What Are International Trade Agreements?

To help facilitate trade between countries, international trade agreements have been put in place to maintain efficient operations, comply with each nation’s standards, and avoid certain non-tariff and tariff barriers, among other benefits.

What Are the Different Types of International Trade Agreements? 

There are two central types of international trade agreements: bilateral and multilateral. Agreements could pertain to certain types of goods and services or specific market entry barrier types.

Bilateral International Trade Agreements

Bilateral agreements facilitate trade between two countries. Some bilateral agreements include Canada-Israel., U.S.-Mexico, and E.U.-South Africa, among others.

Multilateral International Trade Agreements

Also known as regional agreements, multilateral agreements form certain international trade unions, including the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). For example, multiple treaties including the Treaty of Rome help regulate the European Union, while the General Agreement on Trade and Tariffs shapes the WTO.

How Do They Affect Trade?

Having international trade agreements in place can benefit international imports and exports in several ways, including:

• Better access to a larger customer base

• Optimized supply chain operations through dealing with foreign suppliers via the agreement

• Reduced cost of penetrating foreign markets because of more efficient and simplified customs processes, duties, and regulatory compliance

• More efficient production through partially or completely relocated operations

• Easier access to foreign financial institutions and investors along with foreign workforces and customers

Examples of International Trade Agreements

Ever since the General Agreement on Tariffs and Trade (GATT) was implemented, the world has seen an increase in multilateral trade agreements along with local trade agreements.

One important trade agreement that helped pave the way for multilateral regionalism was the 1944 Bretton Woods Agreement, which gave rise to the International Trade Organization (ITO), the International Monetary Fund (IMF), and the World Bank. The Bretton Woods Agreement began when both the U.S. and Britain came out of World War II as the world’s foremost economic leaders, which led them to develop a more liberated and cooperative trade system.

The GATT came along in 1947 as the ITO dissolved following the Bretton Woods Agreement. The GATT would help reduce tariffs for member nations, allowing for expanding multilateral trade, but a growing number of regional trade agreements also came out of it. Part of what would develop from the GATT just five years after its implementation would be the European Union.

Another key trade agreement to come about in the early 1990s would be the North American Free Trade Agreement (NAFTA), which formed in the U.S. between Mexico and Canada. By 1995, the GATT would be replaced by the World Trade Organization (WTO), which would work to develop and implement policies on far more than goods, covering services, investment, and intellectual property.

Another major recent development is the development and implementation of the United States-Mexico-Canada Agreement (USMCA), which is set to replace NAFTA. The USMCA will boost auto manufacturing, strengthen labor laws, provide more market access for dairy farmers, upgrade NAFTA to accommodate the technology sector, and more.

Understanding the ins and outs of international trade, particularly the impacts of international trade agreements, will help you stay up to date with trade law and keep your operations running as smoothly as possible. If you’re finding it difficult to keep up with trade laws or navigate the different agreements–let us do it for you. The knowledgeable trade experts at Carson International can provide reliable assistance on all things trade, from start to finish.