Trade Agreement

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Trade Agreement

A trade agreement, as made clear from the term itself, is a contract signed between two or more countries regarding the trading of certain goods, products and services from one’s home nation to another country or vice versa. This type of a transaction generally involves taxes being levied on the import or export of goods and items, although the United States of America conducts and signs free trade agreements (FTA) with most other nations. The primary objective of the United States in signing these agreements is to reduce U.S export barriers and protect the trade interests of the State, thereby enhancing the rule of law in the other country involved in the pact and hence ensuring better trade relations. This type of a contract is very popular in the trading world of the United States because of the cheaper costs it provides to the export of U.S goods to other countries.  Trade agreements are generally negotiated in the World Trade Organization (WTO), which determine the trade behaviour of all the countries involved.

The United States has signed a number of trade agreements, most of them being FTAs, with various countries including Australia, Israel, Oman, Peru, Bahrain, Singapore, Jordan, New Zealand, Malaysia, Vietnam, Chile, etc. The agreement contracts may include different trade aspects, but the basic structure of framing the agreement documents complies with a set standard, which remains the same for all U.S trade agreements but may be different in behaviour for other countries.

A trade agreement, whether an FTA or not, should necessarily include the following particulars:

  • It should always contain complete details of the countries involved and should also explain the trade rule prevalent there.
  • The nature and functioning of the State government and the government(s) of the partner country/ countries should be discussed clearly in the trade agreement, such that the other country gets an idea of the laws of the land and can abide by the rules and regulations during the term of the agreement.
  • The agreement should place equal rights for both the countries and their suppliers, the specific conditions and code of conduct for exercising which should be included in the agreement itself. It should be noted carefully that none of the rights are exploited in the name of trade, and clauses should thus be framed accordingly.
  • Like most other agreements, a trade agreement should also contain the time period of the validity of the contract and the special clauses that apply to all the parties involved.
  • Signatures are undoubtedly an important part of a trade agreement as well.