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A trade agreement (also known as trade pact) is a wide ranging taxes, tariff and trade treaty that often includes investment guarantees. The most common trade agreements are of the preferential and free trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories.

Contents

1 Logic 2 Classification of trade pacts

2.1 By number and type of signatories 2.2 By level of integration 2.3 Special
Special
agreements 2.4 By the World Trade
Trade
Organization

3 Reaction 4 See also 5 References 6 External links

Logic[edit] The logic of formal trade agreements is that they outline what is agreed upon and the punishments for deviation from the rules set in the agreement.[1] Trade
Trade
agreements therefore make misunderstandings less likely, and create confidence on both sides that cheating will be punished; this increases the likelihood of long-term cooperation.[1] An international organization, such as the IMF, can further incentivize cooperation by monitoring compliance with agreements and reporting third countries of the violations.[1] Monitoring by international agencies may be needed to detect non-tariff barriers, which are disguised attempts at creating trade barriers.[1] Classification of trade pacts[edit] By number and type of signatories[edit] There are three different types of trade agreements. The first is unilateral trade agreement[2], this is what happens when a country wants certain restrictions to be enforced but no other countries want them to be imposed. This also allows countries to decrease the amount of trade restrictions. That is also something that does not happen often and could impair a country. The second is classified as bilateral (BTA) when signed between two sides, where each side could be a country (or other customs territory), a trade bloc or an informal group of countries (or other customs territories). When both countries loosen their trade restrictions to help out businesses so that they can prosper better between the different countries this definitely helps lower taxes and it helps them converse about their trade status'. Usually this revolves around subsided domestic industries. Manly the industries fall under automotive, oil, or food industries.[3] A trade agreement signed between more than two sides (typically neighboring or in the same region) is classified as multilateral. this one is the hardest to work out. Usually involves three or more countries. With the more countries that are involved it’s definitely harder to negotiate. They are also more difficult to deal with because each country has their own set of things that they need and or want. Once this type of trade agreement is settled on it becomes a very powerful agreement. It covers a bigger area of the world. The largest multilateral trade agreement is the North American Free Trade Agreement[4] between United States, Canada, and Mexico are the three countries involved in.[5] By level of integration[edit]

Stages of economic integration around the World (each country colored according to the most integrated form that it participates with):    Economic and monetary union
Economic and monetary union
(CSME/EC$, EU/€, Switzerland–Liechtenstein/CHF)    Economic union
Economic union
(CSME, EU, EAEU, MERCOSUR, GCC, SICA)    Customs and monetary union
Customs and monetary union
(CEMAC/XAF, UEMOA/XOF)    Common market
Common market
(EEA–Switzerland, ASEAN)    Customs union
Customs union
(CAN, EAC, EUCU, SACU)   Multilateral Free Trade
Trade
Area (CEFTA, CISFTA, COMESA, EFTA, GAFTA, NAFTA, SAFTA, AANZFTA, PAFTA, SADCFTA)

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There are a variety of trade agreements; with some being quite complex (European Union), while others are less intensive (North American Free Trade
Trade
Agreement).[6] The resulting level of economic integration depends on the specific type of trade pacts and policies adopted by the trade bloc:

Separate

Trade
Trade
and Investment
Investment
Framework Agreement (TIFA) Bilateral Investment
Investment
Treaty
Treaty
(BIT) Preferential Trade
Trade
Arrangement (PTA)–limited scope and depth of tariffs reduction between the customs territories.

Free Trade
Trade
Agreement establishing a Free Trade
Trade
Area (FTA)–extensive reduction or elimination of tariffs on substantially all trade allowing for the free movement of goods and in more advanced agreements also reduction of restrictions on investment and establishment allowing for the free movement of capital and free movement of services

Common market–FTA with significantly reduced or eliminated restrictions on the freedom of movement of all factors of production, including free movement of labour and of enterprise; and coordination in economic policy

Currency
Currency
union–sharing the same currency

Composite

Customs union–FTA with common external tariffs of all signatories in respect to non-signatory countries

Customs and monetary union– Customs union
Customs union
with Currency
Currency
union Economic union– Customs union
Customs union
with Common market

Economic and monetary union
Economic and monetary union
(EMU)– Economic union
Economic union
with Currency
Currency
Union

Fiscal Union–common coordination of substantial parts of the fiscal policies (proposed step between EMU and Complete economic integration)

Special
Special
agreements[edit]

World Trade Organization
World Trade Organization
treaty

agreements in the WTO
WTO
framework (Textile Agreement and others)

the now defunct Multilateral Agreement on Investment
Investment
(in the OECD framework)

