Trade agreements open many doors for businesses. Access to new markets will increase competition. Increasing competition is forcing companies to produce better quality products. It also translates into greater variety for consumers. If there is a wide selection of quality products, companies can improve customer satisfaction. There are multilateral trade agreements between three or more countries. These are the most difficult to negotiate. They establish rules governing trade between several countries. The larger the number of participants, the more difficult the negotiations. They are also more complex because each country has its own needs and desires.
Multilateral agreements characterize international trade unions such as the WTO, the EU, NAFTA, etc. Once negotiated, multilateral agreements are very powerful. They cover a wider geographical area. This gives signatories a greater competitive advantage. All countries also give themselves the status of most favoured nation. They agree to treat each other in the same way. In addition to creating a market for U.S. products, the expansion has helped spread the mantra of trade liberalization and promote open borders to trade. However, bilateral trade agreements can distort a country`s markets when large multinationals, which have considerable capital and resources to operate on a large scale, enter a market dominated by smaller players.
As a result, they may have to close the store if they are out of the competition. Even in the absence of the constraints imposed by most-favoured-nation clauses and domestic treatment, general multilateral agreements are sometimes easier to reach than separate bilateral agreements. In many cases, the potential loss of a concession to one country is almost as large as that which would result from a similar concession to many countries. The benefits that the most efficient producers derive from global tariff reductions are large enough to warrant considerable concessions. Since the establishment of the General Agreement on Tariffs and Trade (GATT, implemented in 1948) and its successor, the World Trade Organization (WTO, established in 1995), global tariff rates have fallen significantly and world trade has expanded. The WTO contains provisions on reciprocal conditions, most-favoured-nation status and national treatment of non-tariff restrictions. It has contributed to the architecture of the most comprehensive and important multilateral trade agreements of modern times. These trade agreements and their representative institutions are the North American Free Trade Agreement (1993) and the European Free Trade Association (1995). As a general rule, the benefits and obligations of trade agreements apply only to their signatories. The world has received almost more free trade from the next round, known as the Doha Round agreement. If successful, Doha would have reduced tariffs for all WTO members in terms of area. Member States benefit from trade agreements, including increased employment opportunities, lower unemployment rates and market enlargements.
Since trade agreements are usually accompanied by investment guarantees, investors who wish to invest in developing countries are protected from political risks. . . .