Glossary

Glossary

• Absolute and comparative advantage – Absolute and comparative advantage is the primary explanation for trade among countries. When a country has the best technology for producing a good, it has an absolute advantage in the production of that good. When a country produces some goods in the best way compared with how well it produces other goods then it has comparative advantage in producing those goods.
• Competition – Competition can be understood as individual activity which is aimed at an individual achievement.
• Cooperation – Cooperation can be understood as joint production (activity) or consumption by a group of people for their mutual benefit.
• European Union – The EU is a single market which is more than a customs union. The Single Market establishes the EU as one economic entity, with international trade agreements as the main external competence of the EU. Export – Goods leaving the statistical territory of a country.
• Import – Goods which add to the stock of material resources of a country by entering its economic territory.
• International Trade – International trade is about purchasing, selling or exchanging goods and services across national borders. An additional form of international trade is foreign direct investment (FDI), which means acquiring the ownership control of a company in another country.
• Openness – Economic openness shows to what extent any country is engaged in international trade or, in other words, how much its economy is open. This measure is based on a ratio of export value (or sum of export and import) to GDP.
• Ricardian model – The Ricardian model explains how a country’s technology (productivity) affects its trade pattern. Ricardo showed that countries could benefit from international trade without having to use tariffs and that free trade between countries brings gains for all trading partners.
• Win-win situation – A win-win situation or result is one that is good for everyone who is involved. For instance, supporters of globalization assert that it is a win-win proposition for the rich and the poor.