff improves that country's terms of trade. The terms of trade represent the ratio of a country's export prices to its import prices. When import prices fall, the terms of trade improve, meaning the country can acquire more imports for the same amount of exports. These "terms-of-trade gains" can potentially offset the deadweight losses associated with tariffs. The tariff also improves the importing country's trade balance [31](#page=31) [34](#page=34). > **Tip:** Understanding the concept of terms of trade is crucial here. It's about the relative prices of a country's exports and imports. An improvement means a country's exports are becoming more valuable relative to its imports, or its imports are becoming cheaper relative to its exports. ### 3.2 Tariffs in large countries: exporting country perspective For the exporting country, which is often considered smaller relative to the imposing nation, the impact of a tariff imposed by a large country is different. The decrease in the world market price directly affects the exporting country, causing the price of the good in that country to fall [28](#page=28) [31](#page=31) [32](#page=32). #### 3.2.1 Domestic market effects in the exporting country The lower world market price leads to a decrease in supply and an increase in demand for the good within the exporting country. Consequently, exports decrease. This price drop results in increased consumer surplus, as consumers benefit from lower prices. However, producer surplus decreases due to the lower prices received by domestic producers [28](#page=28) [31](#page=31) [32](#page=32) [33](#page=33). #### 3.2.2 Welfare implications for exporting countries Ultimately, the tariffs imposed by large importing countries can reduce the gains from trade for smaller exporting countries. While there are gains for consumers in the exporting country, the reduction in producer surplus is often larger than the increase in consumer surplus, leading to a net decrease in welfare from trade. Furthermore, a drop in world market prices creates disadvantages for producers in exporting countries, potentially limiting their growth [31](#page=31) [33](#page=33) [34](#page=34). > **Example:** Imagine a developing country that exports a large quantity of coffee to a large developed country. If the developed country imposes a tariff on coffee imports, the world price of coffee will likely fall. This means the developing country receives less revenue for its coffee exports, hurting its coffee producers, even though consumers in the developed country might pay a slightly higher price due to the tariff. The developing country's overall welfare from coffee trade could decrease. ### 3.3 Potential for trade wars and retaliation Trade policies, particularly tariffs, enacted by large countries can trigger reactions from other nations. Large exporters might retaliate by imposing increased tariffs on other sectors. This tit-for-tat escalation of tariffs can lead to trade wars, which are characterized by widespread protectionist measures between countries. Retaliation may not be effective for small countries, as their actions have a less significant impact on the global market compared to large economies [34](#page=34). > **Tip:** Trade wars are a serious concern in international economics because they disrupt global supply chains, reduce overall trade volumes, and can lead to significant economic inefficiencies and losses for all countries involved. ### 3.4 Comparison with quotas It is noted that quotas, another form of trade restriction, can have similar effects to tariffs on the world market and the imposing country. Both policies aim to reduce imports, leading to shifts in demand and price [34](#page=34). ### 3.5 Summary of graphical representations The document uses a series of graphs to illustrate these impacts [21-33](#page=21-33). These typically show: * **Importing Country (Large Country):** Supply (S) and Demand (D) curves, with the world price ($p_w$) and the price after tariff ($p_w + t$). Effects on domestic quantity supplied ($I q_{sw}$), domestic quantity demanded ($I q_{d}$), and imports ($I q_{d} - I q_{sw}$) are shown. (#page=21,23,25,29,30) [21](#page=21) [23](#page=23) [25](#page=25) [29](#page=29) [30](#page=30). * **Exporting Country (Small Country):** Supply (S) and Demand (D) curves, with the initial world price ($p_w$) and the new, lower world price ($p_w'$). Effects on quantity supplied ($E q_{sw}$), quantity demanded ($E q_{d}$), and exports ($E q_{sw} - E q_{d}$) are illustrated. (#page=21,22,23,25,27,29,30,32,33) [21](#page=21) [22](#page=22) [23](#page=23) [25](#page=25) [27](#page=27) [29](#page=29) [30](#page=30) [32](#page=32) [33](#page=33). * **World Market:** A supply and demand graph for the world market, showing the initial equilibrium quantity and price ($q_w$, $p_w$) and the new equilibrium after the tariff ($q_w'$, $p_w'$), reflecting the inward shift in demand due to reduced imports by the large country [27](#page=27). --- # Case studies on trade policy impacts This section analyzes the welfare effects of specific trade policy scenarios using illustrative examples, such as the termination of the Black Sea Grain Initiative and the imposition of United States tariffs on pharmaceuticals [35](#page=35). ### 4.1 The Black Sea Grain Initiative (BSGI) termination The Black Sea Grain Initiative (BSGI) was an agreement arranged by the UN and Turkey to allow grain exports from Ukraine through Black Sea ports, which had been blocked by Russia since the start of the conflict in February 2022. This initiative enabled the shipment of millions of tons of grain from Ukraine, a major global producer and exporter, to Europe and Africa. The potential termination of this