trade winds, movement of air toward the equator, from the NE in the Northern Hemisphere and from the SE in the Southern Hemisphere. The trade winds originate on the equatorial sides of the horse latitudes, which are two belts of high air pressure, one lying between 25° and 30° north of the equator and the other lying between 25° and 30° south of it. The high air pressure in these belts forces air to move toward a belt of low air pressure along the equator called the doldrums. The air converging at the doldrums rises high over the earth, recirculates poleward, and sinks back toward the earth's surface in the region of the horse latitudes, thus completing a cycle. The air does not move directly north or south because it is deflected by the rotation of the earth. See wind; Coriolis effect.

trade union: see union, labor.

trade rat: see pack rat.

trade association, group of business people in the same trade or industry organized for the advancement of common interests. The trade association differs from the chamber of commerce in that membership is by industry rather than by locality. The common interests binding the members of the trade association may include credit, public relations, relations with employees, sales development, output, or prices. Some associations publish official journals, and some maintain bureaus at the national and state capitals.

trade, traffic in goods. Conducted by gift, barter, or sale, trade is one of the most widespread of all social institutions.

Early Trade

The discovery of nonlocal objects at many archaeological sites strongly suggests that trade existed in prehistoric times. Anthropologists and other explorers have found trade institutions among diverse peoples throughout the world. The ceremonially elaborate kula trade ring of the Trobriand Islands, the gift-giving potlatch of W Canada's Kwakiutl, and the desert caravan of N Africa and the Arabian peninsula are among the more famous examples. In the Western world a number of peoples, including the Egyptians, Sumerians, Cretans, Phoenicians, and Greeks, at one time or another dominated trade. The Crusades did much to widen European trade horizons and prefaced the passing of trade superiority from Constantinople to Venice and other cities of N Italy.

The Commercial and Industrial Revolutions

In the 15th and 16th cent., with the sudden expansion of Portuguese and Spanish holdings, the so-called commercial revolution reached a high point. In N and central Europe, the earlier supremacy of the Hanseatic League, the Rhenish cities, and the cities of N France and Flanders was eclipsed by the rise of national states. Antwerp began its long career of glory when the Spanish were losing their hegemony, and the Dutch briefly triumphed in the race for world commerce in the 17th cent. The Dutch in turn lost to British-French rivalry, which by 1815 left Britain paramount. The Industrial Revolution of the 18th and 19th cents. considerably aided the development of commerce. The expansion of trade was further promoted by the rise, under the auspices of the national state, of the chartered company and by the modern corporation, which later displaced it.

World commerce was also aided materially by the invention of the astrolabe, the mariner's compass, and the sextant; by the development of iron and steel construction; by the application of steam to both land and water transport; and more recently by national road networks and the accompanying growth of the trucking industry. The development of communication devices such as the telephone, telegraph, cable, radio, and satellite data transmission systems and inventions such as refrigeration, the gasoline engine, the electric motor, the airplane, and the computer have also contributed to the growth of trade.

Modern Trade

The theory of commerce as imposed by the national state has varied from the mercantilism of the 17th and 18th cents. and the protective tariff of the 19th and 20th cents. to the free trade that Britain long upheld. Since World War II a realization of the need for commercial expansion has led to the creation of regional trade zones, the prime example being that of the European Union. A trade agreement among the United States, Canada, and Mexico, called the North American Free Trade Agreement (NAFTA), was signed in 1992, Mercosur was established in South America in 1991, and the Central American Free Trade Agreement, which includes the United States and the Dominican Republic, was signed in 2003-4. Although 34 nations committed themselves in 2001 to the development of a free trade area encompassing the Western Hemisphere progressed toward that goal has been hindered by strained relations between the United States and some Latin American nations. Other trade agreements have been signed by regional groupings of Asian and African nations, such as that involving the Association of Southeast Asian Nations. Less geographically restricted trade systems, such as the General Agreement on Tariffs and Trade and its successor, the World Trade Organization, have also arisen.

In modern times international trade has had an important political role. Nations often use trade either to solidify old political relationships or to create new ones. The principles of efficient marketing have been applied to domestic and international trade in the industrialized countries, which has attained enormous volume. Today the world's major trading powers include the United States, the countries of the European Union (especially those in Western Europe), Japan, China, and South Korea.

