Preferential trade agreements (PTAs) are agreements between countries that aim to reduce trade barriers and promote trade between the signatories. PTAs provide preferential treatment to member countries in the form of tariff reductions or elimination, which makes their goods and services more competitive in each other`s markets. These agreements can be bilateral, between two countries, or multilateral, involving multiple countries. In this article, we will explore an example of a preferential trade agreement to understand its benefits and limitations.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is an example of a preferential trade agreement. It is a multilateral agreement signed by 11 countries, including Australia, Canada, Japan, Mexico, and New Zealand. The agreement was signed in March 2018 and came into effect on December 30, 2018.
The CPTPP aims to liberalize trade among the signatories by reducing tariffs and non-tariff barriers. The agreement covers a wide range of industries, including agriculture, automotive, textiles, and services. Under the agreement, tariffs on more than 95% of the goods traded between member countries will be eliminated or significantly reduced.
One of the key benefits of the CPTPP is that it provides a level playing field for businesses in member countries. Companies can now compete on a fair basis, without having to bear the burden of high tariffs that make their products less competitive. This has the potential to increase trade and investment between member countries, leading to economic growth and job creation.
Another advantage of the CPTPP is that it promotes regulatory cooperation and standards harmonization among member countries. This means that companies will face fewer obstacles when trying to get their products or services certified for sale in other member countries. This can reduce costs and improve efficiency for businesses, making it easier for them to enter new markets.
However, the CPTPP also has some limitations. One of the main criticisms of the agreement is that it may lead to job losses, particularly in industries that are less competitive. Some industries, such as textiles and agriculture, may face increased competition from member countries with lower labor and production costs. This could result in job losses and wage stagnation in those sectors.
In addition, the CPTPP has been criticized for its lack of transparency and public input during the negotiation process. The agreement was negotiated in secret, and there was limited consultation with civil society organizations and other stakeholders. Some people have argued that this lack of transparency undermines democracy and public trust in the agreement.
In conclusion, the CPTPP is an example of a preferential trade agreement that aims to liberalize trade and reduce barriers between member countries. The agreement has the potential to boost economic growth and create jobs, but it also has some limitations and criticisms. As with any trade agreement, it is important to weigh the potential benefits and drawbacks to determine whether it is in the best interests of all parties involved.