RELATED TO TRADE POLICY AND NEGOTIATIONS
entry in Section III.
Call. A request by an importing country for consultations
with an exporting country concerning products whose shipments
during a specified period are at or near a limit specified in
a textile agreement. See Multifiber arrangement (MF A).
Basin Initiative (CBI).
A non-reciprocal preferential arrangement established by the United States in 1984 to promote economic
development in Caribbean countries; it was made a permanent
program in 1990 under the Caribbean Basin Economic Recovery
Act. Under the CBI, US duties are eliminated on all imports
from beneficiary countries except textile and apparel products,
canned tuna, footwear, certain leather goods, and certain watches
and watch parts. Beneficiary countries are Antigua and Barbuda,
the Bahamas, Barbados, Belize, British Virgin Islands, Costa
Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles,
Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent
and the Grenadines, Suriname, and Trinidad and Tobago.
Common Market (CARIBCAN).
A non-reciprocal preferential arrangement established by Canada in 1986 to extend tariff preferences
to Commonwealth countries in the Caribbean region. Beneficiary
countries are Antigua and Barbuda, Bahamas, Barbados, Belize,
British Virgin Islands, Dominica, Grenada, Guyana, Jamaica,
Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and
the Grenadines, and Trinidad and Tobago. Under CARIBCAN, Canadian
duties are eliminated on all products imported from beneficiary
countries except textiles, clothing, footwear, luggage and handbags,
leather garments, lubricating oils, methanol and alcohol, and
tobacco products. Product eligibility requires 60 percent local
and East European Countries (CEECs).
Includes Albania, Bulgaria, the Czech Republic, Hungary, Poland,
Romania, Slovakia, and the former Yugoslav republics. In some
recent applications, this term has been used to also include
some of .the Newly Independent States (NIS) of the former Soviet
Union, e.g., Belarus, Moldova, Ukraine, and the Baltic republics.
Formal name of the GATT headquarters building in Geneva.
A device used by a government agency to avoid charges of dumping
in foreign markets by establishing floor
prices for exporting firms.
A trade war that occurred in 1962-63 between the United
States and the European Community. Prior to 1962, US chicken
exports had entered many European countries at a bound tariff
rate. Adoption of the Common Agricultural Policy imposed
minimum import prices on all imported chicken, nullifying prior
tariff concessions and causing an estimated $26 million in losses
to US poultry farmers. When attempts to achieve a negotiated
resolution failed, the United States imposed retaliatory duties
on European trucks, brandy, and other products.
Circumvention. Measures taken by exporting companies to
forestall or evade the payment of penalty charges in an importing
country such as countervailing or
antidumping duties. Examples
include false labeling, transshipment, and
screwdriver assemblies (Sec.ll). See
also diversionary dumping and
Formally known as the Agreement on Trade in Civil Aircraft.
The only sectoral agreement covering manufactures to result
from the Tokyo Round negotiations. Under the agreement, signatory
countries eliminated tariffs on civil (i.e., nonmilitary) aircraft,
engines, and components; established rules covering governments'
involvement in civil aircraft purchases; and applied the GA
TT Standards Code and Subsidies Code to the aircraft sector. Code signatories
are proscribed from pressuring airlines to buy from particular
suppliers, and may not grant or deny landing rights in attempts
to influence aircraft purchases. Signatories include Austria,
Belgium, Canada, Denmark, Egypt, the European Community, France,
Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands,
Norway, Portugal, Romania, Spain, Sweden, Switzerland, the United
Kingdom, and the United States.
A list compiled by the Coordinating Committee for Multilateral
Export Controls, or COCOM (Sec.III), designating strategic or sensitive products
to be denied exportation to potentially hostile countries. The
COCOM List encompasses the International Atomic Energy List;
the International Munitions List; and the International List,
which includes both military items and dual-use goods. A
uniform control procedure, known as the International Import
Certificate-Delivery Verification System was established by
COCOM member countries to prevent diversion of restricted products.
