The trade agreements (also called free-trade agreements or FTAs) that the United States and other countries sign help to reduce tariffs and other barriers that hinder the flow of goods and services. They include detailed rules about how these trade barriers are to be removed and also cover a range of other topics, including intellectual property protection and services. The details of individual trade agreements vary widely, but most follow a standard basic structure.
The Preamble usually identifies the parties to the agreement and confirms their common interests in trade liberalization. It may also include a list of the trade benefits to be achieved through the agreement.
Chapter 2 sets out the basic trading rules of the agreement and how to determine when a dispute has arisen about its application or interpretation. It includes a dispute settlement mechanism that uses impartial tribunals to settle trade disputes. This is important to ensure that governments are not able to use the agreement to circumvent established international trade rules.
Nontariff restrictions are a major source of protectionism, and the “national treatment” provision in a trade agreement limits their application to the members of the agreement. These measures can include selective excise taxes, sales taxes, quotas, special health requirements, and other government restrictions on imports of certain products.
Trade agreement services schedules outline how countries will lower barriers to the trading of service activities, with commitments varying by mode of supply (cross-border, consumption abroad, commercial presence and direct investment). The most important part of this chapter is the most-favoured-nation clause, which prevents one country from lowering its own barriers to another country’s services in exchange for concessions on its own goods.