chapter  2
20 Pages

Why countries trade

This chapter concerns different types of regional economic integration and the importance of the rules of origin. The chapter analyzes the economic impact of regional integration on the countries involved and the rest of the world. The world's largest and successful regional trade agreement is the European Union (EU). The EU and the various US trade agreements are used as examples of how regional trade agreements (RTAs) operate. Trade liberalization was occurring primarily through multilateral trade negotiations under the auspices of General Agreement on Tariffs and Trade (GATT). The process of obtaining multilateral trade liberalization becomes more difficult with the spread of RTAs. While multilateral trade liberalization may be desirable, the adjustment costs for some domestic industries may be high. The tariff reductions provided for the North American Free Trade Agreement (NAFTA) covers all merchandise trade, trade in services, investment, and intellectual property rights.