See also Commodity Control List.
An international agreement establishing standards of behavior
--by countries, corporations, or individuals --deemed desirable
by the international community. Such codes are essentially normative
statements of principle and, unlike " treaties or commercial
agreements, have no binding force. Not to be confused with GAIT
See Codex Alimentarius Commission (Sec.III). The
compilation of minimum grades and standards for raw and processed
food products published by the Commission is known as the Codex
Alimentarius. Upon adherence by a government, all "codex
standards" become minimum standards by that country .See
sanitary and phytosanitary standards.
US tariff rates which have been established through international
negotiation and approved by Congress. Column I rates are applied
on a most favored- nation basis and are usually subject to binding
2 Rates. US
tariff rates assessed on imports from countries not receiving
most- favored-nation treatment. Most Column 2 rates date from
the Smoot-Hawley Act of 1930
(Sec. IV) and
are substantially higher than Column 1 rates.
deceptive trade practice involving trademark piracy, false labeling,
or other fraudulent means of claiming manufacture by a reputable
producer. See Counterfeit Code.
formal international arrangement among exporters and importers
of a commodity. Such agreements have often been advocated by
commodity exporting countries for the purpose of stabilizing
price fluctuations, but few arrangements have been successful
in doing so. The United States currently participates in commodity
agreements covering coffee, wheat, jute, rubber, lead and zinc,
tropical timber, copper, and cotton; of these, only the International
Natural Rubber Agreement currently contains economic stabilization
measures. See international commodity organization; see
also buffer stocks and
export quota agreement.
Control List. A
listing of products subject to export controls administered by the US Department of Commerce. The list includes
items on the multilateral COCOM List as well as those subject to unilateral US
Agricultural Policy (CAP).
The system of production targets and marketing mechanisms maintained
by the European Community to manage farm trade within the EC
and with the rest of the world. Article 39 of the Treaty
of Rome established the CAP as a mechanism merging the individual member
states' agricultural policies into a unified program to promote
regional agricultural development, fair and rising standards
of living for the farm population, stable agricultural markets,
increased agricultural productivity, and methods of dealing
with security of food supply. The main categories of CAP market-management
and support mechanisms are:
* Support Prices covering most grains, sugar, milk, beef,
veal, pork, certain fruits and vegetables, table wine, and fishery
* External Protection without price supports, applying to eggs,
poultry , certain fruits and vegetables, flowers, and wine other
than table wine.
* Deficiency Payments or supplementary product aid to producers,
covering olive oil, some oilseeds, tobacco, sheep meat, tomatoes,
* Flat-Rate Aid based on acreage or output, covering durum
wheat, cottonseed, flax seed, hempseed, hops, and dehydrated
The CAP was designed as a policy that relied
extensively on trade measures to maintain and stabilize internal
prices. Thus, two of the most prominent features of the CAP
in terms of its effects on international trade are the variable
levy, and export subsidies to promote exports of farm products that
cannot be sold within the EC at target prices. The CAP mechanisms
for managing the domestic market and regulating imports are
based on a variety of price concepts, the main types of which
Target Price. An optimum wholesale price established with reference
to the income requirements of EC farmers and consumer interests
as well as to world market prices. The products concerned are
grain, sugar, milk, olive oil, rapeseed, and sunflower seed.
When the commodity price falls below the target price, the EC
intervenes to purchase supplies and raise prices. To encourage
distribution, the target price for a commodity in an area experiencing
shortages may be reduced by the cost of transport from areas
within the EC where excess supplies exist.
Guide Price. Corresponds to the target price, but applies to
beef, veal, and wine.
Base Price or Basic Price. Corresponds to the target price,
but applies to pork.
