InternationalTrade Agreements in the UK
Internationaltrade agreements are meant to regulate the manner in which businessesare carried out among countries around the world. There are thereforetrading blocs where countries have established trading relationshipsamong themselves. This is the case for United Kingdom which for sometime has been making trade negotiations through the representativebody EU. The country however exited from this economic powerhousemaking it possible to make trade negotiations on its own.
TheEuropean Free Trade Association
TheEuropean Free Trade Association is one of the major internationaltrade agreements in the United Kingdom. The UK was a founding memberwhen the association was formed in the year 1960. The UK and Denmarkin 1973 joined the defunct European Economic Community. Even afterthe member states of EFTA withdrew their membership to join EEC, theymaintained their free trade relationships with the remaining EFTAmembers the United Kingdom is known as the major exporter ofcommodities around the region to date. Preserving the free tradeagreements with other states under the EFTA umbrella was a prudentidea that will benefit them now that they pulled out of EuropeanUnion. There have therefore been bilateral trade agreements betweenthe EFTA member states and the EEC members. The UK applied forreadmission into the trading bloc to avoid tariffs imposed on eitherside of the trade. The benefits of EFTA to the United Kingdom includeremoval of trade barriers between the countries involved in thetrade. Another important aspect is that the United Kingdom is in aposition to negotiate business trades with other states which couldbe nonmember states. Therefore, it is advisable to be an EFTA memberto also avoid the added tariffs that come along with trading withstates which are members of other trading blocs. EFTA is one tradeagreement that allows not only free movement of goods but alsoservices and capital. Statistics show that EFTA has been moresuccessful when compared with EU. It is, therefore, a benefit thatthe United Kingdom can capitalize on to rip maximum profits as atrading partner.
GeneralAgreement on Tariffs and Trade
GeneralAgreement on Tariffs and Trade (GATT), is another important tradeagreement that is applicable in the United Kingdom. The agreement wassigned in 1947. This is a trade agreement aimed at liberalizing thetrade between member states. Additionally, GATT is applied by tradingnations when it comes to resolving trade disputes (Anderson, 2014).The values and goals of this organization are to a larger extentechoed by the global body governing trade WTO. GATT has seen variousinstances of trade liberalization in the world including severalrounds that have ensured businesses are well carried out by themember states. The Kennedy round, for instance, led to the reductionof tariffs by a third (Wong & Yu, 2015). Other parts of thisagreement such as the Uruguay round has led to the removal of tradebarriers among countries among the member countries.
WorldTrade Organization as the main body which administers and regulatestrade agreements among trading blocs has played a key role in theinternational trade agreements including all international tradeagreements that are relevant in the case of United Kingdom. A clearinvestigation into the general aim of these trade agreements is thatthey all were formulated for the purposes of liberating trade betweenmember states, reduce transaction costs and more importantly allowthe open market to all member states (Tesfayesus, 2016).
Benefitsand Challenges of Trade Agreements
Thebenefits or rather pros of international trade agreements areimmeasurable. Trading and especially the import and export of goods,services, capital and human resource between nations that havedifferent economic laws and regulations is a tricky one. The FreeTrade Agreements, therefore, existing between the United Kingdom andthe other nations that they share trade policies especially in theEuropean Union is, therefore, important. It is possible for a nationto access more markets freely without the difficulties of barriers orany form of resistance (Cheong, Kwak, & Tang, 2014).Transactional fees and levies commonly referred to as tariffssometimes are huge and affect the ease of doing business.International trade agreements help in reducing or even eliminatingthe charges and therefore enabling the faster realization of tradegoals. Economic growth is an important aspect of any trade carriedout between economies. With a system governing and benchmarking howbusinesses are carried out, economic growth is inevitable. An economysuch as the United Kingdom has continued to be a strong economyaround the world due to its membership in trading blocs such as EU.
Thereare however challenges that come with international trade agreements.First, it is a challenge for a country to independently negotiate itsbusiness deals with non-member states. A country has to go throughthe trade bloc to access other markets (Jardim De Santa CruzOliveira, 2016). This may limit the trade momentum of an economy thatis performing better than others. The United Kingdom, for instance,could not under EEC strike business deals with other countriesdespite it being the biggest exporter and performer in the union. Itis, therefore, important to liberate the markets in such a way that acountry has the ability to do business freely. This aspect has seenthe United Kingdom pull out of the European Union.
Theimportance of international trade is immeasurable. Nations are in aposition to exploit the benefits of comparative advantage to producewhat they are best in and import what they lack. Economic growth anddevelopment, the international competition of countries happen whichis good for any economic entity and this is as a result ofinternational trade. Trade between countries, therefore, need properregulation and application of international trade agreements isfundamental. Trade agreements dictate the scope of businesses carriedand the charges accruing to the same. The benefits of theseinternational agreements facilitate countries to form a trading blocwhich thereafter ensures their common interests are protected whileat the same time increasing their bargaining power to theinternational markets.
Theseinternational trade agreements have however proved at some instancesto restrain countries from exploiting their full potential when itcomes to trading. A country cannot individually negotiate businessdeals with other countries. This is a limitation that has seen UnitedKingdom vote towards exiting the European Union. There is the aspectof limited freedom in terms of business where the Union has tonegotiate business deals on behalf of individual countries despitetheir different competitive advantages and potentials. These aspectshave been clearly discussed in this paper.
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Cheong,J., Kwak, D., & Tang, K. (2014). Can Trade Agreements CurtailTrade Creation and Prevent Trade Diversion?. ReviewOf International Economics, 23(2),221-238. http://dx.doi.org/10.1111/roie.12162
JARDIMDE SANTA CRUZ OLIVEIRA, M. (2016). Internationaltrade agreements before domestic courts (1sted.). [Place of publication not identified]: SPRINGER INTERNATIONALPU.
Tesfayesus,A. (2016). Liberalization Agreements in the GATT/WTO and theTerms-of-trade Externality Theory: Evidence from Three DevelopingCountries. ReviewOf International Economics, 24(5),1000-1022. http://dx.doi.org/10.1111/roie.12245
Wong,K. & Yu, M. (2015). Democracy and Accession to GATT/WTO. ReviewOf Development Economics, 19(4),843-859. http://dx.doi.org/10.1111/rode.12190