It is also important to note that a free trade agreement is a reciprocal agreement that is authorized by Article XXIV of the GATT. Autonomous trade agreements for developing and least developed countries are permitted by the 1979 decision by the signatories of the General Agreement on Tariffs and Trade (GATT) (“empowerment clause”) on differentiated and more favourable treatment, reciprocity and increased participation of developing countries. It forms the legal basis for the WTO`s Generalized Preference System (GSP). [13] Free trade agreements and preferential trade agreements (as mentioned by the WTO) are considered an exception to the MFN principle. [14] The EU has trade agreements with these countries/regions, but both sides are now negotiating an update. A clause relating to the “government treatment of non-tariff restrictions” is necessary, as most tariff characteristics can easily be duplicated by a set of non-tariff restrictions, designed accordingly. These include discriminatory rules, selective excise or sales taxes, specific health requirements, quotas, “voluntary” import restrictions, specific licensing requirements, etc., not to mention general prohibitions. Instead of trying to list and ban all kinds of non-tariff restrictions, the signatories of an agreement require similar treatment to the processing of products manufactured within the country (for example. B steel). The United States has free trade agreements with 20 countries. These free trade agreements are based on the WTO agreement, with broader and stronger disciplines than those of the WTO.

Many of our free trade agreements are bilateral agreements between two governments. But some, such as the North American Free Trade Agreement and the Dominican Republic-Central America-U.S. Free Trade Agreement, are multilateral agreements between several parties. The WTO continues to classify these agreements as follows: the Most Favoured Nation clause prevents one of the parties to the current agreement from further reducing barriers to another country. For example, in exchange for reciprocal concessions, Country A could agree to reduce tariffs on certain products from Country B. In the absence of a clause of the most favoured nation, Country A could still reduce tariffs on the same goods from Country C in exchange for other concessions. As a result, consumers in Country A could purchase the products in question at a cheaper price in Country C because of the tariff difference, while Country B would get nothing for its concessions. The status of the most favoured nation means that A is required to extend the lowest existing tariff to certain products to all its trading partners enjoying such status.

If A later accepts a lower rate with C, B automatically gets the same lower rate. There are a large number of trade agreements; some are quite complex (the European Union), while others are less intense (North American free trade agreement). [8] The resulting degree of economic integration depends on the specific nature of the trade pacts and policies adopted by the trade bloc: the guides are aimed specifically at small and medium-sized exporters and tell you what each agreement does without having to read the detailed technical language of the full text. There are three different types of trade agreements. The first is a unilateral trade agreement[3] if one country wants certain restrictions to be enforced, but no other country wants them to be imposed.