Norm Price. Corresponds to the target price, but applies to
Threshold Price. A minimum import price for grain, sugar, milk
products, and olive oil, calculated so that the imported product
(after payment of transport costs) cannot be sold at less than
the target price; the difference between the world price and
the threshold price is covered by a variable levy. The threshold price for grain is computed
by subtracting from the target price the costs of inland transportation
from the nearest ocean port to the EC market center showing
the greatest shortage of the commodity.
Gate Price (also known as a "Sluice-Gate Price" or
"Lock-Gate Price"). A minimum import price established
for pork, poultry, and eggs. The gate price is derived by computing
the cost of feed --adjusted quarterly in relation to world market
prices -- and other factors constructed to represent producer
costs in the non-EC country with the highest technical efficiency.
When the price of an imported product falls below the gate price,
a supplementary levy is
imposed to neutralize the presumed price advantage of the foreign
Reference Price. A minimum import price established for fruit
and vegetables, wine, and certain fishery products. The reference
price is established in relation to EC producer prices in a
way similar to the gate price, but modified to reflect the special
characteristics of the relevant commodity markets. A countervailing
charge (not to be confused with a countervailing duty) may be levied in addition to the normal
customs duty to cover the difference between the entry price
of an imported product and the reference price.
Intervention Price. The price at which EC intervention agencies
are obliged to purchase commodities offered on the market. The
products concerned are grain, sugar, butter, powdered milk,
certain cheeses, olive oil, rapeseed, beef, veal, pork, and
The CAP came into effect in 1961; at that
time, the original EC member states were large net importers
of most agricultural products. While variable levies under the
CAP isolated EC producers and consumers from world market forces,
it was not seriously disruptive to world trade for products
in which the EC was a net importer. Since the 1970s, however,
a combination of CAP price incentives and technological advances
led to increased agricultural investment and domestic production
increases at a time when European demand for farm products was
stagnant or falling. The EC consequently went from a net importer
to a major net exporter of grains, sugar, meat, and poultry,
leading to escalating trade frictions with other countries.
At the same time, the CAP has been beset with problems arising
from monetary fluctuations, costly subsidies, overproduction,
and high price support levels.
Common External Tariff. A uniform tariff schedule applied by members
of a customs & union or
common market to
imports from nonmember countries.
Common Market. A group of countries formally committed
to the unrestricted movement of goods, services, and factors
of production traded among themselves. Features of a common
market include elimination of tariffs and other barriers to
internal trade, including harmonization of national standards
that regulate the sale and distribution of goods; establishment
of a common external tariff; and abolition of capital controls
and restrictions on labor mobility among members. A common market
may seek to harmonize macroeconomic policies or promote political
unification, but this is not a necessary feature. See also customs
union and economic union.
Compensation. Trade concessions granted by a GATT member
to offset the disadvantage caused to other members whose exports
are affected by its withdrawal or suspension of previously agreed
trade concessions or bindings. Compensation
usually takes the form of reductions of tariffs on other products
of commercial interest to the countries being compensated. See
also consultations and dispute settlement.
Compensatory Tax. An import levy applied by the European
Community to certain agricultural products when the import price
is below a reference (or minimum
target) price and reflects an export subsidy. Not the same as
a variable levy.
Complementation Agreement. An agreement between a manufacturing firm
and two or more governments to reduce or eliminate duties on
specified items produced by the firm in one of the signatory
countries. Complementation agreements are usually granted to
induce a firm to establish manufacturing facilities in one of
the signatory countries, by ensuring access to all of the signatories'
markets for its output.
Compulsory Licensing. A term used in the context of intellectual
property rights, primarily
with regard to licensing of pharmaceutical patents. It refers
to the legal authority to compel a holder of a patent to license
production to a local firm as a condition of patent protection
and sale in that country. Compulsory licenses may be granted
by a government allowing local parties to use a patent, copyright,
or trademark with or without the owner's consent, and are usually
granted on grounds of national security or overriding national
interests, or of non-working by the original owner. Proponents
argue that compulsory licensing can lead to increased competition
and reduced prices by encouraging production among a larger
number of producers. Critics argue that such measures have the
same trade-distorting effect as a local-content requirement
or performance requirement.
