Glossary of FTA Terms

Ad-Valorem Tariff	A tariff rate charged as a percentage of the value of goods being imported or exported.
Anti-dumping duties	Duties imposed on goods that are deemed to have been exported below market value, causing injury to producers of competing products in the importing country. These duties are equal to the difference between the goods' export price and their normal value.
BIT	A Bilateral Investment Treaty is established to set terms and conditions for private investment, develop market-oriented policies, and promote trade between the SADC members. BITs are seen as a stepping stone to full free trade agreements.
Bilateral Trade Agreement:	A trade agreement between two or countries.
Cash Crops	Crops grown specifically for sale such as coffee or cut flowers export.
Commodities	Products or goods which are produced to meet certain needs and which are for use or for exchange in markets (e.g. fruit, cars, etc).
Common Market	An agreement between two or more countries member of SADC removing all trade barriers between themselves, establishing common tariff and non-tariff barriers for importers, and also allowing for the free movement of labour, capital and services between themselves.
Comparative Advantage	A component of free market theory that states that if each nation made just those things which it could produce cheaper relative to a foreign country and then trade those with other nations to get their products of comparative advantage, wealth would expand and everyone would benefit.
Contractionary Policies	These are policies which may contribute to a decline in economic activity, for example too high interest rates may be seen as contractionary, because business or entrepreneurs are hesitant to borrow money (because interest on credit is so high) for expanding their businesses (buying new machines, etc) or to start new businesses.
The Council	SADC Council of Ministers is established under the SADC Treaty and consists of Ministers responsible for Foreign or External Affairs from each Member State.
CMT	The Committee of Ministers responsible for trade established under the SADC Protocol on Trade responsible for supervising its implementation.
CTC	Change in Tariff Classification One method of applying the rule of origin which sets out that 'substantial transformation' has occurred when a product or good changes tariff classification. See Rules of Origin
CTH	Change in Tariff Heading. A method to determine whether substantial transformation of a product has occurred.
CTL	Change in Tariff Line is a method similar to change in classification to determine whether substantial transformation has occurred.
Cumulation	Rules of origin that permits two or more countries to combine products contributing to the value added of a product.
Currency	A currency is a unit of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. A currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates, which are the prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime. In common usage, currency sometimes refers to only paper money, as in coins and currency, but this is misleading. Coins and paper money are both forms of currency.
Currency Markets	Markets are generally any context where the selling and buying of goods and services take place. Currency markets are where the selling and buying of currencies, the money of any country, takes place.
Customs Union	An agreement between two or more countries of SADC removing all trade barriers between themselves, and establishing common tariff and non-tariff barriers for importers.
Deregulation	The removal of control of government laws and by-laws which regulate certain (economic) activities.
Dispute settlement	Resolution of conflict arising between governments over the interpretation of trade rules or the actions of one of them relating to trade. This can be through a compromise between opposing claims, and can involve the use of an intermediary. At other times, dispute settlement can be adversarial and rules-based.
Doha Development Round	The DDR was a round on ministerial level initiated by the WTO in November 2001 in Doha, Qatar. Its objective was to lower trade barriers and enhancing the Free Trade between countries. Subsequent ministerial meetings took place in Cancun, Mexico (2003) and Hong Kong, China (2005).
Dumping	When goods are exported at a price less than their normal value, generally meaning they are exported for less than they are sold in the domestic market or third-country markets, or at less than production cost.
Duty	A levy, tax or impost charged by governments within their entire jurisdiction on production, transactions and ownership of an asset.
Economies of Scale	Reduction in long-run average and marginal costs, due to increase in size of an operating unit (a factory or plant, for example). Economies of scale can be internal referring to reducing average production costs within a firm (due to technology and management factors) or external with cost reduction due to the effect of technology in an industry or due the location. A firm may be located near a large market which makes mass production profitable, offers more efficient and comprehensive distribution and transport systems, or is near to a specialized workforce.
Export	Goods or services which are produced in one country and sold to and consumed in another country.
Export-led growth	The growth of an economy, which is based on an increase in exports from that economy. The Asian tigers are example of such economies; they deliberately developed a manufacturing and industrial base in their countries for the production of goods (cars, computers, etc) which were then sold mainly in other countries.
Fair Trade	Companies negotiate directly with the growers or producers of products to establish a fair price for the product. In commodities such as coffee, organizations have committed to paying a price and following procedures, which meet needs of the small growers even when the world market is below that price.
Foreign Direct Investment (FDI)	Foreign Direct Investment is the purchase by the investors or corporations of one country of non-financial assets in another country. This involves a flow of capital from one country to another to build a factory, purchase a business or buy real estate.
Free Trade	An economic theory that contends that everyone in the world will be better off if each nation eliminates tariffs and other barriers to the flow of products across borders. The practice of "free trade" departs from theory by including the export of money either for investment purposes or speculation. With firms able to move both money and products around the world, the benefits of lower prices and higher wages have not been enjoyed by most people. In addition, under recent "free trade" agreements, the concept of barriers to trade has been expanded to include domestic regulations, public health and human rights measures, and environmental protection laws which inhibit business activity.
Free Trade Agreement	An agreement between two countries or amongst groups of countries aimed at a policy of non-intervention by the state in trade between their nations. Tariffs and non-tariff barrier to trade are usually removed or lowered, whilst each country maintains its own commercial policy towards countries that are not part of the FTA. Modern FTAs typically also cover trade in services, as well as other non-tariff issues such as the recognition of standards, customs cooperation, protection of intellectual property rights and regulation of foreign investment. FTAs are entered in to pursuant to Article 24 GATT and Article 5 GATS.
Free Trade Area (FTA)	A group of two or more countries that have eliminated tariff and all or most non-tariff measures affecting trade among themselves. Members set their own tariffs on imports from non-members.
Free rider	A casual term used to imply that a country, which does not make any trade concessions, profits from tariff cuts and concessions made by other countries in negotiations under the most-favoured-nation principle.
GATS	The WTO's General Agreement on Trade in Services; a multilateral, legally binding set of rules covering international trade in services. It is one of the trade agreements of the World Trade Organization and it sets the rules for trade and investment in services. Services are estimated to represent 60 - 80% of GDP of WTO member countries. GATS covers 160 service sectors such as road building, water delivery, education, health care, telecommunications, tourism, postal delivery, social security, a variety of municipal services, and insurance. The scope of the agreement is very broad potentially covering government regulation of trade in services, and potentially covering government services at all levels of governments.
GATT	The General Agreement on Tariffs and Trade, which has been superseded as an international organization by the WTO. GATT 1947: The official legal term for the old (pre-1994) version of the GATT. GATT 1994: The official legal term for new version of the General Agreement, incorporated into the WTO, and including GATT 1947.
Globalisation	Globalisation refers to the increasing economic integration and interdependence of countries. Economic globalisation in this century has proceeded along two main lines: trade liberalisation (the increased circulation of goods) and financial liberalisation (the expanded circulation of capital).
Geographical Indications (GI)	Indications which identify a good as originating in a territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin. See Article 22 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Government Procurement Policies	Rules utilized by governments for purchasing of goods and services. Such rules are often used as a way to promote important public policy goals such as consumer protection, economic development, environmental protection, public health, and gender and racial equality.
Gross Domestic Product (GDP)	The total value of goods and service produced within a territory within a given amount of time, usually annually unless otherwise specified. GDP differs from Gross National Product (GNP) in that the latter includes international income transfers. Thus GDP is the measure of what's produced within a territory rather than what is received by a territory. Nominal GDP refers to the money spent on GDP while "real" GDP has been adjusted for inflation. Per capita GDP (total GDP divided by population) is a popular measure of national standards of living because GDP is measured consistently and frequently on an international basis. However, GDP is really a measure of economic activity within a country rather than the standard of living, and does not directly measure income distribution, access to housing, healthcare, education, and other important contributors to quality of life.
Harmonized System (HS)	An international classification system for traded goods developed by the World Customs Organization, arranged in six-digit codes. Beyond the six-digit level, countries are free to introduce national distinctions for tariffs and many other purposes. The classification is divided up into: Chapter (2 digits), Headings (4 digits), Sub-headings (6 digits) and Split-subheadings (7-11 digits).
Imports	Goods or services consumed (used/bought) in one country which has been bought from another country for example machinery, clothes, etc.
In-quota rate	The tariff applicable to a product imported within the limits of a tariff quota.
Intellectual Property	Non-tangible property that derives from the intellect or mind. Includes patents, copyrights, business methods and industrial methods. The Intellectual Property Right is the right to control and derive the benefits from writing (copyright), inventions (patents), processes (trade secrets) and identifiers (trademarks).
Investment	The commitment of capital in the expectation of a return, with the assumption of risk. Investment can include (amongst others) enterprise, equity participation in enterprise (shares, stocks), debt instruments (bonds, debentures), derivatives (futures, options) and intellectual property rights.
Investor state dispute settlement (ISDS)	A dispute settlement process focused on resolving investment disputes between a party to an FTA (i.e. the government) and an investor of another party.
Market Access	The set of conditions that allow foreign exporters of goods or services, or foreign service providers or foreign investors, to access the market of an importing country (member of the trade agreement)
Market Fundamentalism	A strategy to apply strict market principles-free trade, privatization, and reduced government regulation-to all countries and all situations.
Member State	A country that is a member of SADC.
Millennium Development Goals (MDG)	The MDG were adopted unanimously by the Millennium Summit of the UN General Assembly in 2000. The MDG are intended to promote human development in order to improve living conditions and address key global imbalances in poverty, hunger and disease.
MFN	Most-favoured-nation treatment is a fundamental principle of trade that means that the a country a member of a trade arrangement will be granted all trade advantages of trade such as low tariffs that any other country also receives.
MMTZ	Malawi, Mozambique, Tanzania and Zambia
Negative list	Approach to determining coverage of products or sectors within an agreement by listing only those which will be excluded from coverage.
Non-agricultural products	Term used to describe goods which are not agricultural products as defined by the WTO Agreement on Agriculture. As well as a range of industrial products. Non-agricultural products include fish and fish products, and forestry and forestry products.
Non-originating good	Good or component imported from a non SADC Country or Good Produced in a SADC Country but does not meet the Rule of Origin.
Non-reciprocal Preferential Market Access	This term refers to development policies under which wealthy countries exclude developing and Least Developed Countries (LDCs) from tariffs (or provides reduced tariffs) or quotas while recipient countries are not compelled to provide similar market access to wealthy countries. Non-reciprocal preferences are threatened by Most Favored Nation based trade liberalization used under the World Trade Organization (WTO) regulations, and are being phased-out around the world.
Non-Tariff Barriers (NTB)	Measures other than tariffs that restrict trade flows. These include import licensing, prohibitions, voluntary restraint arrangements and variable levies. They give advantage to local producers over foreign producers. Examples of non-tariff barriers include quotas - putting a limit on the amount of a specific good which can be imported and safety and technical standards - for example that certain products may not be imported because they are unhealthy, etc.
Non-Tariff Measures (NTM)	Anything, including non-tariff barriers such as technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), and safety standards that have an effect on trade flows. These effects are not necessarily negative.
Originating good	A good that is either wholly obtained or produced within a country, produced in a country wholly from originating materials, or produced in a country partly from originating materials but complies with particular Rules of Origin of the FTA.
Out-of-quota rate	The tariff rate applied to products imported in excess of a tariff quota. This is meant to discourage imports above the tariff quota.
Phase-in	Term applied to the gradual introduction of new trade rules or conditions, such as tariff reductions and changes to non-tariff measures.
Phase-outs	Term applied to the gradual removal or alteration of trade rules or conditions, such as tariffs and non-tariff measures.
Positive List approach	Approach to determining coverage of products or sectors within an agreement by listing only those which will be included in coverage.
Preferential Rules of Origin	A system for deciding whether a product exported from one party to an FTA to another will be considered as having originated from that party, and therefore qualify for preferential treatment.
Price undertaking	Undertaking by an exporter to raise the export price of the product to avoid the possibility of an anti-dumping duty.
Quantitative restrictions	Prohibitions or restrictions on imports into, or exports from a Member State whether made effective through quotas, import licences, foreign exchange allocation practices or other measures and requirements restricting imports or exports;
Quotas	A maximum number placed by a nation state on the goods that can he imported into the country in any one period. The quota is defined for a particular product category.
Regional value content	A term used in many free trade agreements describing the value added to a good by the exporting country.
Rules of origin	The criteria needed to determine the national source of a product. There is wide variation in the practice of governments with regard to the rules of origin. While the requirement of substantial transformation is universally recognized, some governments apply the criterion of change of tariff classification (CTH Change of Tariff Heading), others the ad valorem percentage criterion and yet others the criterion of manufacturing or processing operation. In a globalizing world it has become even more important that a degree of harmonization is achieved in these practices of Members in implementing such a requirement.
SADC	The Southern African Development Community was founded in 1992 with the signing of the SADC Declaration. It includes Angola, Botswana, DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
SADC Trade Protocol	The Protocol that defines trading relations between SADC States Safeguards Temporary measures to allow industry to adapt to altered trading circumstances such as elimination of duties or increased competition from importers following the implementation of an FTA.
SCCC	Sub-Committee on Customs Cooperation. At the meeting in Harare in October 2004 the Customs Union Road Map was adopted by the SCCC in order to prepare Customs Administration for the implementation of the Customs Union in the SADC Region by 2010.
Special safeguards	A mechanism available under the WTO Agreement on Agriculture to members who have converted non-tariff measures to tariffs, which allows them to charge extra tariffs on agricultural imports. They provide a safety net for importing countries in the event that there is a surge in imports. *
Specific tariff	A tariff rate charged as a fixed amount per quantity. I.e. $100 per ton.
Standards	Methods to ensure uniform specifications or attributes of a product or a service. They are divided broadly into technical standards (e.g. minimum or maximum size, colour, composition etc.) or performance standards (the product or service must have a certain capability). They may be compulsory or voluntary. *
Subsidy	Financial or in-kind assistance by governments to producers or exporters of commodities, manufacturers and services. They are paid in order to, for example, support inefficient production structures, raise income in one sector, promote regional development, or to develop export markets.
