A trade agreement is a contractual arrangement that lowers (or eliminates) tariff barriers on products based on their country of origin and other specified criteria. This makes the landed cost of imported goods lower, which spurs cross-border ecommerce and international trade. Trade agreements also typically include provisions to facilitate investments and protect intellectual property, among other things. They can also help to level the playing field between domestic and foreign businesses competing for government procurement contracts in a country.
Since the General Agreement on Tariffs and Trade (GATT, implemented in 1948) and its successor, the World Trade Organization (WTO, created in 1995), world tariff levels have dropped substantially as the number of trading countries has expanded. The WTO also includes the principles of reciprocity, most-favored nation status and national treatment of nontariff restrictions to ensure a fair level playing field between trading partners.
The United States has signed and implemented dozens of free trade agreements (FTAs). The core benefit is lowered or eliminated tariffs on imported products that meet the terms of the FTA. For example, the North American Free Trade Agreement between Canada, Mexico and the United States (first implemented in 1994, and later renegotiated by the Trump administration into the US-Mexico-Canada Agreement or USMCA) reduces tariffs on nearly all imports between the three nations.
Similarly, the Regional Comprehensive Economic Partnership between Japan and the six other signatory nations of the TPP (Comprehensive and Progressive Trans-Pacific Partnership) reduces tariff barriers in that region. And, in Africa, the African Continental Free Trade Agreement and the East African Community are creating new opportunities to open up markets. Even notoriously protectionist countries like India and China are pursuing FTAs, with dozens currently in force or in negotiation.