A trade agreement in which two or more countries agree on terms of trade between them. The tariffs and duties that countries can impose on imports and exports are determined in these agreements.

The international trade is being affected by all trade agreements.

 

TYPES OF TRADE AGREEMENTS

  1. UNILATERAL TRADE AGREEMENT: When a country imposes or loosen trade restrictions and other countries do not reciprocate, then unilateral trade agreement occurs.
  2. BILATERAL TRADE AGREEMENT: It takes place between two countries that agree to loosen restrictions on trade in order to expand business opportunities between them.
  3. MULTILATERAL TRADE AGREEMENTS: These are among 3 or more countries. Since the number of participating countries is more and they have their own needs and requests, these are most difficult to negotiate. But are very powerful as a larger geographic area is covered.

 

ROLE OF WTO IN TRADE AGREEMENTS

 World Trade Oganisation is the only international organisations that deals with global trade rules. It helps in negotiation of global trade agreements, enforces them and also responds to complaints.

 

ADVANTAGES OF TRADE AGREEMENTS

  • Accessibility to larger variety of products.
  • Large scale production and increase in world consumption.
  • International competition helps in breaking up domestic monopolies.
  • Promotes exchange of ideas, knowledge and culture between nations.
  • Best quality products are available at low prices.

 

DISADVANTAGES OF TRADE AGREEMENTS

  • Excessive dependence on foreign countries.
  • Domestic industries may not develop rapidly due to the superiority of foreign industries.
  • Free trades had given rise to colonialism and imperialism in the past.
  • Import of expensive and harmful products is also possible.