reciprocal trade agreement, international commercial treaty in which two or more nations grant equally advantageous trade concessions to each other. It usually refers to treaties dealing with tariffs. For example, one nation may grant another a special schedule of tariff concessions in return for equivalent advantages. Originally reciprocity agreements involved bilateral tariff reductions that were not to be extended to third countries. In the 18th cent., England relaxed its Navigation Acts in return for similar action by other nations. In the 19th cent. the German Zollverein was based on reciprocity, and the system of reciprocity fostered by Napoleon III worked strongly in favor of free trade. After the downfall of the French Second Empire (1870), many European countries began to follow a policy of high tariffs. In the United States reciprocity was advocated as part of the tariff policy after 1880. The use of the most-favored-nation clause after 1922 resulted in a widespread exchange of tariff concessions; it was followed by the Trade Agreements Act (1934). Since 1948 the general policy of the United States has been to negotiate reciprocal tariff concessions within the framework originally established by the General Agreement on Tariffs and Trade (GATT). The Trade Expansion Act (1962) provided for negotiations, under GATT auspices, to expand reciprocal trade agreements, especially with the European Economic Community, or Common Market (now part of the European Union). The act resulted in the Kennedy Round (1964-67) and the Tokyo Round (1974-79) of GATT talks, which produced reciprocal tariff reductions, mainly between the United States and W Europe, and new rules on customs and duties. GATT's Uruguay Round (1986-93) culminated in the creation (1995) of the World Trade Organization. Reciprocal agreements may also deal with such matters as rights of foreigners and consular relations.

fur trade, in American history. Trade in animal skins and pelts had gone on since antiquity, but reached its height in the wilderness of North America from the 17th to the early 19th cent. The demand for furs was an important factor in the commercial life of all the British and Dutch seaboard colonies, as well as of S Louisiana, Texas, and the far Southwest. But its effect in opening the wilderness was even more striking in Canada, where the rivers and lakes offered avenues to the heart of the continent. The speed with which fur traders traveled halfway across the continent was remarkable. The Great Lakes region was extensively exploited by men buying furs from the Native Americans before the end of the 17th cent.

The effect on the indigenous peoples who received the white man's goods (including firearms and liquor, as well as diseases previously unknown to them) in exchange for the furs was cataclysmic; native cultures were overturned. This process also occurred among the natives of far NE Siberia as Russian traders reached that remote region in the 18th cent. The promyshlenniki [fur traders] pushed even farther across the icy seas and prepared the way for the long Russian occupation of Alaska.

The Great Trading Companies

The greatest of the British trading companies, the Hudson's Bay Company, contended after 1670 with the French traders in Canada, and after Canada became British in 1763, with French and Scottish traders based in Montreal. The North West Company was created, and rivalry was bitter until the two companies were combined in 1821, taking the name Hudson's Bay Company. The largest of the companies in the United States was John Jacob Astor's American Fur Company, which also came into conflict with the North West Company, notably in 1812-13 at the Pacific coast establishment of Astoria. By that time the Canadian traders had set up posts across the continent (first crossed in the north by Sir Alexander Mackenzie) and had neared the Russian posts in Alaska.

Movement West

A U.S. law in 1816 excluded British traders from the United States, and many British fur traders who had helped to build the Old Northwest were compelled to become U.S. citizens and were reluctant to comply. The trade in the United States was now pushing west ahead of the advancing line of settlement, and the rich fur territories of the upper Missouri River, which had been tapped earlier by such traders as Manuel Lisa and Andrew Henry, attracted attention. After the first expedition of William Henry Ashley in 1823, the now celebrated mountain men (chief among them Kit Carson, Jedediah Smith, James Bridger, and Thomas Fitzpatrick), who were trappers more than they were traders, made the Rocky Mt. West known.

Decline

The popularity of the beaver hat had helped to create an enormous demand for beaver, which was the staple article of the American fur trade, but fashion changed, and the fur trade declined accordingly. An equally important factor in the decline of fur trade was the advance of settlement, for the trade in wild furs could not flourish on a large scale near farms. Finally, there was the depletion of the stock of beaver and other fur-bearing animals, hunted relentlessly for centuries; the square miles of beaver country were shrinking to acres. The era of the fur traders ended in the 1840s in the United States and S Canada, but only after the traders had contributed vast amounts of geographic knowledge and lore learned from the Native Americans to the benefit of both nations.

free trade, in modern usage, trade or commerce carried on without such restrictions as import duties, export bounties, domestic production subsidies, trade quotas, or import licenses. The basic argument for free trade is based on the economic theory of comparative advantage: each region should concentrate on what it can produce most cheaply and efficiently and should exchange its products for those it is less able to produce economically.

Internal Free Trade

Free trade within national borders is in some countries a comparatively recent development. Jean Baptiste Colbert tried to abolish internal trade barriers in France in the 17th cent., but that was not accomplished until the French Revolution, a hundred years later. In the German states Prussia took the lead in organizing the Zollverein movement after 1818. The desire to assure freedom from internal trade barriers in the United States was a factor in calling the Constitutional Convention. In Britain, the classic home of the free-trade movement, the term free trade was first used during the agitation for removal of the privileges of the chartered companies in the 17th cent.

