A trade agreement is a set of rules agreed upon by two or more countries to regulate their economic interactions. They typically focus on government barriers to trade that are imposed at the border or internally through taxes and regulations. They can also cover other issues that impact trade, such as rules on foreign investment and intellectual property protection or environmental and labor standards.
Trade agreements vary in their scope and complexity. Some are multilateral, covering multiple countries (such as the Comprehensive and Progressive Trans-Pacific Partnership and the United States-Mexico-Canada Agreement), while others are bilateral (such as the North American Free Trade Agreement). Trade agreements can cover a broad range of economic issues, from tariff reductions to cooperation on nontariff barriers, digital trade rules and economic security coordination.
They discipline how governments collect tariffs, requiring them to follow specific criteria when determining the amount of duties to charge on a shipment of goods. They may also contain an annex listing the specific commitments made by each party for each good covered by the agreement.
Chapters in the trade agreements may address trade in services, establishing standards and procedures for providing services to each other. This is especially important for service-intensive industries, which rely heavily on access to new markets to generate revenues.
This section usually addresses competition law, investigations and sanctions related to trade cartels, abuse of dominant market positions by companies and anti-competitive mergers. It may also include rules on subsidies, state-owned enterprises and enterprise privileges to ensure a level playing field for private businesses.
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