Trade agreements make it easier and cheaper for businesses to export products and services to foreign markets. They do so by lowering or eliminating tariffs (taxes on goods imported into the country) and other trade barriers, and often by creating rules and processes for trading in services and intellectual property. These agreements also provide business-to-business opportunities such as the ability to sell to government procurements or participate in setting product standards.
While there are many different types of trade agreements, all follow the fundamental principle that a country promises not to raise a trade barrier if another member of the agreement does so. This gives businesses predictability and reduces the risk of sudden policy changes that could impact their international operations and investment.
Countries that are serious about their commitment to free trade negotiate comprehensive trade agreements, which set broad rules and cover a wide range of issues. These include not only trade in goods and services but also rules governing the treatment of foreign investments, intellectual property, customs valuation, import licensing procedures, anti-dumping, subsidies, and other domestic support measures that can distort market competition.
Other countries have more limited trade agreements that cover a narrow range of targeted sectors and industries. These are often known as “regional” trade agreements. While these have their benefits, they tend to show lower levels of liberalization and fewer provisions for non-trade issues.
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