Preferential Trade Agreements Essay - 1454 Words

International Trading Blocs Preferential Trade Agreements (PTAs) Preferential Trade Agreements or trading blocs are a form of economic integration in which countries agree to create a free trade area or some form of common market to facilitate trade. This agreement can be in different forms and depths, for instance there is Free Trade Area is a trading bloc that has no tariff, then Custom Union is where there is common level of trade barriers, in Economic unions such as European Union, the member countries have open national policies and a common currency (Euro). There are several forms of regional trade areas, varying according to the extent to which countries extend cooperation and provide concessions to their member countries. For†¦show more content†¦Bilateral agreements are preferred over multilateral agreements due to ease of enforcement and require less negotiation. Zhai (2006) reports that the new PTAs in Asia agree on more that tariff and non-tariff policies, rather they include provisions on nvestment liberalization, services, assistance in trade and technical and economic collaboration. The graph below shows the drastic rate at which the number of PTAs are increasing. Benefits of PTAs The foremost reason for creating a PTA is to gain concessions in trade with member countries. Being in a PTA implies that the member countries will get preference over other non-member countries. This removal of barriers of trade has a number of inherent benefits. These can be in several forms, such as: †¢ Economies of scale In countries that are located nearby each other, having preference can also benefit through lower transportation costs. Japan-Singapore Economic Partnership Agreement (JESPA) is an agreement in which both the nations have promised coordination in technology, regulatory, e-commerce, media and broadcasting, and human resources. This will benefit the multinational companies in both the countries because they can take benefit of economies of scale at regional level. †¢ Tax benefits Countries in PTA agree to trade with member countries at low tariffs, but do not abolish them; this reduces the cost of trade. The loss of tax revenue from import duties can be made up by more trade and more taxes fromShow MoreRelatedThe History Of Preferential Trade Agreements Essay2119 Words   |  9 Pages B The History of Preferential Trade Agreements 1 Traditional PTAs Historically, trade agreements had been signed before World War II. To begin with, the Cobden-Chevalier Treaty of 1860 was concluded as a means of opening the French market to British manufacturers, stimulating a series of liberalising trade agreements among the European countries. In 1930, the Netherlands, Denmark, Norway and Sweden established the Dutch-Scandinavian Economic Pact as a means of protecting themselves from economicRead MoreImportance Of Preferential Trade Agreement1414 Words   |  6 PagesInternal Memorandum 2 Countries are increasingly using preferential trade arrangements in order to liberalize trade. There are specific terms used in this context as such. When talking about a PTA, it should be first made clear that this is an exception the core WTO principle of MFN. Some countries are treated better than others for the purposes of such agreements, as opposed to the MFN status of the WTO, where everybody is treated the same. There are going to be increasing levels of integrationRead MoreThe Effect Of Preferential Trade Agreement On The Trade Of Paraguay976 Words   |  4 Pagesof the engagement in preferential trade arrangement on the trade of Paraguay. Preferential trade agreements (PTAs) have become a prevalent tool for regional economic collaboration. Despite its recognition and popularity, however, many economists are still skeptical of the effectiveness of PTAs. Preferential trade agreements (PTAs) are critical parts of the world’s current multidimensional trading system. The agreements allow nations to engage in regional or exclusive free trade cooperation. When countriesRead MoreAsian Preferential Trade Agreement ( Sapta )1299 Words   |  6 PagesWhile realizing the need of intra-regional trade, the SAARC countries decided to incorporate the economic cooperation under the South Asian Preferential Trade Agreement (SAPTA). This agreement was signed in April 1993 at the Dhaka Summit and came into force in December 1995. SAPTA was the origin of economic cooperation in the region. 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