Commercial Policy


DEFINITION of 'Commercial Policy'

The regulations and policies that determine how a country conducts trade with other countries. A country's commercial policy includes the use of tariffs and other trade barriers, such as restrictions on what goods can be imported or exported, and which countries are allowed to import or export goods to the home country.

Countries that are part of an economic union often have a single commercial policy that determines how member countries can interact with non-member countries. An example of an organization with a common commercial policy is the European Union.

BREAKING DOWN 'Commercial Policy'

Commercial policies are a point of contention in international trade, and are one of the underlying reasons for the existence of organizations such as the World Trade Organization (WTO). Because a country's commercial policy can include the use of tariffs and trade barriers, free trade is negatively impacted.

  1. Free Trade Area

    A group of countries that invoke little or no price control in ...
  2. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  3. Voyage Policy

    A financial protection plan that provides coverage for goods ...
  4. Import Substitution Industrialization ...

    An economic theory employed by developing or emerging market ...
  5. Trade War

    A negative side effect of protectionism that occurs when Country ...
  6. General Agreement On Tariffs And ...

    A treaty created following the conclusion of World War II. The ...
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  3. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  4. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  5. Investing Basics

    Explaining the Real Effective Exchange Rate

    The REER is a measure of the weighted average of a country’s currency against an inflation-adjusted and trade-weighted index of other currencies.
  6. Investing

    What a Fed Delay Means for the ECB & BoJ

    The Fed’s continued delay has repercussions for more than just the U.S. economy and markets. The ECB and the BoJ may support the case for stocks in Europe.
  7. Economics

    Understanding Income Inequality

    Income inequality refers to the uneven distribution of income across a single economy.
  8. Economics

    Who is a Hawk?

    In the economic sense of the word, a hawk is someone who believes high interest rates should be maintained to keep inflation low.
  9. Investing Basics

    Explaining Fixed Exchange Rates

    A government using a fixed exchange rate has linked the value of its currency to the value of another country’s currency, or the price of gold.
  10. Investing

    How Worried Should We Be About China?

    An economic slowdown, a freezing up in trade and plunging markets and currencies are casting a shadow across Asia—and the globe. How worried should we be?
  1. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  4. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!