Trade agreements lower the landed cost of imports by lowering or eliminating tariffs and non-tariff barriers to trade, which opens opportunities for businesses to expand their global footprint. As governments reshape their international trade policies in light of new realities around digitalization, sustainability, and geopolitical shifts, companies must leverage their FTA network to improve competitiveness.
FTAs generally offer a set of benefits to the parties, such as broad tariff reductions and liberalizing components like services and investment disciplines. They can also include specific rules of origin for certain products to encourage domestic production and limit protectionism. The 20 bilateral and regional FTAs the United States currently has in place achieve what even trade populists would describe as a goal: substantially all trade between the nations is now duty-free.
Countries pursuing more extensive trade liberalization and enforcement often sign multiple FTAs and are party to regional trade agreements. For example, Canada and Mexico are members of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which extends those same reciprocal zero-tariff benefits to an expanded circle of trading partners.
Other countries often pursue more limited FTAs and focus on a particular sector or issue. For example, India and China are party to multilateral FTAs focused on specific issues such as competition in government procurement markets, technical barriers to trade, subsidies and countervailing duties, customs valuation, and import licensing procedures. These multilateral FTAs typically have a national treatment clause, which means that signatories treat other country goods in a way similar to their own.
About the Author