International Free Trade

In 18th-century Britain, free trade eventually came to mean the desire for a moderate tariff policy in international trade, especially with France. The rapid growth of British industry in the late 1700s (see Industrial Revolution) gave added force to the attack on international trade restrictions (see mercantilism). Adam Smith's Wealth of Nations (1776) provided a powerful intellectual basis for the free trade movement, and the later work of David Ricardo was important in developing the notion of comparative advantage as an argument in its favor. The most important practical blow in favor of the free-trade movement came with the formation (1839) of the Anti-Corn-Law League, and the repeal (1846) of the corn laws. The Anglo-French commercial treaty of 1860 represented perhaps the high-water mark of free trade.

After World War I, Britain reintroduced protection and a system of imperial preference in an attempt to establish a greater measure of economic autonomy. France, along with other European nations, historically followed a policy of protection. In the period of international economic dislocation in the mid-1930s, the United States reversed earlier policy and signed reciprocal trade treaties with many foreign governments, embracing a policy of selective tariff reduction for economic and political reasons. At present the United States is a relatively low tariff nation, although it still maintains a fairly restrictive system of import quotas. Japan also has restrictive import quotas, as well as high tariffs and other trade restrictions.

After World War II, strong sentiment developed throughout the world against protection and high tariffs and in favor of freer trade. The results were new organizations and agreements on international trade such as the General Agreement on Tariffs and Trade (1948), the Benelux Economic Union (1948), the European Economic Community (Common Market, 1957), the European Free Trade Association (1959), Mercosur (1991), and the World Trade Organization (1995). In 1993 the North American Free Trade Agreement (NAFTA) was approved by the governments of Canada, Mexico, and the United States. In the early 1990s the nations of the European Union (the successor organization to the Common Market) undertook to remove all barriers to the free movement of trade and employment across their mutual borders.

Critics of free trade zones argue that such measures are detrimental to domestic economies. In the case of NAFTA, for example, opponents contended that the jobs of some American workers would be "exported" to Mexico, where labor costs are lower. Many have continued to oppose the international impetus toward freer trade, arguing the accords not only fail to protect jobs in more developed nations but also harm workers and the environment in less developed nations, where the laws are more lax or less enforced. Despite such objections, support for free trade has continued. In Apr., 2001, for example, 34 nations of the Western Hemisphere committed themselves to the development of a Free Trade Area of the Americas, though movement toward such an organization subsequently stalled. In May, 2004, the Central American Free Trade Agreement was finalized by the United States and five Central American nations; the Dominican Republic is also a member of the group. The United States, Japan, China, and other countries have also negotiated bilateral free-trade agreements with individual nations or regional trade associations; such agreements generally open trade in some areas while preserving the protection of politically sensitive economic sectors.

See also reciprocal trade agreement.

fair-trade laws, in the United States, a former group of statutes that permitted manufacturers to specify the minimum retail price of a commodity. The first fair-trade law was adopted (1931) by California. Intended to protect independent retailers from the price-cutting competition of large chain stores, such statutes were originally nullified by the courts, which found most fair-trade rules in violation of the Sherman Antitrust Act. As a result, Congress passed (1937) the Miller-Tydings Act in order to exempt fair trade from antitrust legislation. In the late 1950s, however, many manufacturers began to abandon the practice of setting minimum retail prices, largely because of the difficulties involved in enforcing such agreements. With the post-World War II rise of bargain outlets for a wide range of consumer products, fair-trade laws became increasingly unpopular and were repealed in many jurisdictions. In 1975, federal legislation eliminated the remaining fair-trade laws.

balance of trade, relation between the merchandise exports and imports of a country. The concept first became important in the 16th and 17th cent. with the growth of mercantilism. Mercantilist theorists believed that a country should have an excess of exports over imports (i.e., a favorable balance of trade) to bring money, which they confused with wealth, into the country. They urged legislation to restrict the use of foreign goods, encourage exports, and forbid the export of bullion. The importance of a favorable balance of trade remained unchallenged until David Hume, Adam Smith, David Ricardo, and John Stuart Mill concerned themselves with theories on the adjustment of balance of trade. The classical theory of the mechanism is that a country whose exports fall short of its imports must export part of its stock of gold, thereby affecting its price structure and its ability to compete on the world market. Today the balance of trade is regarded as only one of several elements that make up the balance of payments of a nation; the U.S. Dept. of Commerce issues reports on the current status of the balance of trade in goods and services on a monthly basis. Since the 1980s the value of U.S. imports has greatly exceeded exports, resulting in large trade deficits that complicated U.S. relations with its trading partners, particularly Japan, China, and the United States' partners in the North American Free Trade Agreement, Canada and Mexico.

