DICTIONARY OF TRADE TERMS

The intent of this dictionary was to produce a broad listing of terms, which are commonly used in trade negotiations and especially within the context of the Free Trade Area of the Americas (FTAA) with a view to providing an information tool for the public at large. The dictionary is presented in the four official languages of the FTAA: English, Spanish, Portuguese and French.

The compilation does not attempt to present the entire universe of terms used nor does it seek to prejudge or to affect in any way definitions or approaches currently proposed by any country in any trade negotiation. In fact, many of the definitions included in the publicly-available Draft FTAA Agreement which are still the subject of difficult debates have been excluded from this dictionary. The definitions are based on widely available source material including other trade agreements.

An alphabetical listing of the terms is included to facilitate the use of the dictionary. The terms and their definitions are presented by general negotiating theme found in the FTAA and in other trade negotiations.

An electronic version of this document can be found on the following websites: IADB, OAS,  and ECLAC.

IADB

OAS

ECLAC

TERM	DEFINITION
Classification of service sectors	There are several classification lists that may be used for the purpose of negotiating trade in services. The most common, however, is the one developed by the WTO in GATS w/120 which sets out 155 service sub-sectors in 12 broad sectoral categories. The categories in this list are based on an aggregated version of the United Nations Commodity Product Classification List (CPC). The list can be found at the WTO website under the references “Trade Topics – Services” http://www.wto.org
Commercial presence (Mode 3)	A mode of service supply or trade where services are supplied through any type of business or professional establishment, i.e. foreign direct investment, of one member of the agreement in the territory of another. An example is the establishment of a branch of a foreign bank or of a franchising outlet in a foreign location.
Consumption abroad (Mode 2)	A mode of service supply or trade where services are supplied in the territory of one member of a trade agreement to the consumers of another. This mode of supply requires that the consumer of services move abroad. An example is the traveling abroad to receive: medical treatment or to enroll in an education program.
Cross-border trade in services (Mode 1)	A mode of service supply or trade where services are supplied from the territory of one member of a trade agreement into the territory of another. An example is architectural design services, supplied, by an architect in one country by post or electronic mail to consumers in another country.
Denial of benefits	The right of members to a trade agreement to deny the preferential treatment provided for by the agreement to any non-member. In the case of services, benefits may be denied if it is determined that the service is supplied from the territory of a non­member country; or by an enterprise that is not duly constituted or domiciled in a member country; or by an enterprise of a non-member country that does not have substantial business activities or operations in the territory of any member; or by an enterprise that is owned or controlled by persons of a non-member; or by a combination of these conditions. See Investment, page 32, where this text may have a slightly different meaning.
Domestic regulation	The set of non-discriminatory and non-quantitative regulations that are applied by governments and that may affect foreign and national service suppliers alike once in the market, as well as the ability of foreign service suppliers to enter the market. These consist of measures relating to qualification requirements and procedures, technical standards and licensing requirements, among others.
List of commitments	Under a positive list approach, the list of commitments comprises a national schedule and contains all of the commitments, set out by sector, which a party to a trade agreement has chosen to include.
List of reservations	Under a negative list approach, the list that is found in annexes to a trade agreement and that contains all of the measures that do not conform to the core disciplines of the relevant chapters and that governments choose to maintain.
Market access	The set of conditions that allow for 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 or investment agreement). In the context of the FTAA, market access covers five main negotiating areas: tariffs for non-agricultural goods, agriculture, services, investment and government procurement. In addition, there is a Negotiating Group on Market Access in the FTAA in which the following six issues are being negotiated: tariffs; non-tariff measures; safeguards; customs procedures; rules of origin; and technical barriers to trade.
Modes of supply in services trade	The means through which services are traded. There are four modes of supply, which include: Cross-border trade (Mode 1), consumption abroad (Mode 2), commercial presence (Mode 3), and temporary movement of natural persons (Mode 4). These modes of supply require the movement of either the service itself (Mode 1), the service consumer (Mode 2) or the service supplier (Modes 3 and 4). For a more detailed explanation, see the definition under each mode of supply in this section.
Most favored nation treatment (MFN)	This principle contained in trade and investment agreements obliges members of a trade agreement to give the most favorable treatment accorded to any of their trading partners, to all the other members immediately and unconditionally. It guarantees that foreign services and service providers (from another member country of the trade agreement) are treated no worse than any other foreign service or foreign service provider. (or/ are extended the best treatment that is provided to any other). See Investment, page 33, where this text may have a slightly different meaning.
National treatment	This principle contained in trade agreements and in services chapters ensures that there is no discrimination between foreigners and nationals. It guarantees that foreign services and service providers (those of another member country of the trade agreement) are treated no less favorably than local services and service providers. See Investment, page 33 and Tariffs and Non-tariff Measures, page 43, where this text may have a slightly different meaning.
Negative list approach	The comprehensive inclusion of all service sectors, unless otherwise specified in the list of reservations, under the specific disciplines of the services chapter and the general disciplines of the trade agreement. A negative list approach requires that discriminatory measures affecting all included sectors be liberalized unless specific measures are set out in the list of reservations.
Positive list approach	The voluntary inclusion of a designated number of sectors in a national schedule indicating what type of access and what type of treatment for each sector and for each mode of supply a country is prepared to contractually offer service suppliers from other countries.
Right to regulate	The sovereign right of all governments, members to a trade agreement, to introduce regulations for the pursuit of legitimate objectives in order to meet national policy objectives, including those related to the protection and safety of human, animal or plant life or health, or to prevent deceptive and fraudulent practices or to protect privacy of individuals.
Service sectors	Several broad service categories have been defined for the purpose of services trade negotiations at the WTO and used by many countries pursuing services negotiations in other fora. They include the following: business and professional services; communications; construction/ engineering services; transport services; distribution services; educational services; health services; financial services; environmental services; cultural and recreational services.
Temporary movement of natural persons (Mode 4)	A mode of service supply or trade where services are supplied by nationals of one member of a trade agreement in the territory of another, requiring the physical presence of the service provider in the host country. This mode includes both independent service providers as well as employees of the services providers of another member. Examples include consultants, teachers and actors of one country supplying services through their physical presence in a member country, or the managers of a multinational enterprise.
Trade in services	Trade in services involves the exchange or sale of a service within the eleven broad categories subsequently indicated between residents of one country and residents of another country, according to one of the four modes of supply defined below.
Transparency	This principle requires that members of a trade agreement publish or make available national laws, regulations or decrees or any type of administrative act that may affect trade in services and foreign service suppliers with respect to the disciplines within the agreement. Transparency obligations in trade agreements may include publication, notification, right to prior comment, explanation upon request of the adoption of laws or regulations, and the provision of information to interested parties upon request. See Competition Policy, page 22, where this text may have a slightly different meaning.