Trade agreements are an essential aspect of the American economy. These agreements enable the United States to expand its trade relations with other countries, providing significant benefits to the nation`s businesses, consumers, and economy as a whole. In this article, we`ll take a closer look at the different types of trade agreements in the United States and their impact on the economy.
What are Trade Agreements?
A trade agreement is a legal agreement between two or more countries that governs their trade relations. The main objective of trade agreements is to eliminate trade barriers between countries, such as tariffs and quotas, which restrict the flow of goods and services across borders. These agreements help to facilitate free trade, promote economic growth, and create jobs.
Different Types of Trade Agreements in the United States
1. Free Trade Agreements (FTAs)
FTAs are agreements between two or more countries that eliminate tariffs, quotas, and other trade barriers between them. The United States has several free trade agreements, including the North American Free Trade Agreement (NAFTA), the United States-Korea Free Trade Agreement (KORUS), and the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
FTAs have been proven to effectively boost U.S. exports, create jobs and improve the economy. For instance, the U.S. International Trade Commission reports that the KORUS agreement had led to a 76% increase in U.S. vehicle exports to South Korea within the first five years of its implementation.
2. Preferential Trade Agreements (PTAs)
PTAs are trade agreements that provide preferential access to certain products and services between two or more countries. PTAs generally include preferences such as reduced tariffs and special quotas for specific goods or services. The United States has several PTAs in place, including the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP).
3. Bilateral Investment Treaties (BITs)
BITs are agreements between two countries that promote and protect foreign investment. These treaties provide a framework for investment protection by establishing rules for the treatment of foreign investors and their investments. The United States currently has BITs with over 40 countries.
Impact of Trade Agreements on the U.S. Economy
Trade agreements have had a significant impact on the U.S. economy since their inception. These agreements have helped to increase exports, create jobs, and spur economic growth. In fact, the U.S. Department of Commerce estimates that exports support over 11 million American jobs. Additionally, trade agreements have helped to lower consumer prices by reducing the cost of imported goods.
Trade agreements also serve as an important tool for the United States to maintain and strengthen its relationships with its trading partners. These agreements help to enhance market access and promote regulatory coherence, which benefits both the U.S. economy and those of its trading partners.
In Conclusion
Trade agreements are important for the United States, as they promote free and fair trade, expand market access, and create jobs. The United States has continued to work towards developing and improving its trade agreements with other countries, enabling the economy to continue to grow and prosper. As a result, businesses and consumers benefit from the increased trade and investment opportunities that trade agreements provide.
