What is a trade agreement?

We speak of a commercial agreement to refer to the bilateral agreement that occurs between the companies or states that participate in the pact. The main objective of this type of agreement is to satisfy the needs of each of the parties involved, in order to increase the possibilities of commercial exchange between companies or states. In the event that some kind of transfer of sovereignty occurs between the parties involved, we would be talking about economic integration and not a trade agreement.

How are trade agreements classified?

Depending on the complexity and scope of the commercial agreement, we identify two large groups of agreements:

  • International cooperation trade agreements, in which the participating companies or states are associated in order to achieve common objectives without the measures employed affecting their respective policies.
  • International integration trade agreements, in which the participating companies or states associate with each other, delegating their jurisdiction to a supranational authority (which will carry out the talks taking into account the interests of the parties involved).

Why is a trade agreement beneficial?

Trade agreements have a large number of economic advantages, both for the participating companies and for the states that intervene in said agreement. Let's see some of the most representative:

  • The trade agreement attracts the different investment flows.
  • It improves innovation and diversification of the production of the parties involved.
  • Greater access to the public procurement market.
  • Less restriction on the possibility of investing in other countries.
  • It generates greater job opportunities and improves people's quality of life.
  • It facilitates the recognition of professional qualifications and improves the internal promotion of workers.
  • Trade agreements are beneficial both for companies and for workers and consumers.
  • It is a source of inclusive growth between companies and states.

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