Trade terms explained

(Terms are listed in alphabetical order)

Doha Development Agenda

Negotiations at the World Trade Organisation (WTO) in 2001, known as the Doha Development Agenda, agreed that world trade rules should aim to reduce poverty. So far, the round has failed to agree any significant poverty-reduction measures.

The WTO ministerial conference collapsed in Cancún in 2003, as developing countries rejected the blueprint proposed by the EU and the US, which amounted to more subsidies and more market access for rich producers, and nothing for the developing world. It is important that progress is made in Hong Kong.

Dumping

The rich world tells the poor world to get rid of subsidies, but continues to spend US$1 billion a day subsidising its own farming enterprises. Countries such as the US and the EU 'dump' subsidised produce on developing countries, driving down the price of local produce– with potentially devastating effects on the local economy.

Fair trade

Fair trade is about trading with producers in the Third World on more direct and equitable terms to ensure that trade contributes to, rather than hinders, development. The international Fairtrade labelling system is already helping 800,000 disadvantaged producers in the Third World to build a sustainable livelihood. But this is only part of the solution. There needs to be a fundamental change in trade rules to make trade work for the poor.

Free trade

Trade is said to be ‘free’ when there are no restrictions on the movement of goods or services, such as tariffs, or restrictions on foreign companies.

General Agreement on Trade in Services (GATS)

WTO agreement aimed at removing restrictions and government regulation of services. The term “services” covers a huge range of sectors, including health care, education, retail stores, transport, communications, broadcasting, entertainment, tourism. These sectors not only comprise over half of the economy of most developing countries but are vitally important in terms of social wellbeing, culture and the environment. GATS is binding on local authorities as well as central government.

Liberalisation

The removal of government control over or interference in the regulation of markets and economic transactions. This includes abolishing subsidies, tariffs or control over prices. The policy of full liberalisation leads to free trade.

Market access

Market access means the extent to which a country permits imports. A variety of tariffs and trade barriers can be used to limit the entry of imports. Rich countries charge high taxes on processed imports, which means many countries can only afford to export raw materials, which give far lower returns than finished products. This means the rich world can buy cheap raw materials like cotton and cocoa and turn them into expensive clothes and chocolate – reaping huge profits in the process.

Patent

A patent on a product prevents others from making, using or selling the product, without the owners consent. Many essential products such as medicines, seeds, textbooks and software are protected by patents, which push up their prices. Increased patent protection for companies in rich countries cost developing countries $40 billion each year. Stringent patent protection on vital drugs are a key concern. Vital drugs are being priced out of the reach of poor people and many lives could be saved if cheaper, generic drugs were available.

Subsidy

Financial assistance granted by the government to support an enterprise or industry.

Tariffs

A tariff is a border tax on imported goods.

Trade Barriers

Restrictions of any kind on international trade. These include tariffs and quotas (a limit on the amount of any particular good that can be imported). Trade barriers are particularly damaging for the developing world when imposed by rich countries to prevent poor countries from increasing access to markets for their exports.

World Trade Organisation (WTO)

The WTO comprises 148 countries that come together to decide the rules of international trade. It is supposed to be a democratic process of negotiation and consensus – but in reality rich countries use their power and influence to dominate decision making and push through policies that benefit themselves with no regard for the world’s poorest people.