Trade Agreement or Trade Pact: What`s the Difference?
When discussing international trade, you may often hear the terms “trade agreement” and “trade pact” used interchangeably. However, there are subtle differences between the two terms that are important to understand.
A trade agreement refers to a set of rules and regulations established between two or more countries to govern their trade relationship. Such agreements are usually aimed at reducing or eliminating trade barriers, such as tariffs and quotas, and facilitating the flow of goods and services between countries.
Examples of trade agreements include the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) between 11 Asia-Pacific countries, including Japan, Australia, and Canada.
A trade pact, on the other hand, is a broader term that can encompass multiple trade agreements between a group of countries. A trade pact is typically a more comprehensive and ambitious initiative aimed at establishing closer economic ties among its members and promoting regional economic integration.
One notable example of a trade pact is the European Union (EU), which is a political and economic union of 27 member states in Europe. The EU has a single market that allows the free movement of goods, services, and people, and a customs union that sets common external tariffs on goods imported from non-member countries.
Another example is the Asia-Pacific Economic Cooperation (APEC), which is an intergovernmental forum composed of 21 member economies across the Asia-Pacific region. APEC aims to promote regional economic integration, facilitate trade and investment, and promote sustainable economic growth and development.
In summary, a trade agreement is a specific deal between two or more countries to regulate their trade relationship, while a trade pact is a broader initiative aimed at promoting closer economic ties and integration among a group of countries. Both terms are important in the context of international trade and have significant implications for businesses, consumers, and economies around the world.