Trade Agreements

• Globalisation has accelerated due to trade agreements across the world
• To lower the costs of trade, countries can enter trade agreements which work to benefit all parties involved
• All trade agreements are overseen by the World Trade Organisation (WTO) to ensure fairness
• An example of a trade agreement is the North American Free Trade Agreement (NAFTA) which has lowered and removed tariffs on imports and exports between Canada, the USA, and Mexico
• Richer countries control trade agreements

  • Can pressure low income countries into making more beneficial deals
  • Rich corporations and TNCs can influence trade by creating sanctions or refusing to trade with countries
• Trade Blocs are groups of countries in a trading agreement, allowing them to have certain advantages over other countries, such as reduced tariffs or higher quotas
• Trade Blocs

  • Groups of countries in a trading agreement, allowing them to have certain advantages over other countries, such as reduced tariffs or higher quotas
  • Trade blocs give all countries involved mutual benefits and often include countries with varying economic levels
  • Trade blocs are usually between neighbouring countries, but can also be for industries such as oil trade blocs
• Major trade blocs

  • EU - The European Union. 28 countries. Free trade within the EU has allowed goods and services to be transported internationally with ease
  • NAFTA - The North American Free Trade Agreement. 3 countries. Aimed to remove barriers to agricultural products, manufactured products, and services
  • ASEAN - The Association of Southeast Asian Countries. 10 countries. The bloc has free trade agreements to ensure political, economic, and social stability
  • Other trading blocs include The African Union (AU), The Union of South American Nations (USAN), and The Caribbean Community (CARICOM)
• Countries left out of trade agreements can be at even more of a disadvantage
• Less developed markets especially must pay tariffs when those in trade agreements do not, meaning they may struggle to have access to the market
• Many trade blocs and agreements are made up of primarily periphery regions


  They are left with less developed markets and little opportunity to gain access into the market
• North American Free Trade Agreement was signed by USA, Canada + Mexico


  1994
• Trans-Pacific Partnership (TPP) is a free trade agreement being negotiated by 12 countries
• Transatlantic Trade and Investment Partnership (TTIP) is a free trade agreement being negotiated by the EU and USA
• What is a bilateral agreement?

  When two countries trade with each other with no tariffs or extra costs
• What is a multilateral agreement?

  The same as a bilateral but with 3 or more countries
• Where is an example of a multilateral agreement?

  EU
• What is the global supply chain?

  Transferring products around the world by ships, planes, or people
• What are economies of scale?

  Bigger companies can buy in bulk to earn more profit than small companies as it's cheaper
• What is outsourcing?

  Selling part of the business or moving to a country where labour and resources are cheaper
• Trade agreements are formed by countries joining together to form a trade bloc that encourages trade between themselves and promotes economic co-operation, for example, NAFTA.
• Trade agreements are a factor in globalisation by encouraging trade across several countries. This may lead to increased investment from other countries.

  For example Audi has built a factory in Mexico to gain access to other NAFTA countries.
• Trade agreements can lead to people moving more freely to seek work in the trading bloc. This encourages globalisation by increasing links between countries as often supporting goods and services will follow.
• Bilateral agreements allow trade between two countries and can therefore enable a greater flow of goods and labour between the two countries.
• Without trade agreements, some countries wouldn’t trade with others.

  Therefore, agreements such as the WTO which covers trade in goods, services and designs help trade flow freely by providing a forum for negotiations encouraging trade across the globe.
• It can also be argued that trade agreements are necessary because of globalisation. Countries need to act as a bloc to be able to negotiate on a global scale due to unequal power.
• A lack of trade agreements, e.g. causing high quotas and tariffs, acts against globalisation as trade is limited and flows of capital are reduced.