Compound Tariff. A combination of a specific duty and an ad valorem tariff on the same imported item (e.g.,
$100 per unit plus 5 percent of the assessed value). Sometimes
called a "mixed tariff."
Computed Value. (Not to be confused with constructed
alternative method permitted by the Customs Valuation Code
for establishing the value of imported merchandise
for customs purposes when neither the transaction value nor the deductive value can be determined. The computed value is
the sum of various production costs and charges associated with
preparing goods for export, together with imputed profit and
Concession. An agreement to reduce import restrictions
--such as through a tariff reduction or binding --granted in negotiations in return for
equivalent concessions by trading partners. See reciprocity.
Conditional MFN. The granting of most favored-nation
treatment subject to the recipient country's
compliance with specific terms or conditions. Because all members
of GA TT are expected to accord unconditional MFN treatment
to other members, conditional MFN is normally applied only to
countries that do not belong to GATT.
Confrontation and Justification. In negotiating parlance, refers to the
process of defining country positions through multilateral cross-examination.
Following confrontation, or questioning of a country's policy
position or negotiating offers by other countries, the country
being confronted is expected to respond with justification of
its stand on the points raised.
Consensus. In GATT parlance, the outcome of a negotiated
decision among contracting parties in which sufficiently generalized
support for a position is achieved to permit action. A decision
in GA TT is made by consensus if no party formally objects to
the decision, and is almost always achieved by avoiding rather
than utilizing voting. Because GATT is a contractual arrangement,
members cannot normally be bound through voting procedures in
"majority rule" fashion. As a result, virtually all
GATT decisions are by consensus except decisions on amendments,
waivers, and accessions. In any given case, a dissatisfied GATT
member must decide whether the issue warrants expending negotiating
capital in blocking a consensus. Consensus decisions in GATT
are not necessarily optimal; one former negotiator referred
to the GATT consensus process as a "balance of dissatisfaction."
See also reverse consensus.
Constructed Value. See fair value; not to be confused with computed value.
Consular Fees and Formalities. Special charges and procedures --such as
documents that must be approved by a designated official--.required
by importing countries as a prerequisite for permission to import
merchandise. Cumbersome consular formalities are especially
widespread among developing countries and, because substantial
fees are often charged for required authorizations, they can
function as a significant non-tariff barrier to trade. See also customs and administrative
Consultations. Any GATT member that believes its trade
interests have been adversely affected by changes in the trade
policy of another member, or by failure of another member to
live up to its obligations, may request consultations with the
Article 22 stipulates that contracting parties must be receptive
to requests for consultation "on any matter affecting the
operation of the Agreement" --i.e., even if no violation
of GATT rules or commitments is at issue. Article 22 consultations
are important because they give members an opportunity to negotiate
solutions to trade problems on a bilateral basis within the
framework of the GATT. Should bilateral consultations under
Article 22 fail to resolve a dispute, one or both of the parties
may "raise the ante" by invoking Article 23.
Article 23 also provides for bilateral consultations --as a
prerequisite for invoking the multilateral dispute settlement
process --if a GATT member believes that
the actions or inaction of another member have caused nullification
or impairment of
benefits r expected
under GATT .As such, Article 23 consultations represent a higher
threshold of "seriousness" since they can culminate
in multilateral review and recommendations from the GATT Council
on how to resolve a dispute.
Consumer Subsidy Equivalent (CSE). The percentage by which consumer prices
on an item are affected by direct or indirect government supports
Contingent Reciprocity. See selective reciprocity.
Contracting Party (CP). Formal term designating a signatory to
the GATT (the term "member" of the GATT is often used
informally). As signatories, contracting parties have accepted
specific obligations and benefits of the General Agreement and
have agreed to follow GATT rules in conducting their trade policy.
