Shortage clause
Shortage clause: a provision sometimes included in free-trade agreements to enable a party to impose export restrictions because of a shortage of a commodity on the internal market. The free-trade agreement between the European Community and Mexico, for example, states that a party may adopt export restrictions or export customs duties if major difficulties arise, or are likely to arise, for the exporting party because of (a) a critical shortage, or threat thereof, of foodstuffs or other products essential to the exporting party, or (b) a shortage of essential quantities of domestic materials to a domestic processing industry when prices are held below the world market price as part of a governmental stabilization plan, or re-export to a third country against which the exporting party maintains export customs duties or export prohibitions or restrictions. If such measures are taken, they must not be arbitrarily or unjustifiably discriminatory, and they must not be used to protect the domestic industry.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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