Trade Agreement Between 2 Countries

In 1995, GATT became the World Trade Organization (WTO), which now has more than 140 member states. The WTO controls four international trade agreements: the GATT, the General Agreement on Trade in Services (GATS) and the Trade-Related Intellectual Property Rights and Trade Investment Agreement (TRIPS and TRIMS). The WTO is now the forum for members to negotiate the removal of trade barriers; The most recent forum is the Doha Development Round, launched in 2001. 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. In the United States, the Office of Bilateral Trade Affairs minimizes trade deficits by negotiating free trade agreements with new countries, supporting and improving existing trade agreements, promoting economic development abroad and other measures. Let us assume, for example, that Japan sells bicycles for $50, that Mexico sells them for $60, and that they both expect a $20 dollar in the United States. If tariffs on Mexican products are removed, U.S.

consumers will transfer their purchases of Japanese bicycles to Mexican bicycles. The result is that Americans will buy from a more expensive source, and the U.S. government does not receive customs revenue. Consumers save $10 per bike, but the government loses $20. Economists have shown that when a country enters such a „trade“ customs union, the cost of trade diversion can outweigh the benefits of enhanced trade with other members of the customs union. The result is that the customs union could degrade the country. As a general rule, the benefits and obligations of trade agreements apply only to their signatories. It is a list of free trade agreements between two parties in which each party could be a country (or another customs territory), a trade bloc or an informal group of countries. However, the WTO has expressed some concerns.

According to Pascal Lamy, Director-General of the WTO, the dissemination of regional trade agreements (RTA) is „… is the concern of inconsistency, confusion, exponentially increasing costs for businesses, unpredictability and even injustice in trade relations. [2] The WTO is how typical trade agreements (called preferential or regional agreements by the WTO) are to some extent useful, but it is much more advantageous to focus on global agreements under the WTO, such as the ongoing Doha Round negotiations.