An agreement between countries that sets the rules for buying or selling goods and services. Trade agreements reduce restrictions on importing and exporting, which can make doing business easier and cheaper.
Besides their core free-trade aspect, which includes enforceable commitments to limit protectionism, trade agreements also include international obligations in a wide range of policy areas—everything from government procurement requirements and agriculture subsidies to intellectual property rights and civil society advocacy of social policies. Critics point out that these non-free-trade aspects of the agreements often do not advance free trade and may discourage trade.
For manufactured goods, trade agreements typically define what constitutes “country of origin,” which can significantly decrease the landed cost of imported products. The negotiated rules are complicated and vary by product type, but in general, countries that manufacture a good entirely within the country of destination qualify as originating from that country (for example, wood imported into Canada for a sled bed must be cut and shaped into the finished product before it can qualify as coming from a USMCA member).
A number of other trade agreement provisions aim to keep special interests from dominating the process. These include a system for filing complaints that is designed to keep private commercial disputes out of public court and an enforcement mechanism that requires governments to follow the outcome of impartial tribunal decisions. They also classify certain subsidies as particularly trade distorting and attempt to prevent such subsidies from being used for protectionist purposes.
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