Types of International Agreement Affecting US Trade - Explained
International Trade Agreements
Written by Jason Gordon
Updated at April 8th, 2023
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What major international agreements affect international trade?
The United States has entered into two types of treaty with multiple countries regarding the trade and shipment of goods. These treaties allow individuals from the US and the host country to sell and ship goods to the other country without special tariffs or duties. The two types of treaty are as follows:
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What is the Treaty of Friendship, Commerce, & Navigation (FCN)?
These are commerce agreements that the US maintains with over two-dozen countries. Many of these agreements have been replaced by other specific agreements.
What is a Bilateral Investment Treaty (BIT)?
These agreements provide provisions for foreign countries (or its citizens) owning businesses within another country. The US is currently involved in over 40 BIT agreements with foreign nations.
What are Direct Agreements between Countries?
Numerous direct agreements between countries affect the international sale of goods. The most commonly recognized international agreement is the North American Free Trade Agreement (NAFTA). NAFTA was an agreement between the US, Mexico, and Canada to increase trade and foreign investment across the countries. NAFTA allowed for trade and shipping among these countries without tariff or duties. It also provided a system of dispute resolution for disagreements among trading parties. NAFTA was replaced by the United States Mexico Canada Agreement (USCMA), which accomplishes similar objectives. The US is a party to similar free-trade agreements with the Dominican Republic, Colombia, South Korea, and Panama, Israel, Jordan, Australia, Chile, Singapore, Bahrain, Morocco, Oman, and Peru.
Discussion Question
Why do you think the US Government has so many international trade agreements with other countries? How do you think these agreements affect both countries? What are the arguments for and against these types of agreement? Hint: Think in terms of economic productivity and the role that each country plays in these types of relationships.
Practice Question
ABC Corp is considering importing goods made in several Asian, European, and South American Countries. ABC will decide on the importation countries based upon the costs associated with importing. What types of treaties or agreements may aid ABC in its objectives?
Related Topics
- International Law (Intro)
- What is International Law?
- What are the types of international law?
- United Nations
- United Nations Commission on International Trade law
- United Nations Conference on Trade Development
- North Atlantic Treaty Organization
- International Monetary Fund
- Other Economic Development Organizations
- World Bank
- World Trade Organization
- European Union
- What international courts exist and what are their functions?
- What are the methods of carrying on international business?
- What are the legal risks associated with carrying on international business?
- What major international agreements affect international trade?
- When is carrying on business in a foreign country prohibited by US law?
- What is the significance of boycotts between foreign countries?
- What US laws apply to limit business transactions in foreign countries?
- What regulations apply to exports from the United States?
- What are the legal limitations on importing goods into the United States?
- How are private international business agreements generally enforced?
- How do parties determine the rules, location, and method of resolving disputes?