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Regional Trade Arrangements are Evolving, and It Is Important to Know Why.What are Regional Trade AgreementsRegional Trade Agreements are treaties or agreements signed between two or more countries. The treaty defines the rules under which all the signatory countries will conduct trade with each other. Regional Trade Agreement treaties aim to enable the easy trade of goods and services amongst member nations. Usually, trade between countries involves the imposition of import-export tariffs, quotas, sanctions, etc. The RTAs work towards reducing and eliminating trade blocks. Trade is crucial for any country’s economy. Goods and services produced in one country meet the demand in other countries. Trade opens new markets for producers and helps the local economy. RTAs help provide new markets and open borders to all members beyond political issues. The RTAs play an essential role in enhancing economic growth among the member nations. Types of Trade AgreementsDifferent trade agreements depend upon terms and understanding amongst participating governments. Free Trade Agreements: Under Free Trade Agreement (PFA), there is free exchange and movement of goods and services without any trade barriers, tariffs, or blocks. But the members may have different trade rules for external countries, depending upon their policies. Preferential Trade Agreements: Preferential Trade Agreements (PFA) aims to reduce some of the trade blocks among members though some barriers or quota exist between them individually. The level of cooperation and agreement is limited in PFA. Still, it opens doors to trade previously closed. There are no common barriers for external countries. Customs Union: Under this, the members do away with trade barriers among members and have common barriers for non-members. They try to eliminate external members taking advantage and conduct indirect trade using members to save tariffs. Common Market: In this agreement, members eliminate trade barriers and allow the exchange of labour and capital to boost production and trade. Economic Union: In this agreement, members agree to remove all trade barriers, have a single currency, allow free import and export, share resources and have uniform economic policies. They also have common trade barriers for external countries. Evolution of Regional Trade Agreements
Policy Implications
Conclusion:Regional Trade agreements open doors to new markets, bring large trade volumes and benefit domestic business and economic growth. RTAs also help create local employment and better skills due to the high quality demanded by trade partners and competition. RTAs boost exports and buffer foreign currency reserves. The incentives given under the trade agreements attract companies to bring investments and new technology to local businesses. Trade ties also enhance political ties and promote regional stability. |
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