How Do Trade Agreements of International Organizations Affect Trade

Trade agreements of international organizations play a critical role in the global economy. These agreements are designed to enhance cooperation among member countries and facilitate trade by reducing trade barriers, including tariffs, quotas, and regulations. The agreements aim to ensure fair competition, promote economic growth, and increase job opportunities in member countries.

The trade agreements of international organizations like the World Trade Organization (WTO), the Free Trade Area of the Americas (FTAA), and the European Union (EU), among others, have a significant impact on the global trade environment. They promote free trade among members by lowering the costs of importing and exporting goods and services. As a result, businesses are encouraged to expand their markets, improve efficiencies, and take advantage of global economies of scale.

Through these trade agreements, member countries can reduce or eliminate tariffs on goods and services traded between them, providing a competitive advantage to businesses in these member countries. This enhances the global reach of domestic businesses, facilitates the integration of smaller businesses into the global economy, and promotes overall economic growth.

Trade agreements also promote investment, as they provide a stable environment for businesses to enter and operate in foreign markets. Reduced trade barriers and regulations make it easier for businesses to expand into new markets, increasing job opportunities and economic growth. With fewer trade barriers and more liberal trade policies, businesses can access larger markets, allowing for an increase in competition and innovation.

For example, the Trans-Pacific Partnership (TPP) agreement, a trade agreement between twelve Pacific Rim countries, including the United States, Mexico, Canada, and Japan, aimed to reduce trade barriers and promote economic growth. The TPP agreement would have eliminated over 18,000 tariffs on U.S. exports to member countries, making American goods more competitive, and providing an advantage to U.S. businesses. However, the TPP agreement was never ratified, and the United States withdrew from the agreement in 2017.

In summary, trade agreements of international organizations have a critical role in promoting trade and economic growth globally. These agreements allow businesses to access new markets, increase competition, boost innovation, and create new job opportunities. As trade barriers are reduced, businesses are encouraged to expand globally, creating a more interconnected and prosperous global economy.