Summary Of International Agreement

Second, the multilateral removal of trade barriers can reduce political opposition to free trade in each of the countries concerned. This is because groups that otherwise oppose or are indifferent to trade policy reforms could join the free trade campaign if they see the trade agreement as export opportunities to other countries. Therefore, free trade agreements between countries or regions are a useful strategy for liberalizing world trade. Since Adam Smith published The Wealth of Nations in 1776, the vast majority of economists have accepted the thesis that free trade between nations improves overall economic well-being. Free trade, generally defined as the absence of tariffs, quotas or other government barriers to international trade, allows each country to specialize in products that it can produce cheaply and efficiently compared to other countries. Such specialization allows all countries to earn higher real incomes. Mercantilist trade policy has discouraged trade agreements between nations. This is because governments have supported local industry by applying tariffs and quotas to imports, as well as by prohibiting the export of tools, capitalization, skilled labour or anything that could help foreign countries compete with domestic production of industrial products. However, these advantages must be offset by a disadvantage: by excluding some countries, these agreements can transfer the composition of trade from low-cost countries that are not parties to the agreement to high-cost countries that are. Since Adam Smith praised the virtues of division of labour and David Ricardo explained the comparative advantage of trade with other nations, the modern world has become increasingly economically integrated. International trade has increased and the number of trade agreements has increased. While the trend over the past hundred years has been for greater openness and liberalization of trade, the path has not always been straight.

Since the implementation of the General Agreement on Tariffs and Trade (GATT), the proliferation of multilateral trade agreements between three or more countries, as well as local and regional trade agreements, has undergone a double evolution. Given that European regionalisation has been able to launch many other regional trade agreements in Africa, the Caribbean, Central and South America, it has also helped to advance the GATT agenda, with other countries seeking further tariff reductions to compete with the preferential trade that the European partnership has produced.