World Trade Organization (WTO), international organization established in 1995 as a result of the final round of the General Agreement on Tariffs and Trade (GATT) negotiations, called the Uruguay Round. The WTO is responsible for monitoring national trading policies, handling trade disputes, and enforcing the GATT agreements, which are designed to reduce tariffs and other barriers to international trade and to eliminate discriminatory treatment in international commerce. In an effort to promote international agreements, WTO negotiations are conducted in closed sessions; many outsiders have strongly criticized such meetings as antidemocratic. Unlike GATT, the WTO is a permanent body but not a specialized agency of the United Nations; it has far greater power to mediate trade disputes between member countries and assess penalties. In the Uruguay Round, agreement was reached to reduce tariffs on manufactured goods by one third. Under the WTO, subsidies and quotas are to be reduced on imported farm products, automobiles, and textiles, which were not covered by GATT; there is also freer trade in banking and other services and greater worldwide protection of intellectual property. Negotiations to eliminate subsidies and protections for agricultural products, however, have proved to be a stumbling block. The Doha Round of talks, launched in 2001, have been deadlocked over such subsidies; the round was originally scheduled to be finished in Jan., 2005. The WTO is headquartered in Geneva and also holds international ministerial conferences; it has 151 members.

World Trade Center, former building complex in lower Manhattan, New York City, consisting of seven buildings and a shopping concourse on a 16-acre (6.5-hectare) site; it was destroyed by a terrorist attack on Sept. 11, 2001. Prior to its destruction, the World Trade Center had been the world's largest commercial complex, home to many businesses, government agencies, and international trade organizations. Most prominent among its structures were the 110-story rectangular twin towers, one rising to 1,362 ft (415 m) and the other to 1,368 ft (417 m), with floors roughly an acre in size. Designed by Minoru Yamasaki and Emery Roth, the towers and concourse portion of the center were completed in 1973 at a cost of some $750 million. For a brief period (until the completion of the Sears Tower in Chicago in 1974), the World Trade towers were the tallest buildings in the world. They remained the largest structures on the Eastern Seaboard of the United States, an internationally known landmark and tourist attraction rising high above the skyline of lower Manhattan.

In 1993 a terrorist car-bomb explosion damaged portions of the complex, killing six people and causing more than $300 million in damage. Sheik Omar Abdel Rahman and nine other Islamic extremists were convicted of conspiracy and other charges related to the bombing in 1993, and the so-called mastermind, Ramzi Yousef, was convicted in 1998. On Sept. 11, 2001, a second terrorist attack, in which two hijacked commercial jetliners were crashed into the towers, ignited huge, intense fires in the upper stories of both buildings, weakening them and leading to their collapse. Other structures in the complex were completely or partially destroyed as a result, and many surrounding buildings were severely damaged. More than 2,700 people, including the passengers and crew of the airliners and several hundred emergency personnel responding to the initial fires, lost their lives; more than 7,000 people were injured.

The enormity of the events of Sept. 11 (see also 9/11), which also involved a similar attack with a hijacked jetliner on the Pentagon in Washington, D.C., and the crash in W Pennsylvania of a fourth hijacked plane, galvanized national feeling in the United States, where many watched the events unfold on television. In the aftermath of the worst terrorist attack in history, President George W. Bush announced a war on terrorism, and many nations pledged their support. Al Qaeda, headed by Osama bin Laden, was identified by U.S. authorities as being behind the attacks, and the United States subsequently began military operations in Afghanistan, where bin Laden was based and where the government was closely allied with him.

In Dec., 2001, Zacarias Moussaoui, a Frenchman of Moroccan descent who had been arrested (Aug., 2001) on immigration violations in Minnesota, was indicted on charges that he was part of the conspiracy responsible for the September attacks. He pleaded guilty in 2005 to being part of a conspiracy to attack the White House in a similar manner but denied being part of either Sept. 11 attack, and was given a life sentence in 2006.

The alleged mastermind of the plot was Khalid Sheikh Mohammed, a Kuwaiti of Pakistani parentage who had become a high-ranking member of Al Qaeda. He was captured in Pakistan in 2003, held by the United States at an undisclosed location, and transferred to Guantánamo Bay in 2006. According to a censored transcript of a closed-door hearing in 2007, he admitted to organizing and supervising the execution of the attacks of Sept. 11, but the government also later revealed that he had been subjected to waterboarding, which is generally regarded as a form of torture. In Feb., 2008, the Pentagon announced that a military tribunal would try Mohammed and five others held at Guantánamo on conspiracy and other charges relating to the attacks.

In the aftermath of the center's destruction, many competing interests—the city and state of New York, the owners of the site, the buildings' developer, survivors of the attack and families and friends of those killed, and others—advocated a variety of approaches to rebuilding the site. After a lengthy design competition, a preliminary master construction plan for the site, by Daniel Libeskind, was approved in 2003. The design has since been much modified, and a new overall plan was unveiled in 2006.

Embracing the footprints where the towers once stood, a street-level memorial plaza is planned, with two sunken pools fed by waterfalls; the names of those who died as a result of the attack will be displayed in the plaza, which will also include a World Trade Center Museum. Surrounding the memorial, will be a group of office towers that rise in height toward the the "Freedom Tower" (Tower 1), designed by the American architect David M. Childs of Skidmore, Owings and Merrill. Tower 2 is being designed by England's Lord Norman Foster, Tower 3 by another English architect, Lord Richard Rogers, and Tower 4 by Japan's Fumihiko Maki. The complex will also include a transportation hub by Spain's Santiago Calatrava and a performing arts center to be created by Frank Gehry.

North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations. It also calls for the gradual elimination, over a period of 15 years, of most remaining barriers to cross-border investment and to the movement of goods and services among the three countries. Major industries affected include agriculture, automobile and textile manufacture, telecommunications, financial services, energy, and trucking. NAFTA also provides for labor and environmental cooperation among member countries. The pact contains provisions for the inclusion of additional member nations. Labor representatives have criticized NAFTA, claiming the agreement has led to numerous jobs lost in the United States because industries have moved plants to Mexico (see maquiladoras); NAFTA proponents point to the U.S. jobs created because of increased imports by Mexico and Canada. The agreement has negatively affected the economies of several Caribbean countries whose exports to the United States now compete with duty-free Mexican exports.

Latin American Free Trade Association: see Latin American Integration Association.

International Trade Commission, United States, independent agency of the U.S. government established in 1916 as the Tariff Commission; renamed International Trade Commission in 1975. It is charged with serving the president and Congress as an advisory, fact-finding agency on tariff, commercial-policy, and foreign-trade problems. Earlier tariff agencies had a definite policy of protection; the 1916 commission was considered the first truly unbiased agency. Recent legislation, such as the Trade and Competitiveness Act of 1988, empowers the commission not only to investigate the effects of imports on competing domestic industry, but to direct imports to be excluded if it finds producers engaging in unfair trade or in violation of patent or copyright law. The president may terminate commission orders for policy reasons. On request, the commission's findings are made available to the president or the congressional committees concerned with trade. The commission advises on the possible effects of pending trade agreements or tariff legislation as well. The U.S. Trade Commission consists of six members appointed by the president and confirmed by the Senate for nine-year terms, not more than three to be of the same political party and the chairman and vice chairman to be of different parties.

General Agreement on Tariffs and Trade (GATT), former specialized agency of the United Nations. It was established in 1948 as an interim measure pending the creation of the International Trade Organization. However, plans for the latter were abandoned and GATT continued to exist until the end of 1995. Members of GATT were pledged to work together to reduce tariffs and other barriers to international trade and to eliminate discriminatory treatment in international commerce. The most important service of GATT was to negotiate multilateral extensions of tariff reductions through the application of the most-favored-nation clause. GATT also provided for regular meetings to consider other problems of international trade. An important GATT principle was that protection of domestic industries was to be done strictly through tariffs and not measures such as import quotas. The only exceptions permitted to GATT rules were those dealing with balance of payments difficulties, and these exceptions are carefully supervised. GATT provided the framework for most important international tariff negotiations from 1947 until 1994. The eighth, or Uruguay round, of GATT negotiations, which began in 1986 with 15 negotiating groups, was long stalemated by the issue of agricultural subsidies maintained by the European Community. The agreement that resulted (1994) from the Uruguay round led to the creation (1995) of the more powerful World Trade Organization (WTO) as a replacement for GATT. However, the GATT framework remained in place for a 12-month transition period.

Federal Trade Commission (FTC), independent agency of the U.S. government established in 1915 and charged with keeping American business competition free and fair. The FTC has no jurisdiction over banks and common carriers, which are under the supervision of other governmental agencies. It has five members, not more than three of whom may be members of the same political party, appointed by the President, with the consent of the Senate, for seven-year terms. The act was part of the program of President Wilson to check the growth of monopoly and preserve competition as an effective regulator of business.

Duties of the FTC

The duties of the FTC are, in general, to promote fair competition through the enforcement of certain antitrust laws; to prevent the dissemination of false and deceptive advertising of goods, drugs, curative devices, and cosmetics; and to investigate the workings of business and keep Congress and the public informed of the efficiency of such antitrust legislation as exists, as well as of practices and situations that may call for further legislation.