agreement raises questions about its welfare effects on Ukraine, the global grain market, and importing countries [36](#page=36) [37](#page=37). #### 4.1.1 Welfare effects in Ukraine If the BSGI were terminated, Ukraine would lose its ability to export grain via Black Sea ports, reverting to a situation of autarky. In this scenario, grain prices in Ukraine would fall to the autarky equilibrium price (#page=38, 39). Consumer surplus would increase, producer surplus would decrease, and the net welfare gains from trade would be eliminated [38](#page=38) [39](#page=39). * **Graphical Analysis:** * **With BSGI:** Ukraine exports grain, indicated by a higher domestic price ($p_w$) than the autarky price ($p_0$), and a lower quantity supplied domestically than consumed domestically. * **Terminating BSGI:** Ukraine faces autarky, with a single equilibrium price ($p_0$) and quantity ($q_0$), eliminating exports. #### 4.1.2 Consequences on the world grain market The termination of the BSGI would reduce the supply of grain in the world market (#page=40, 41). This reduction in supply would lead to an increase in the world market price for grain (#page=40, 41) [40](#page=40) [41](#page=41). * **Graphical Analysis:** * **With BSGI:** The world market equilibrium is at price $p_w$ and quantity $q_w$. * **Terminating BSGI:** The supply curve shifts leftward (to $S'$), resulting in a higher world market price ($p_w'$) and a lower world market quantity ($q_w'$). #### 4.1.3 Welfare effects for grain importing countries (e.g., Ethiopia) For grain-importing countries like Ethiopia, the termination of the BSGI would lead to an increase in the price of grain due to the higher world market price (#page=42, 44). This would result in a decrease in grain imports [42](#page=42) [44](#page=44). * **Welfare Impacts in Ethiopia:** * **Consumer Surplus (CS):** Decreases due to the higher price. * **Producer Surplus (PS):** Increases as domestic producers can sell at the higher world price. * **Net Welfare Gains from Trade:** Decreases, indicating a net welfare loss in society because the consumer loss outweighs the producer gain [44](#page=44). The conclusion for Ethiopia is similar to that for other grain-importing countries, irrespective of whether they directly import from Ukraine [44](#page=44). #### 4.1.4 Importer becoming exporter due to BSGI termination A remarkable consequence of the BSGI termination could be that a country, previously a net importer, becomes a net exporter of grain (#page=45, 46). This transformation occurs if the world market price of grain rises sufficiently due to the reduced global supply, surpassing the country's autarky equilibrium price (#page=46, 49) [45](#page=45) [46](#page=46) [49](#page=49). * **Welfare Consequences of Importer-to-Exporter Shift:** * **Consumer Surplus (CS):** Decreases as domestic consumers face a higher price. * **Producer Surplus (PS):** Increases as domestic producers can now export at the higher world price. * **Net Welfare Gains from Trade:** The change in net welfare can be an increase, decrease, or remain the same, depending on whether the increase in PS is larger, smaller, or equal in absolute value to the decrease in CS [49](#page=49). ### 4.2 United States tariffs on pharmaceuticals A case study involves the imposition of a general tariff of 10% on pharmaceuticals and medical supplies imported into the United States, which imports these goods from countries including Ireland, Mexico, China, and the European Union. This policy action prompts an analysis of its welfare effects in the USA, the world market, and exporting countries like those in the EU [50](#page=50) [51](#page=51). #### 4.2.1 Welfare effects in the USA The imposition of tariffs on imported pharmaceuticals leads to an increase in the domestic price of these goods in the USA (#page=52, 56). This price increase results in several consequences [52](#page=52) [56](#page=56): * **Reduced Imports:** The higher domestic price makes imported goods less competitive, leading to a decrease in the volume of imports [56](#page=56). * **Reduced Consumer Surplus (CS):** Consumers face higher prices, leading to a loss of welfare. * **Increased Producer Surplus (PS):** Domestic producers of pharmaceuticals benefit from reduced competition and potentially higher prices for their goods. * **Government Tax Revenue:** The government collects revenue from the tariffs imposed on imported goods. * **Deadweight Losses:** Tariffs create inefficiencies in the market, leading to deadweight losses, which represent a net loss to society [56](#page=56). If the world market price of pharmaceuticals subsequently drops, this can dampen the effects of the tariff. The domestic price would decrease, leading to an increase in imports, a rise in consumer surplus, and a reduction in deadweight losses. This drop in the world price can also result in terms of trade gains for the imposing country [56](#page=56). * **Graphical Analysis:** * **Before Tariff Increase:** Equilibrium is at $p_w$ and $q_w$. * **After Tariff Increase (before world price drop):** The domestic price rises to $p_w + t$. This creates a wedge between the price paid by consumers and the price received by producers after tariffs. * **After Tariff Increase & World Price Drop:** The world price drops to $p_w'$, and the domestic price is $p_w' + t$. This new domestic price may be lower or higher than the original domestic price depending on the magnitude of the world price drop relative to the tariff. #### 4.2.2 Consequences on the world market The increased US tariffs on pharmaceuticals shift the demand curve in the world market inwards, as the USA imports less of these goods (#page=53, 57). This reduced demand leads to a decrease