RTAS

 TAXONOMY OF REGIONAL TRADE AGREEMENTS (RTAS)

Regional Trade Agreements (RTAs) are defined as groupings of countries, (not necessarily belonging to the same geographical region) which are formed with the objective of reducing barriers to trade between member countries.

Trade negotiations result in different types of agreements namely;
1. Unilateral trade agreements under which an importing country offers trade incentives in order to encourage the exporting country to engage in international economic activities that will improve the exporting country’s economy. E.g. Generalized System of Preferences.

2. Bilateral Agreements are agreements which set rules of trade between two countries, two blocs or a bloc and a country. These may be limited to certain goods and services or certain types of market entry barriers. E.g. EU-South Africa Free Trade Agreement; ASEAN–India Free Trade Area

3. Regional Preferential Trade Agreements among a group of countries reduce trade barriers on a reciprocal and preferential basis for only the members of the group. E.g. Global System of Trade Preferences among Developing Countries (GSTP)

4. Trading Bloc has a group of countries that have a free trade agreement between themselves and may apply a common external tariff to other countries Example: Arab League (AL), European Free Trade Association (EFTA)

5. Free-trade area is a group of countries that eliminate all tariff barriers on trade with each other and retains independence in determining their tariffs with nonmembers. Example: NAFTA

6. A customs union is a group of countries that eliminate all tariffs on trade among themselves but maintain a common external tariff on trade with countries outside the union (thus technically violating MFN). e.g. EC, MERCOSUR.

7. Common Market: A Common Market deepens a customs union by providing for the free flow of factors of production (labor and capital) in addition to the free flow of outputs. The member countries attempt to harmonize some institutional arrangements and commercial and financial laws and regulations among themselves. There are also common barriers against non-members (e.g., EU, ASEAN)

8. In an Economic and Monetary Union, members share a common currency and macroeconomic policies. For example, the European Union countries implement and adopt a single currency.

There has been significant growth in international trade since the end of the Second World War, mostly due to multilateral trade system which is both a political process and a set of political institutions. It is a political process because it is based on negotiations and bargaining among sovereign governments based on which they arrive at rules governing trade between or among themselves. The political institutions that facilitate trade negotiations, and support international trade cooperation by providing the rules of the game have been the former General Agreements on Tariffs and Trade (GATT) and the World Trade Organization (WTO).