Because of the most- favored-nation principle,
all CPs receive the benefits of lower tariffs and trade barriers
that have been negotiated in GATT, as well as recourse to GATT
procedures for settling disputes with other members. CPs need
not be independent, sovereign countries --Hong Kong and Macau
are GATT members, for example --but must be autonomous in setting
their trade policies. When written in capital letters, "CONTRACTING
PARTIES" in GATT documents refers to the collective membership
of the GATT , acting jointly rather than in their individual
capacities. This entity is the only legally recognized body
in GATT, as the Agreement itself makes no provision for a secretariat
or for any subsidiary organs.
Conventional Duty. A tariff or customs duty arising out of
an international agreement, as contrasted with an "autonomous
duty" unilaterally levied by a government. '"
Convention on International Trade in
Endangered Species of Flora and Fauna (CUES). A multilateral agreement signed in 1973 to suppress international
trade in endangered species of wildlife and plants. Signatories
committed themselves to interdict exports or imports of species
listed in the agreement, with limited exceptions.
Convention on Settlement of Investment
Disputes Between States and Nationals of Other States. A multilateral agreement, signed among
World Bank member states in 1965, that established the International
Center for Settlement of Investment Disputes (Sec. IIl). Signatories committed themselves to recognize
decisions and arbitral awards in investment disputes referred
to the Center as binding.
Copyright. The exclusive right of authors, composers,
playwrights, artists, publishers, or distributors to publish
and dispose of their work for a specified time. Copyright protection
varies from country to country , and its enforcement is a major
issue in international negotiations concerning intellectual
Counterfeit Code. A draft agreement, initiated in the closing
stages of the Tokyo Round but
never concluded, which would have addressed commercial counterfeiting
problems in international trade. The initiative
set the stage for subsequent work in the Uruguay Round on protecting intellectual property rights.
Counterpurchase Contracts. See Countertrade.
Countertrade. An international commercial agreement in
which a buyer pays for purchases wholly or partly with something
other than money. Countertrade transactions can take various
Counterpurchase contracts obligate the foreign seller to purchase
from the buyer goods and services unrelated to the goods and
Reverse countertrade contracts require the importer to export
goods equivalent in value to a specified percentage of the value
of the imported goods.
Buyback arrangements obligate the foreign seller of a plant,
machinery, or technology to buy from the purchaser a portion
of the subsequent production during a specified time period.
Clearing agreements between two countries stipulate that each
signatory is required to purchase certain amounts of each other's
products over a specified period using a designated "clearing
Switch trading involves a purchaser in one country assigning
to a seller in another country an obligation due from a third
party as compensation for goods purchased.
Swap schemes involve parties exchanging equivalent goods at
different locations to minimize transportation costs.
Countervailing Charge. A charge in addition to normal import
duties that may be imposed under the European Community's Common
Agricultural Policy on
imports of certain fishery products, fruits and vegetables,
and wine, to match the difference between the reference price
and the entry price (for fishery products and fruits and vegetables)
or the free-at-frontier price plus customs duty (for wine).
Countervailing Duty (CVD). A special duty levied on imports to enable
domestic producers to compete on an equal footing with subsidized
foreign producers. CVDs are levied in addition to normal tariffs,
in an amount necessary to offset government subsidies in the
exporting country .US trade law empowers the President to levy
CVDs equal in amount to any "bounties or grants" extended
by other governments to exporters, although the law does not
specify what kinds of government practices should be considered
actionable; see export subsidies. GATT
Article 6 permits and regulates the use of CVDs; additionally,
signatories to the GA 1T Subsidies Code are
required to meet an injury test before
levying CVDs on imports from another signatory nation. Because
foreign subsidies usually reflect broader government policies
and programs, countervailing duties are frequently the object
of intense and sometimes acrimonious bilateral diplomacy. CVDs
are not used as a remedy to dumping, which refers to pricing practices by foreign
Countries in Transition (CITs). A group of countries classed by the International
Monetary Fund as countries in transition to market economies.
