Many businesses rely on trade agreements to lower their costs and open new markets. They also depend on them to provide stability and predictability that enable investment, expansion, and operations. Yet the global array of trade agreements is a maze that can be difficult to navigate. Often, businesses are unaware of the extent to which their own government or trade bloc is engaged in them.
Trade-related agreements cover a wide range of policies, from lowering tariffs or quotas on goods to establishing international standards and regulations. They can also include provisions that limit the use of certain taxes or subsidies and establish enforcement mechanisms. They can be bilateral or multilateral.
While the benefits of free-trade agreements are widely proclaimed, they don’t always have the same impact across countries or industries. The degree to which an agreement is effective depends on a country’s overall trade strategy. The US, for example, has a large number of bilateral and regional agreements and is part of the multilateral Geneva Round (formerly the General Agreement on Tariffs and Trade) and the World Trade Organization.
This reflects the US’s long-standing commitment to openness, nondiscrimination, and the principle of most-favored nation treatment of other economies. It has also led to a significant increase in goods trade and global value chains and has made the US a global leader in foreign investment. Despite the current political noise, decades of experience and economic analysis confirm that America has benefitted from its trade agreements.