Trade Agreement Examples

Trade Agreement Examples

The European Union is today a remarkable example of free trade. The Member States form an essentially unlimited unit for the purposes of trade and the introduction of the euro by most of these nations paves the way. It should be noted that this system is regulated by a Brussels-based bureaucracy, which has to deal with the many trade-related issues that arise between representatives of the Member States. The benefits of free trade were outlined in On the Principles of Political Economy and Taxation, published in 1817 by the economist David Ricardo. Although the WTO embodies the principle of non-discrimination in international trade, Article 24 of the GATT allows for the creation of free trade areas and «customs unions» among WTO members. A free trade area is a group of countries that remove all tariffs on trade, but remain autonomous in determining their tariffs with non-members. A customs union is a group of countries that remove all trade customs duties between them, while maintaining a common external right on trade with non-EU countries (which technically undermines the highest remuneration). Some countries, such as Britain in the nineteenth century and Chile and China in recent decades, have made unilateral tariff cuts – reductions made independently and without any reciprocal action by other countries. The advantage of unilateral free trade is that a country can immediately reap the benefits of free trade. Countries that remove trade barriers themselves do not need to postpone reforms as they try to convince other nations to follow suit. The benefits of such trade liberalization are considerable: several studies have shown that incomes rise faster in countries open to international trade than in countries more closed to trade. Dramatic examples of this phenomenon are the rapid growth of China after 1978 and India after 1991, which indicate when major trade reforms took place.

The advantage of these bilateral or regional agreements is that they promote greater trade between the contracting parties. They can also accelerate the liberalization of world trade when multilateral negotiations are in difficulty. Recalcitrant countries that are excluded from bilateral agreements and therefore do not participate in the enhancement of the resulting trade may then be led to join them and remove their own barriers to trade. Proponents of these agreements have called this process «competitive liberalization,» which challenges countries to remove trade barriers in order to keep pace with other countries. Thus, shortly after the implementation of NAFTA, the EU embarked on a free trade agreement with Mexico and finally signed it to ensure that European products do not suffer any competitive disadvantage in the Mexican market as a result of NAFTA. The United States currently has a series of free trade agreements. These include multinational agreements such as the North American Free Trade Agreement (NAFTA), which covers the United States, Canada and Mexico, and the Central American Free Trade Agreement (NAFTA), which includes most Central American nations. There are also separate trade agreements with nations ranging from Australia to Peru. For example, one nation could allow free trade with another nation, with exceptions, that prohibit the importation of certain drugs that have not been approved by their regulators, or animals that have not been vaccinated or processed foods that do not meet their standards. . .

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