Trade agreements make it easier for companies to sell their products and services abroad. They can reduce or eliminate tariffs (taxes on imported goods) or other barriers to trade, and can also provide intellectual property protection and access to government procurement opportunities.
These types of agreements can be bilateral or multilateral. The most common types are free trade agreements (FTAs) and preferential trading arrangements (PTAs).
An FTA is an agreement between two or more countries that reduces or eliminates tariffs on qualified goods. The United States currently has 14 FTAs.
The benefits of trade agreements are clear: They open up new markets, increase the efficiency of businesses and make it cheaper for consumers to buy foreign goods. But they can also be controversial. Opponents argue that free trade invites foreign competition with domestic industries, causing job loss in key sectors of the economy. They also say that governments are too lenient with violators of world trade rules, rewarding companies that pollute the environment or use abusive labor practices. They also worry that global firms will compete with local ones for natural resources such as oil, mining and agricultural land.
The WTO is a global body that sets international trade rules and settles disputes between its member countries. If a country believes that another is violating trade rules, it can file an anti-dumping or countervailing duty (CVD) complaint with the WTO. If the complaint is successful, the offending country will be required to change its trade policies.