Enforcement

The commission's law-enforcement activities have to do with the prevention of unfair methods of competition and false advertising (in accordance with the Federal Trade Commission Act of 1914 and the Wheeler-Lea Act of 1938); with administration of provisions restricting tying and exclusive dealing contracts, acquisition of capital stock, interlocking directorates, and price discriminations (in accordance with the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936); and with administration of the Webb-Pomerene Act of 1918, which permits associations to engage in export trade without incurring the penalties of the Sherman Antitrust Act. In 1946 the FTC was given the right to cancel faulty trademarks. The FTC also enforces the provisions of the Truth in Lending Act of 1968 over creditors (e.g., finance companies, retailers, and nonfederal credit unions) not specifically regulated by another government agency. The act was designed to ensure that a potential borrower can obtain meaningful information about the actual cost of consumer credit.

To enforce antitrust legislation, the commission is empowered to issue cease-and-desist orders upon ascertaining to its satisfaction that the laws are being violated. These orders, to be effective, usually must have court sanction, and the commission must, therefore, in various instances prove its case in court. In deciding such cases the courts have interpreted and applied the phrase "unfair methods of competition." Many of the judicial decisions have frustrated the work of the commission in restricting the growth of monopoly and also, to some degree, the intent of the antitrust laws. Yet the commission has done much toward ridding the business world of vicious competitive practices.

The commission may undertake special investigations at the order of Congress, the President, or upon its own initiative. In its investigatory work, the commission was delegated the power to require information from any corporation in interstate commerce. Many companies, however, gave only partial access to their records, and others gave none. A decision by the Supreme Court declared that access to records of private business, except where substantial proof is submitted as to a specific breach of the law, is a violation of the Fourth Amendment. Despite the fact that the commission's investigatory power was thus greatly limited, it has made and published a notable series of investigations. After the checks rendered by the courts, the commission tended more and more to carry out its recommendations through trade-practice conferences, at which representatives of an industry might voluntarily adopt regulations to control competition in that industry.

European Free Trade Association (EFTA), customs union and trading bloc; its current members are Iceland, Liechtenstein, Norway, and Switzerland. EFTA was established in 1960 by Austria, Denmark, Great Britain, Norway, Portugal, Sweden, and Switzerland. Iceland joined in 1970, Finland in 1986, and Liechtenstein in 1991. This group was known through the 1960s as the "outer seven" as opposed to the "inner six" members of the European Economic Community (EEC, or Common Market; after 1967 part of the European Community [EC], which is now the European Union [EU]). It was organized largely on the initiative of Great Britain in an attempt to solve economic problems posed by the development of the EEC and Britain's exclusion from it.

EFTA began with two goals: to establish free trade among members and to seek a broader economic union with the rest of Western Europe. The first was accomplished in 1966, when most of the intra-EFTA tariffs were abolished. Negotiations toward the second goal began in 1961, when Great Britain sought entry into the EEC. Its bid was rejected (1963) by France; however, later discussions succeeded, and in 1973 Denmark and Great Britain left EFTA to join the EC. The same negotiations produced a trade accord between the newly expanded EC and the remaining members of EFTA. In 1986, Portugal also left EFTA for the EC. The development of a single market between the EU and most EFTA nations was completed in 1994, when the European Economic Area (EEA) came into being. EFTA members Austria, Finland, and Sweden joined the EU in 1995, but in Norway the voters rejected a similar move.

Relationship between the prices at which a country sells its exports and the prices paid for its imports. If a country's export prices rise relative to import prices, its terms of trade are said to have moved in a favourable direction, since, in effect, it now receives more imports for each unit of goods exported. The terms of trade, which depend on the world supply of and demand for the goods involved, indicate how the gains from international trade will be distributed among trading countries. An abrupt change in a country's terms of trade (e.g., a drastic fall in the price of its main export) can cause serious problems in its balance of payments. Seealso comparative advantage.

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Association of workers in a particular trade, industry, or plant, formed to obtain improvements in pay, benefits, and working conditions through collective action. The first fraternal and self-help associations of labourers appeared in Britain in the 18th century, and the era of modern labour unions began in Britain, Europe, and the U.S. in the 19th century. The movement met with hostility from employers and governments, and union organizers were regularly prosecuted. British unionism received its legal foundation in the Trade-Union Act of 1871. In the U.S. the same effect was achieved more slowly through a series of court decisions that whittled away at the use of injunctions and conspiracy laws against unions. The founding of the American Federation of Labor (AFL) in 1886 marked the beginning of a successful, large-scale labour movement in the U.S. The unions brought together in the AFL were craft unions, which represented workers skilled in a particular craft or trade. Only a few early labour organizers argued in favour of industrial unions, which would represent all workers, skilled or unskilled, in a single industry. The Congress of Industrial Organizations (CIO) was founded by unions expelled from the AFL for attempting to organize unskilled workers, and by 1941 it had assured the success of industrial unionism by organizing the steel and automotive industries (see AFL-CIO). The use of collective bargaining to settle wages, working conditions, and disputes is standard in all noncommunist industrial countries, though union organization varies from country to country. In Britain, labour unions displayed a strong inclination to political activity that culminated in the formation of the Labour Party in 1906. In France, too, the major unions became highly politicized; the Confédération Générale du Travail (formed in 1895) was allied with the Communist Party for many years, while the Confédération Française Démocratique du Travail is more moderate politically. Japan developed a form of union organization known as enterprise unionism, which represents workers in a single plant or multiplant enterprise rather than within a craft or industry.

