Nyle Casey 
Trade agreements reduce government barriers to international commerce, leading to an increase in trade which benefits both consumers and producers alike.
These include efficiency gains from greater product diversity, which allows firms and workers to shift resources towards more productive sectors; as well as disincentives to trade wars; in addition, trade agreements promote rules-based global commerce.
Economic Benefits
Trade agreements reduce barriers to trade by eliminating tariffs, facilitating investment flows, and setting standards in areas such as labor and environmental protection. Economic analyses have repeatedly demonstrated how trade agreements tend to accelerate economic growth while creating jobs.
Although economists may overstate the effects of trade agreements–and their nontrade effects–it is important to remember that it is impossible to know exactly how much any particular agreement will benefit a country’s economy, given how difficult it can be to disentangle changes in trade balance from other factors that affect performance.
Noting the potential advantages of trading with countries who do produce certain goods–for instance clothing–is also important, and should continue pushing for trade agreements as part of an economic policy plan. This efficiency gain is one of the reasons countries sign trade agreements; and should serve as another reason why the United States continues to push for these arrangements.
Increased Standards of Living
International trade agreements such as FTAs and BITs help lower the landed costs associated with imported goods, which fuel economic growth. They can also assist countries in creating more market-oriented policies, increasing private investment, and cooperating more on issues like climate change.
Critics argue that trade agreements are mercantilist, yet modern trade agreements actually limit protectionism through reciprocal market-opening commitments and market liberalisation commitments. Furthermore, modern trade agreements use open markets as an inducement towards socially desirable goals like combatting tax avoidance or regulatory competition.
Further liberalization is required to fully realize trade’s potential as a driver of sustainable economic growth and development. Industrial countries should make greater efforts to remove barriers to service trade. More progress should also be made toward eliminating tariff peaks and escalation in textiles and agriculture products, textiles and agriculture production respectively. A more robust agenda of reform should also be put forth by developing nations in order to assist them in emerging out of poverty; including expediting efforts such as creating new trade agreements.
Promotion of Innovation
With easier and lower-priced access to more products, businesses are better able to invest in research and development for new goods and services – something which increases productivity, competitiveness and ultimately economic growth.
Trade agreements make business life easier by lowering tariffs and quotas, making entry to new markets simpler, increasing export volumes, and connecting with an enlarged customer base – benefits which in turn translate to higher profits, greater employment and wages, improved living standards, and an overall higher quality of life for everyone involved.
While these agreements help limit protectionism through reciprocal market-opening commitments and an efficient dispute settlement system, they also establish a hierarchy for nontariff barriers to trade – designating specific measures as particularly trade distorting, leading to stiffer penalties than others. They encourage technology transfer by including patents and copyrights within their texts as well as setting an international standard for regulatory cooperation.
Economic Growth
Trade agreements have proven their economic worth for nations both large and small alike, by lowering government barriers to cross-border trading, these agreements create economic opportunities for both businesses and individuals alike, enabling them to access cheaper goods from other nations or sell their own products more readily across borders.
Since the GATT and WTO came into force, numerous bilateral or regional trade agreements (known as FTAs ) have been reached between governments to reduce global tariffs and promote greater expansion in world trade. These FTAs have played a critical role in expanding world commerce.
However, too many trade agreements could create inefficiencies and complications within the multilateral trading system, diverting trade away from more efficient nonmember exporters and towards less competitive member exporters – known as trade diversion. Regardless, numerous studies have demonstrated the positive economic effects associated with trade agreements that should continue being pursued.
About Author
