Trade Agreements

Introduction
• Trade agreement is any contractual trade arrangement
between states concerning their relationships
• Trade agreement is a type of economic integration
2

• Successful trade agreements are very complicated
• Some common features of trade agreements are:
 Reciprocity
 A most-favoured-nation (MFN) clause
 National treatment of nontariff barriers
3

Importance of trade agreements
1. Reduce trade barriers
– For most countries international trade is regulated by
unilateral barriers of several types:
 Tariffs
 Nontariff barriers
– Two or more nations can go for economic integration
by partial or full abolition of these barriers
4

- Trade agreements are one way to reduce these
barriers, thereby opening all parties to the benefits
of increased trade
- In most modern economies the possible coalitions
of interested groups are numerous, and the variety
of possible unilateral barriers is great
5

2. Increase the combined economic productivity
– It increase the combined economic productivity of the
countries by economic cooperation
– International trade, allows each country to specialize in
the goods it can produce cheaply and efficiently relative
to other countries
– Specialization enables all countries to achieve higher real
incomes
6

3. Trade agreements bring many benefits for economies
around the world
-New markets
-Jobs
-Competitiveness
-Foreign investment
7

• New markets
 Trade liberalization opens new markets between
trade partners
 Free trade zones allow exports to grow
• Jobs
 Trade Agreements can create jobs and help to grow
the economy
 Most of jobs depend on exports
8

• Foreign investment
 Free trade agreements spawn foreign investment,
creating economic growth
 As markets open for each of the trade partners so does
investment opportunities
• Competitiveness
 Free trade agreements increase industry
competitiveness and the expansion of exports
 Competition from abroad forces domestic producers to
keep prices down 9

Classification of trade agreements
1. Bilateral Trade Agreement
2. Multilateral Trade Agreement
3. Plurilateral Trade Agreement
4. Unilateral Trade Agreement
10

Bilateral Trade Agreement
• Bilateral (BTA) signed between two countries
• BTA give preference to certain countries in commercial
relationships, facilitating trade and investment between
the home country and the foreign country by:
 Reducing or eliminating tariffs,
 import quotas
 export restraints and other trade barriers
11

Multilateral Trade Agreements
• A trade agreement signed between more than two
countries
• They are usually intended to lower trade barriers
between participating countries
• Once negotiated, they are very powerful
• MTA are considered the most effective way of
liberalizing trade in an interdependent global
economy 12

Plurilateral Trade Agreement
• A Plurilateral Trade Agreement (PTA) is a special type
of MTA
• The primary difference between a PTA and other MTA
is that the availability of reservations is more limited
under a PTA
• Due to the limited nature of a PTA, the full co-
operation of the parties to the agreement is required
13

Unilateral Trade Agreements
• Trade incentives an importing country offers in order to
encourage the exporting country to engage in international
economic activities that will improve the exporting country’s
economy
• Intensives offered to developing countries
• The incentives typically include - Reduced duty rates
• The most common program is the General System of
Preferences
14

Bilateral Trade Agreements
• Related to Sri Lanka
 China -Sri Lanka Rubber Rice Agreement
 Indo-Lanka Free Trade Agreement (ISFTA)
 Bangladesh mulls FTA with Sri Lanka
 Pakistan-Sri Lanka FTA (PSFTA)
• Other
 Canada and USA Trade Agreement
15

China -Sri Lanka Rubber Rice Agreement
Important Features
 Sri Lanka received a fair price for its rubber exported
to China and paying the right price for the rice
imported from them
 During low price it helps to country to selling rubber
production at a decent price
16

Indo-Lanka Free Trade Agreement (ISFTA)
Important Features
 Complete or phased elimination of tariffs
 Does not remove all tariffs on all goods at once
 Negative Lists to protect national interests of both
countries
17

 The Rules of Origin criteria to ensure a minimum local
content
 Adequate safety clauses to protect domestic and
national interests of both countries
18

Pakistan-Sri Lanka Free Trade Agreement (PSFTA)
Important Features
 Establishment of a Free Trade Area through complete
or phased elimination of tariffs
 Does not remove all tariffs on all goods at once
 Negative Lists to protect national interests of both
countries
19

Canada and USA Trade Agreement
Important Features
 Canada - wheat, cattle, processed potatoes, and sugar
exports to the United States,
 USA exports of corn to Canada
20

Multilateral Trade Agreements
• Related to Sri Lanka
 South Asian Free Trade Area (SAFTA
 Asia– Pacific Trade Agreement (APTA) -Formerly the
Bangkok Agreement
• Other
 North American Free Trade Agreement (NAFTA)
21

South Asian Free Trade Area (SAFTA)
Important Features
 The agreement outlines a 10 year schedule for trade
liberalization
 Reducing and eliminating customs duties on cross-
border trade
 SAFTA was focus appeared to implement measures
to improve intra South Asian economic links
22

Asia– Pacific Trade Agreement (APTA)
Important features
• Formerly the Bangkok Agreement
• APTA, is a window into the massive Chinese and Korean
markets as it is the only trade agreement of Sri Lanka with
these two countries
• This covers around 50 % of Sri Lanka’s total exports into
China
• Exchanging the sports training skills
23

North American Free Trade Agreement (NAFTA)
Important Features
 NAFTA, have substantially reduced trade barriers for
agricultural commodities, manufactured goods, and
services in North America
24

Merits of trade agreements
1. Removal of disputes
2. Expanded Markets for Exports
3. Specialization of Labour and Capital
4. Foreign employment and economic growth
25

5. Increased production efficiently & effectively
6. Consumer satisfaction
26

Demerits of trade agreements
1. Removing a trade barrier on a particular good hurts
the shareholders and employees of the domestic
industry who produces that good
2. Some of the groups that are hurt by foreign
competition wield enough political power to obtain
protection against imports
27

3. Increased domestic economic instability from
international trade cycles, as economies become
dependent on global markets
4. With the removal of trade barriers, structural
unemployment may occur in the short term
5. Pollution and other environmental problems
28

Conclusion
• Trade agreement is a type of economic integration
• Trade agreements can be classified based on number
of states and based on articles in the agreement
• Sri Lanka has also joined to many trade agreements
with many countries
• There are both merits and demerits of trade
agreements
29

Suggestions
• Should be beneficial to each side
• Specific trade difficulties should to be resolved
• Illegal trading activities should be banned
• Should be concerned to protect the domestic
economy
• Should be used to develop relationship between
each side 30

References
• www.itfglobal.org/itf-americas/types-agreements.cfm
• http://www.gktoday.in/different-types-of-trade-
agreements/
• http://www.britannica.com/topic/583535/bibliograp
hy
• http://www.econlib.org/library/Smith/smWN.html
31

Group members
• Illeperuma R.D
• Watawala W.K.S.W
• Jayalath S.A.D
• Herath P.S.K
UWU/PLT/11/0046
UWU/PLT/11/0015
UWU/PLT/11/0006
UWU/PLT/11/0034
32

Trade Agreements

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Trade Agreements