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or trade fair

Temporary market organized to promote trade, where buyers and sellers gather to transact business. Trade fairs are organized at regular intervals, generally at the same location and time of year. They are especially common in Europe and Asia, where nearly every country has at least one major annual international exposition. They range in scope from those dealing with one industry or branch of industrial production to general exhibits of goods and merchandise. Trade shows and conventions confined to a single industry or even to a specialized segment of an industry have become increasingly common.

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or pack rat

Any of 22 species (genus Neotoma, family Cricetidae) of rodents that are nocturnal vegetarians of North and Central American deserts, forests, and mountains. Wood rats are buff, gray, or reddish brown, usually with white undersides and feet. They have large ears and are 9–19 in. (23–47 cm) long, including the 3–9-in. (8–24-cm) furry tail. The nest, up to 3 ft (1 m) across and usually built of twigs or cactus, is placed in a protected spot (e.g., under a rock ledge). Wood rats are sometimes called pack rats because they collect material to deposit in their dens.

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Association of craftsmen or merchants formed for mutual aid and for the advancement of their professional interests. Guilds flourished in Europe between the 11th and 16th century and were of two types: merchant guilds, including all the merchants of a particular town or city; and craft guilds, including all the craftsmen in a particular branch of industry (e.g., weavers, painters, goldsmiths). Their functions included establishing trade monopolies, setting standards for quality of goods, maintaining stable prices, and gaining leverage in local governments in order to further the interests of the guild. Craft guilds also established hierarchies of craftsmen based on level of training (e.g., masters, journeymen, and apprentices).

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Difference in value over a period of time between a nation's imports and exports of goods and services. The balance of trade is part of a larger economic unit, the balance of payments, which includes all economic transactions between residents of one country and those of other countries. If a nation's exports exceed its imports, the nation has a favourable balance of trade, or a trade surplus. If imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists. Under mercantilism a favourable balance of trade was an absolute necessity, but in classical economics it was more important for a nation to utilize its economic resources fully than to build a trade surplus. The idea of the undesirability of trade deficits persisted, however, and arguments against deficits are often advanced by advocates of protectionism.

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Any contractual arrangement between states concerning their trade relations. Trade agreements may be bilateral or multilateral, that is, between two states or more than two. For most countries international trade is regulated by unilateral barriers, including tariffs, nontariff barriers, and government prohibitions. Trade agreements aim to reduce such barriers and thus provide all parties with the benefits of increased trade. Reciprocity is a necessary feature of trade agreements, since neither state will be willing to sign the agreement unless it expects to gain as much as it loses. Another common feature is a most-favoured-nation clause, which provides against the possibility that one of the parties to the current agreement will later offer lower tariffs to another country. Agreements often include clauses providing for “national treatment of nontariff restrictions,” meaning that both states promise not to duplicate the properties of tariffs with nontariff restrictions such as discriminatory regulations, selective excise taxes, quotas, and special licensing requirements. General multilateral agreements are sometimes easier to reach than separate bilateral agreements, since the gains to efficient producers from worldwide tariff reductions are large enough to warrant substantial concessions. The most important modern multilateral trade agreement was the General Agreement on Tariffs and Trade (GATT), which reduced world tariff levels and greatly expanded world trade. Such agreements continue under the aegis of the World Trade Organization (WTO), which replaced GATT in 1995. Seealso NAFTA.

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Selling of merchandise directly to the consumer. Retailing began several thousand years ago with peddlers hawking their wares at the earliest marketplaces. It is extremely competitive, and the failure rate of retail establishments is relatively high. Price is the most important arena of competition, but other factors include convenience of location, selection and display of merchandise, attractiveness of the establishment, and reputation. The diversity of retailing is evident in the many forms it now takes, including vending machines, door-to-door and telephone sales, direct-mail marketing, the Internet, discount houses, specialty stores, department stores, supermarkets, and consumer cooperatives.

