A trade agreement or commonly also known as a trade pact can be said to be a contract/agreement/pact between two or more countries that states on how they will work together to ensure mutual benefit in the field of trade and investment. It often includes investment guarantees within two or more trading entities. This can be bilateral that is between two countries or multilateral if more than two countries.
Once a trade agreement is finalised between two trading entities (countries), there come Trade Blocs – a type of intergovernmental agreement, where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.
The most common trade agreements are of the preferential and free trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories.
Two or more countries can go for economic integration by partial or full abolition of tariff and non-tariff barriers taking place among them. The objective of this integration normaly is to increase the combined economic productivity of the countries by economic cooperation hence allowing free trade among the firms running within the agreeing blocs. This therefore, leads to welfare of the people of the integrating economies with other by-product such as competitiveness is achieved.
A trade agreement ( trade pact) is a wide ranging tax, tariff and trade treaty that often includes investment guarantees. The most common trade agreements are of the preferential and free trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories.