In the previous video, we surveyed the many ways that nations create barriers and obstacles to trade with one another. In this video, we'll turn it around and review the ways that countries create agreements to reduce and sometimes eliminate those same barriers. A free trade agreement is a treaty between two or more countries and, or trading blocks to reduce and limit barriers to trade. There are generally three types of trade agreements. Bilateral agreements are where two countries or trading blocks agree to terms to reduce trade barriers between them. Regional agreements are where multiple countries collectively agree to reduce trade barriers, and global agreements is where most countries of the world come to an agreement on global terms of trade. In this video, we will focus on bilateral and regional agreements, and global trade agreements in the next video. Bilateral trade agreements are between two countries or trading blocs to reduce trade barriers. Some examples are, an agreement between Canada and the EU in 2017, who signed the Canada-EU Trade Agreement called CETA. The US and Korea signed their KORUS Trade Agreement in 2012, and the US and the EU are now in extended negotiations to create a Transatlantic Trade and Investment Partnership called TTIP. Note that this would be a bilateral trade agreement between a sovereign nation the US and a trading bloc the EU. The map in the right shows the number of bilateral trade agreements for countries around the world, varying from very many in the blue to very few in the orange. Multilateral or regional trading blocks are agreements formed between multiple countries or trading blocks. In general, there are three types of multilateral agreements. There are free trade areas that eliminate tariffs between the economy's in the trading bloc. There are no tariffs between members, no common tariffs for non-member countries but there are border checks to verify country of origin and imports. Members are free to negotiate their own trade deals with non-member countries. An example of this is the North American Free Trade Agreement between Mexico, Canada, and the US. The custom union is a free trade area plus a common external tariff for non-members. No internal tariffs, no internal border checks, but a common external tariff for imports into the customs union. Trade deals are negotiated for the whole union, individual members cannot strike deals with outside countries. An example is the Caribbean Community CARICOM Trade Agreement. Third are single markets, which are custom genius plus common rules and regulations. No internal tariffs are in a common external tariff as with a customs union. In addition, single markets allow freedom of movement, goods, and people across national borders, and create common rules and regulations for all single market members. The premier example of this is the European Union formed several decades ago. Prominent regional trading blocks operating today include the following. The European Union is the most integrated trading block in the world currently. The EU 27 have free trade and common regulations and are part of a customs union. It operates as a single market without border controls and with free movement within the union. The North American Free Trade Agreement is a free trade area between Canada, the US, and Mexico. The Association of Southeast Asian Nations, or ASEAN and Southeast Asia, is a free trade area in Southeast Asia founded in 1992. The South Asian Free Trade Area, SAFTA is a free trade area based around the Indian sub-continent. The African Union includes 55 countries on the continent of Africa. It was created to forge closer political ties and economic ties. The union has aspirations to eventually become a free trade area. Finally, Latin American Integration Association, or ALADI includes 13 South American countries with long-term objectives to establish a Latin American single market. These are some of the most important large trading areas blocs in the world. The largest and perhaps most successful international trade agreement is the European Union. It was created in 1993 and currently includes 27 countries as members. There are no internal border controls in the EU, allowing free movement of EU citizens and goods. The EU has common visa entry policies for non EU visitors and has legislated homogeneous commercial regulations and rules throughout the EU. Finally, since 1999, the European Union has used a common currency called the euro. This slide demonstrates the complexity and overlap of international trade deals. The graphic shows all of the interlocking and overlapping deals involving European countries. Pause the video for a minute and see if you can figure them out. I sure can't. Another large trading bloc is a North American Free Trade Association or NAFTA. Canada, the US, and Mexico formed the trade association in 1994 to reduce tariffs, and revise trade, and promote trade. It was revised in 2018 to include increased environmental and labor regulations, and was rebranded as the USMCA, but the USMCA is awaiting final approval by national legislatures before it can be implemented. The Trans-Pacific Partnership or TPP, was a proposed agreement to form a large free trade area with many nations bordering the Pacific Ocean as shown on the map at the right. The TPP was signed on February 4th, 2016 by national treaty negotiators. The TPP would lower non-tariff and tariff trade barriers including labor, intellectual property, environmental dispute resolution mechanisms, and much more. It's a very comprehensive treaty. All signatories anticipated net positive economic outcomes, one of which was to reduce dependence on Chinese trade. However, in January 2017, the US president withdrew from the treaty citing concerns about job losses and wages. Nonetheless, the remaining countries without the US, signed a revised version of the treaty called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTTP. A clumsy title. It remains to be seen if the US will ever choose to reopen negotiations with these countries and reform the TPP. The advantages and disadvantages of trade agreements largely mirror those for globalization in general. Advantages include, lower consumer costs, increased economic growth and job creation, more dynamic business climate, lower government spending, greater foreign investment, gained expertise, and technology transfer. Common criticisms include, increased job outsourcing and job loss, theft of intellectual property, crowding out of domestic industries, poor working conditions in some nations, degradation of natural resources, destruction of native cultures, and reduced tax revenues from lack of tariffs. In summary, nations can engage in free trade agreements either bilaterally, one-to-one, or multi-nationals, with many nations, all in an effort to reduce trade barriers. There are many free trade agreements in the world, in the Americas, in Europe, in Asia, in Africa and there are many smaller free trade agreements signed for smaller regions, and others are currently in negotiation, I think we'll see quite a few more in the future. Trade agreements bring many benefits for signatories, but not without criticisms similar to those for globalization. In the next video we'll discuss global trade organizations. Stay tuned for that.