in world market prices for pharmaceuticals (#page=53, 57) [53](#page=53) [57](#page=57). * **Graphical Analysis:** * **Before Tariff Increase:** World market equilibrium is at $p_w$ and $q_w$. * **After Tariff Increase:** The demand curve shifts inwards (to $D'$), leading to a lower world market price ($p_w'$) and a lower world market quantity ($q_w'$). #### 4.2.3 Welfare effects in exporting countries (e.g., European Union) For countries that export pharmaceuticals to the USA, such as those in the European Union (EU), the US tariffs have significant welfare implications (#page=54, 57) [54](#page=54) [57](#page=57). * **Impacts in the EU:** * **Exports:** The drop in the world market price and reduced demand from the USA leads to a decrease in exports from the EU [57](#page=57). * **Consumer Surplus (CS):** Increases in the EU as domestic consumers benefit from the lower world market price. * **Producer Surplus (PS):** Decreases in the EU, as EU producers receive lower prices for their goods in the international market. * **Net Gains from Trade:** The reduction in producer surplus in the EU is larger in absolute value than the increase in consumer surplus. Consequently, the net gains from trade for the EU reduce [57](#page=57). * **Graphical Analysis:** * **Before US Tariff Increase:** Equilibrium in the EU market is at $p_w$, with exports $E q_{s w}$ and domestic demand $E q_{d w}$. * **After US Tariff Increase:** The world price drops to $p_w'$. This leads to lower exports ($E q_{s w}'$) and increased domestic demand ($E q_{d w}'$) in the EU, but at a lower price for domestic producers and consumers. > **Tip:** When analyzing trade policy impacts, it is crucial to distinguish between the effects on the imposing country, the exporting country, and the world market as a whole. Graphical analysis is an indispensable tool for visualizing these complex interactions and welfare changes. > **Tip:** Remember to consider both the immediate impact of a policy (like a tariff) and potential secondary effects, such as changes in world market prices or the possibility of a country shifting from being an importer to an exporter. --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | GATT (General Agreements on Tariffs and Trade) | An international agreement established in 1947, resulting from the Bretton Woods Conference, with the primary aim of liberalizing trade and reducing trade barriers among its member countries. | | WTO (World Trade Organization) | An international organization that replaced GATT in 1995, currently having 164 member countries. Its goals include liberalizing trade, reducing trade barriers, facilitating trade, and handling trade disputes. | | Most Favoured Nation (MFN) Principle | A principle of the WTO where member countries must apply the same trade conditions, including tariffs, equally to all other WTO members, preventing discrimination. | | Trade liberalization | The process of reducing or eliminating trade barriers between countries, such as tariffs and quotas, to promote freer international commerce and economic integration. | | Tariffication | The conversion of non-tariff barriers, such as import quotas, into tariffs, which are considered less trade-distorting and are prohibited under WTO rules. | | Non-tariff barriers (NTBs) | Obstacles to international trade other than tariffs, such as import quotas, subsidies, and regulations, which can restrict trade flows and protect domestic industries. | | Free trade agreements (FTAs) | Agreements between two or more countries to reduce or eliminate tariffs and other trade barriers on goods and services traded among them, promoting regional economic integration. | | Bilateral free trade agreements | Trade agreements negotiated and signed between two countries. | | Regional free trade agreements | Trade agreements negotiated and signed among a group of countries within a specific geographical region. | | Protectionism | An economic policy of restraining trade between countries through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations. | | Infant industry argument | An economic rationale for temporary protection of new industries from foreign competition, allowing them to develop and achieve economies of scale before facing established international competitors. | | Pollution haven hypothesis | The theory suggesting that polluting industries tend to relocate to countries with less stringent environmental regulations to reduce production costs, leading to the formation of "pollution havens." | | Terms of trade | The ratio of a country's export prices to its import prices, often expressed as an index. A favorable terms of trade means a country can afford to import more for a given volume of exports. | | Autarky | A state of economic self-sufficiency; a country that is not participating in international trade. | | Consumer surplus | The economic gain customers receive when they are willing to pay more for a good or service than its market price. | | Producer surplus | The economic gain producers receive when they sell a good or service for a higher price than the minimum they would be willing to accept. | | Deadweight loss | A loss of economic efficiency that can occur when the equilibrium outcome is not achievable or is not achieved. In trade, it can result from tariffs distorting market outcomes. | | Trade wars | A series of escalating retaliatory tariffs and trade restrictions imposed by countries against each other, often stemming from protectionist measures. | | Black Sea Grain Initiative (BSGI) | An agreement arranged between the UN, Turkey, and Russia to facilitate the export of grain from Ukrainian ports in the Black Sea, especially during the conflict between Russia and Ukraine. |