By the World Trade
Trade
Organization[edit] Typically the benefits and obligations of the trade agreements apply only to their signatories. In the framework of the World Trade
Trade
Organization, different agreement types are concluded (mostly during new member accessions), whose terms apply to all WTO
WTO
members on the so-called most-favored basis (MFN), which means that beneficial terms agreed bilaterally with one trading partner will apply also to the rest of the WTO
WTO
members. All agreements concluded outside of the WTO
WTO
framework (and granting additional benefits beyond the WTO
WTO
MFN level, but applicable only between the signatories and not to the rest of the WTO
WTO
members) are called preferential by the WTO. According to WTO
WTO
rules these agreements are subject to certain requirements such as notification to the WTO
WTO
and general reciprocity (the preferences should apply equally to each of the signatories of the agreement) where unilateral preferences (some of the signatories gain preferential access to the market of the other signatories, without lowering their own tariffs) are allowed only under exceptional circumstances and as temporary measure.[7] The trade agreements called preferential by the WTO
WTO
are also known as regional (RTA), despite not necessarily concluded by countries within a certain region. There are currently 205 agreements in force as of July 2007. Over 300 have been reported to the WTO.[8] The number of FTA has increased significantly over the last decade. Between 1948 and 1994, the General Agreement on Tariffs and Trade
Trade
(GATT), the predecessor to the WTO, received 124 notifications. Since 1995 over 300 trade agreements have been enacted.[9] The WTO
WTO
is further classifying these agreements in the following types:

Goods covering:

basic preferential trade agreement (a.k.a. partial scope agreement) free trade agreement customs union

Services covering:

Economic Integration Agreement–any agreement, including a basic PTA, that covers also services

Reaction[edit] Trade
Trade
pacts are frequently politically contentious since they may change economic customs and deepen interdependence with trade partners. Increasing efficiency through "free trade" is a common goal. For the most part, governments are supportive of further trade agreements. There have been however some concerns expressed by the WTO. According to Pascal Lamy, Director-General of the WTO, the proliferation of RTA “...is breeding concern — concern about incoherence, confusion, exponential increase of costs for business, unpredictability and even unfairness in trade relations.” [10] The position of the WTO
WTO
is that while the typical trade agreements (called preferential or regional by the WTO) are useful to a degree, it is much more beneficial to focus on global agreements in the WTO
WTO
framework such as the negotiations of the current Doha round. The anti-globalization movement opposes such agreements almost by definition, but some groups normally allied within that movement, e.g. green parties, seek fair trade or safe trade provisions that moderate what they perceive to be the ill effects of globalization. See also[edit]

Trade
Trade
and development Trade
Trade
creation Trade
Trade
preference Permanent Normal Trade
Trade
Relations (PNTR)

Lists:

List of international trade topics List of free trade agreements List of trade blocs

References[edit]

^ a b c d Grossman, Gene M. (March 2016). "The Purpose of Trade Agreements". NBER Working Paper No. 22070. doi:10.3386/w22070.  ^ "See Why Afghan Rugs Cost You More Today Than a Year Ago". The Balance. Retrieved 2018-03-26.  ^ "Top 12 U.S. Bilateral Trade
Trade
Agreements". The Balance. Retrieved 2018-03-26.  ^ "Fast Facts About the World's Largest Trade
Trade
Agreement". The Balance. Retrieved 2018-03-26.  ^ "5 Pros and 4 Cons to the World's Largest Trade
Trade
Agreements". The Balance. Retrieved 2018-03-26.  ^ Gonzalez, Eddie (1998). "Why do countries seek Regional Trade Agreements". The Regionalization of the World Economy. p. 64. ISBN 0-226-25995-1. Retrieved 2008-07-21.  ^ The EU got a WTO
WTO
waiver to grant favourable access to its market for the ACP states, without requiring that in return they open their markets to competition from the EU. The WTO
WTO
waiver already expired and currently the EU and the ACP states are negotiating WTO
WTO
compliant reciprocial agreements). ^ "Regional trade agreements". WTO. July 2007. Retrieved 2008-07-20.  ^ "Facts and figures". World Trade
Trade
Organization. Retrieved 2009-08-16.  ^ Lamy, Pascal (2007-09-10). "DG Pascal Lamy–Proliferation of regional trade agreements "breeding concern"". Geneva. Retrieved 2008-07-20. 

External links[edit]

ITC's Market Access Map, an online database of customs tariffs and market requirements.

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International trade

Terminology

Absolute advantage Balance of payments Balance of trade Capital account Comparative advantage Current account Export-oriented industrialization Fair trade Foreign exchange reserves Globalization Import
Import
substitution industrialization Net capital outflow Outsourcing Tariff Trade
Trade
justice Trade
Trade
war Trading nation

Organizations and policies

International Monetary Fund
International Monetary Fund
(IMF) United Nations Conference on Trade
Trade
and Development World Bank Group World Trade Organization
World Trade Organization
(WTO)

International Trade
Trade
Centre

Bilateral investment treaty Economic integration Free-trade zone Special
Special
economic zone Trade
Trade
agreement Trade
Trade
barrier Trade
Trade
bloc

Political economy

Free trade
Free trade
(Adam Smith, The Wealth of Nations, Repeal of the Corn Laws) Mercantilism Protectionism
Protectionism
(Economic nationalism, Autarky)

Regional organizations

ACU ASEAN CACM CAN CARICOM CEMAC CUBKR EAC EAU EU GCC Mercosur RCEP SAARC SACU WAEMU

Exports by product

Aircraft & Spacecraft Aircraft parts Aluminium Cars Car parts Coal Coffee Computers Copper Corn Cotton Diamonds Electricity Engines Gas turbines Gold Integrated circuits Iron ore Natural gas Oil Petrol Pharmaceuticals Ships Steel Telecommunications equipment Telephones Trucks Wheat Wine

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