Aim Of Trade Agreements

The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating international trade. A common market is the first step towards a single market and may, initially, be limited to a free trade area. Section 2 focuses on theoretical and empirical research, which examines the purpose of trade agreements. In the theoretical part, I focus mainly on three theories: the theory of terms of trade, according to which the purpose of a trade agreement is to prevent governments from manipulating trade conditions; the “domestic obligation” theory that a trade agreement can allow a government to unite with its own hands against domestic agents; and the “new trade” theory, which emphasizes the role that a trade agreement can play in the presence of imperfect competition. The empirical part of the discussion focuses on two sets of contributions: those that test the predictions of key theories and those that more descriptively examine the impact of trade agreements on trade barriers and trade flows. In response to such a proposal, Bagwell et al. (2007) are considering using an auction with sealed bids to exchange retaliatory rights. They use a multilateral business model in which two foreign countries import a product from their home country and two foreign governments participate in the auction to impose a retaliatory duty on imports from their home countries. To introduce asymmetrical information into this auction, Bagwell et al. (2007) assume that each foreign government is subject to fortuitous political pressure, allowing them to take into account their political economic parameters (section 2.2.1) before participating in the auction.

Unlike the standard allocative efficiency result of the auction, where the auction function increases the bid`s valuation to the point that the highest always wins the position, the foreign government will not offer low political parameters, the government with intermediate values will offer an exogenous minimum price for the auction, and only the government with high political parameters will increase its bid with its valuation. This auction behaviour does not create bids as a possible balancing act, although any foreign government will benefit strongly from obtaining the right of retaliation. This unconventional result can be attributed to the existence of positive externalities with bidders, i.e. any foreign government with a low political parameter would prefer that the other foreign government win the offer so that it can take free rein on the effect of the other government`s retaliatory action on the price of its imports from the country of origin. Regional trade agreements are very difficult to conclude and claim when countries are more diverse. The agreement opened the door to open trade by ending tariffs on various goods and services and implementing equality between Canada, America and Mexico. NAFTA has allowed tariff exemption for agricultural products such as eggs, maize and meat. This has allowed companies to act freely and import and export different products at the North American level.

The International Monetary Fund (IMF) is an international organization established on July 22, 1944 at the Bretton Woods Conference and established on December 27, 1945, when 29 countries signed the IMF agreement. It originally had 45 members. The IMF`s stated objective was to stabilize exchange rates and support the reconstruction of the global payment system after World War II. Through a quota system, countries introduce money into a pool from which countries with payment imbalances can temporarily borrow funds. Through these and other activities, such as monitoring the economies and policies of its members, the IMF is working to improve the economies of its member countries.