The CITs include Albania, Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina,
Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary,
Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia,
Poland, Romania, Russia, Slovakia, Slovenia, Tajikistan, Turkmenistan,
Ukraine, and Uzbekistan. Prior to 1993, the IMP had used the
term "former centrally planned economies" in referring
to these countries. See former East Bloc countries.
Country of Origin. For purposes of customs administration,
the country in which an imported product was manufactured, produced,
or grown. When goods pass through more than one country in the
manufacturing process, the country of origin does not change
unless the product has been substantially transformed. In general,
a product is considered to have originated in the country in
which at least 50 percent of its final value was derived, although
higher percentage thresholds are sometimes used. In the case
of goods entering the United States under the Caribbean Basin
Initiative or the Generalized System of Preferences, lower levels of local value-added may be
allowed in establishing eligibility .See rules of origin.
Coverage. The extent of applicability of a trade
action, agreement, or policy.
Cross-Retaliation. Retaliation in one sector of trade, such as agriculture,
to counter unfair actions or violations of agreements affecting
trade in another sector, such as services.
Currency Controls. See exchange controls.
Customs and Administrative Entry Procedures.
applying to customs clearance of imported goods at national
ports of entry, including health and sanitary certificates,
certificates of origin disclosing the name and location of the
manufacturer, and consular invoices. Such procedures can result
in increased import costs that inhibit trade even when not intended
to do so. See also consular formalities and documentation
and Kyoto Convention.
Customs Classification. The determination of the appropriate category
in which a traded product is classified for tariff purposes.
Also refers to the coding system or "nomenclature"
used by customs officials as a guide in determining which tariff
rate applies to a particular item. See dutiable status.
Customs Harmonization. International efforts to increase the uniformity
of customs procedures such as valuation, nomenclature, and enforcement
by participating countries. See Harmonized System.
Customs Territory. The geographical area within which a country1s
customs authority is empowered to impose duties and controls
upon foreign merchandise entering the territory .The customs
territory does not necessarily encompass all the territory over
which the nation asserts sovereignty. The customs territory
of the United States, for example, does not include the Virgin
Islands, American Samoa, or various foreign trade zones established within the United States. On
the other hand, a country's customs territory may extend to
other sovereign states. Monaco, for example, is part of the
customs territory of France.
Customs Union. A group of countries that have agreed to
eliminate barriers to trade among themselves while harmonizing
their tariffs on imports from nonmember countries into a common
external tariff. A customs union represents a level of economic
cooperation intermediate between a free trade area and a more closely integrated common
a common market, it does not provide for free movement of capital
and labor among members.
Customs Valuation. The process of appraising the value of
imported goods on which duties are to be assessed, according
to the tariff schedule of the importing country.
Customs Valuation Code. Formally known as the Agreement on Implementation
of Article VII of the GA TT. A GAIT Code establishing rules for the determination
of value for customs purposes, designed to provide a fair, uniform,
and neutral system of valuation, and to preclude use of arbitrary
or fictitious values as a disguised form of protectionism. The
cornerstone of the Code is the presumption that the actual sale
price - -or transaction value --will be used whenever possible for valuation
purposes; the deductive value or the computed value methods may be used in cases where the transaction value cannot
be determined. Signatories include Argentina, Australia, Austria,
Brazil, Canada, Cyprus, Czech Republic, the European Community,
Finland, Hong Kong, Hungary, India, Japan, Korea, Lesotho, Malawi,
Mexico, New Zealand, Norway, Poland, Romania, Slovakia, South
Africa, Sweden, Switzerland, Turkey, the United Kingdom, the
United States, and Zimbabwe.
Customs Value. A method of valuing imported
goods which excludes shipping costs from the final price.