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Guarantee of same trading opportunities (i.e., tariff concessions) already granted to the most favoured nation (MFN). It is a method of establishing equal trading opportunities among states by making originally bilateral agreements multilateral. Attempts to guarantee equal trading opportunities were incorporated into commercial treaties as far back as the early 17th century. The Anglo-French treaty signed in 1860 became the model for many later trade agreements, establishing a set of interlocking tariff concessions (see tariff) later extended worldwide by most-favoured-nation treatment. MFN treatment has always applied primarily to the duties charged on imports, but specific provisions have extended the principle to other areas of economic contact, including property rights, patents, and copyrights. Seealso General Agreement on Tariffs and Trade; reciprocity; World Trade Organization.

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Area within which goods may be landed, handled, and re-exported freely. The purpose is to remove obstacles to trade and to permit quick turnaround of ships and planes. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to tariffs and customs regulation. Free-trade zones are found around major seaports, international airports, and national frontiers; there are more than 200 such zones in the U.S. alone.

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Policy in which a government does not discriminate against imports or interfere with exports. A free-trade policy does not necessarily imply that the government abandons all control and taxation of imports and exports, but rather that it refrains from actions specifically designed to hinder international trade, such as tariff barriers, currency restrictions, and import quotas. The theoretical case for free trade is based on Adam Smith's argument that the division of labour among countries leads to specialization, greater efficiency, and higher aggregate production. The way to foster such a division of labour, Smith believed, is to allow nations to make and sell whatever products can compete successfully in an international market.

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In the U.S., any law allowing manufacturers of brand-name or trademarked goods to fix the actual or minimum resale prices of these goods. (Elsewhere the practice is called price maintenance.) Fair trade laws were passed by many states during the Great Depression in an effort to protect independent retailers from price-cutting by large chain stores and consequent loss of employment in distributive trades, but most were later repealed at the state level. Critics argued that such laws restricted competition; the complexity of post-World War II marketing channels also made enforcement impracticable. In 1975 the few that remained in existence were repealed by an act of Congress.

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International organization based in Geneva that supervises world trade. It was created in 1995 to replace the General Agreement on Tariffs and Trade (GATT). Like its predecessor, it aims to lower trade barriers and encourage multilateral trade. It monitors members' adherence to GATT agreements and negotiates and implements new agreements. Critics of the WTO, including many opponents of economic globalization, have charged that it undermines national sovereignty by promoting the interests of large multinational corporations and that the trade liberalization it encourages leads to environmental damage and declining living standards for low-skilled workers in developing countries. By the early 21st century, the WTO had more than 145 members.

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Complex formerly consisting of seven buildings around a central plaza, near the southern tip of Manhattan. Its huge twin towers (completed 1970–72) were designed by Minoru Yamasaki (1912–86). At 1,368 ft (417 m) and 1,362 ft (415 m) tall, they were the world's tallest buildings until surpassed in 1973 by the Sears Tower in Chicago. The towers were notable for the relationship of their simple, light embellishment to their underlying structure. In 1993 a bomb planted by terrorists exploded in the underground garage, killing several people and injuring some 1,000. A much more massive attack occurred on Sept. 11, 2001, when first One World Trade Center and then Two World Trade Center were struck by hijacked commercial airliners that were deliberately flown into them. Shortly thereafter both of the heavily damaged towers, as well as adjacent buildings, collapsed into enormous piles of debris. The attacks claimed the lives of some 2,750 people. Thousands more were injured. See September 11 attacks.

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in full North American Free Trade Agreement

Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's largest free-trade area. It basically extended to Mexico the provisions of a 1988 Canada-U.S. free-trade agreement, calling for elimination of all trade barriers over a 15-year period, granting U.S. and Canadian companies access to certain Mexican markets, and incorporating agreements on labour and the environment. Seealso General Agreement on Tariffs and Trade; World Trade Organization.

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Set of multilateral trade agreements aimed at the abolition of quotas and the reduction of tariff duties among the signing nations. Originally signed by 23 countries at Geneva in 1947, GATT became the most effective instrument in the massive expansion of world trade in the later 20th century. By 1995, when GATT was replaced by the World Trade Organization (WTO), 125 nations had signed its agreements, which governed 90percnt of world trade. GATT's most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and its largest trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas. It sponsored many treaties that reduced tariffs, the last of which, signed in Uruguay in 1994, established the WTO.

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International organization whose purpose is to remove barriers to trade in industrial goods among its members. The EFTA's current members are Iceland, Liechteinstein, Norway, and Switzerland. It was formed in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and Britain as an alternative to the European Economic Community (EEC). Some of those countries later left the EFTA and joined the EEC. In the 1990s Iceland, Liechtenstein, and Norway joined the European Economic Area, which also included all members of the European Union. Each country in the EFTA maintains its own commercial policy toward countries outside the group.

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