The Summit	The supreme policy-making Institution of SADC consisting of Heads of State or Government of all Member States.
Substantial transformation	Term applied where a product has undergone a specified level of transformation in order to reach its final state. The country where the last substantial transformation has occurred is deemed to be the country of origin. Under the Change of Tariff Classification method, for example, the product is deemed to have been substantially altered if either the Chapter, Heading, or Sub-heading of the Harmonized System (HS) has been changed.
Tariff	A customs duty levied at the border on goods going from one customs territory (generally a country) to another. It can be either levied on an ad valorem basis (percentage of value) or on a specific basis (e.g. $5 per 100 kg.). Tariffs give price advantage to similar locally-produced goods and raise revenues for governments.
Tariff binding	Commitment not to increase a rate of duty beyond an agreed level. Once a rate of duty is bound, it may not be raised without compensating the affected parties.
Tariff escalation	The setting of a tariff in such a way that it rises with the increasing transformation of the product. This practice protects domestic processing industries and discourages the development of processing activity in the countries where raw materials originate.
Tariff peaks	Relatively high tariffs, usually on "sensitive" products, amidst otherwise generally low tariff levels. For industrialized countries, tariffs of 15% and above are generally recognized as "tariff peaks".
Tariff quota	The application of a reduced tariff rate for a specified quantity of imported goods. Imports above this specified quantity face a higher tariff rate.
Tariff schedule	A comprehensive list of the goods which may be imported into a country, and the duties applicable to each product.
Technical barriers to trade (TBT)	Barriers to trade relating to standards, technical regulations, conformity assessment procedures etc. for a specific market.
Trade	The exchange of goods (buying and selling) between individuals or groups in a specific country either through barter (exchanges in kind) or through money is known as internal trade. The exchange of goods between countries, generally referred to as imports and exports, is known as foreign trade. The difference between internal and foreign trade is that the latter involves the use of different currencies and is subject to additional regulations such as tariffs and/or quotas.
Trade facilitation	Removing obstacles to the movement of goods across borders (e.g. simplification of customs procedures).
Trade liberalisation	A general term for the gradual or complete removal of impediments to trade in goods and services.
Trade remedies	Under the WTO rules, members have access to trade remedies such as anti-dumping, countervailing and safeguard measures to protect their domestic industries and allow for rapid adjustment to trade liberalization. These remedies are not diminished under FTAs.
Transitional/Provisional safeguards	Mechanism available under the WTO Agreement on Safeguards to protect domestic industries by temporarily restricting imports if the threat of damage to a particular industry is particularly urgent.
Transparency	Degree to which trade policies and practices, and the process by which they are established, are open and predictable.
The Troika	A SADC institution consisiting of the Chairperson of SADC, the Incoming Chairperson of SADC and the Outgoing Chairperson of SADC functioning as function as a steering committee of the institution. The Organ on Politics, Defence and Security Co-operation also has a Troika.
TNF	SADC Trade Negotiating Forum established under the SADC Protocol on Trade and responsible for conducting trade negotiations.
United Nations Conference on Trade and Development (UNCTAD)	This conference, first convened in 1964, is now a permanent organ of the General Assembly of the United Nations. All members' countries of the UN are members of the conference and it has a permanent executive organ and secretariat. In 1990 it had 166 members. The role of UNCTAD is to protect and champion the case of the less developed countries against the trade policies of developed countries; and it has argued (not very successfully) for easier access to the markets of developed countries at UNCTAD IV in Nairobi, 1976. One of its successes has been the Generalized System of Preferences (GSP, started in 1971) by means of which some EXPORTS from developing countries were given preferential access to the markets of industrial countries.
Wholly obtained materials	Materials and goods that originate entirely in the territory of the exporting country.
World Bank	Its full name is the International Bank for Reconstruction and Development, established in 1945, as an international development bank, along with the IMF. Since 1948 the main objective of the bank has been to assist the development of member countries by providing loans to governments where private capital is not available on reasonable terms to help finance investment projects. Loans generally have a grace period of five years and are repayable over fifteen years or less. Loans are given to or guaranteed by governments. The World Bank became known in the 1980s for its STRUCTURAL ADJUSTMENT PROGRAMS in developing countries, supposedly aimed at assisting countries to manage their BALANCE OF PAYMENTS and in support of adjustment and policy reform to promote future growth.
World Trade Organization (WTO)	The international organization dealing with the global rules of trade between nations. It was created, and replaced GATT, following the conclusion of the Uruguay round of world trade negotiations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. It was established following signature of the Agreement Establishing the WTO, in Marrakesh, Morocco, 1994.

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