This presentation is made by Palm & Latex Technology & Value Addition degree programme students in Uva Wellassa University of Sri Lanka as to fulfill a requirment for their course of Trade & Finance. In this presentation is generally related to Sri Lanka.
2. Introduction
• Trade agreement is any contractual trade arrangement
between states concerning their relationships
• Trade agreement is a type of economic integration
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3. • Successful trade agreements are very complicated
• Some common features of trade agreements are:
Reciprocity
A most-favoured-nation (MFN) clause
National treatment of nontariff barriers
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4. Importance of trade agreements
1. Reduce trade barriers
– For most countries international trade is regulated by
unilateral barriers of several types:
Tariffs
Nontariff barriers
– Two or more nations can go for economic integration
by partial or full abolition of these barriers
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5. - Trade agreements are one way to reduce these
barriers, thereby opening all parties to the benefits
of increased trade
- In most modern economies the possible coalitions
of interested groups are numerous, and the variety
of possible unilateral barriers is great
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6. 2. Increase the combined economic productivity
– It increase the combined economic productivity of the
countries by economic cooperation
– International trade, allows each country to specialize in
the goods it can produce cheaply and efficiently relative
to other countries
– Specialization enables all countries to achieve higher real
incomes
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7. 3. Trade agreements bring many benefits for economies
around the world
-New markets
-Jobs
-Competitiveness
-Foreign investment
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8. • New markets
Trade liberalization opens new markets between
trade partners
Free trade zones allow exports to grow
• Jobs
Trade Agreements can create jobs and help to grow
the economy
Most of jobs depend on exports
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9. • Foreign investment
Free trade agreements spawn foreign investment,
creating economic growth
As markets open for each of the trade partners so does
investment opportunities
• Competitiveness
Free trade agreements increase industry
competitiveness and the expansion of exports
Competition from abroad forces domestic producers to
keep prices down 9
11. Bilateral Trade Agreement
• Bilateral (BTA) signed between two countries
• BTA give preference to certain countries in commercial
relationships, facilitating trade and investment between
the home country and the foreign country by:
Reducing or eliminating tariffs,
import quotas
export restraints and other trade barriers
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12. Multilateral Trade Agreements
• A trade agreement signed between more than two
countries
• They are usually intended to lower trade barriers
between participating countries
• Once negotiated, they are very powerful
• MTA are considered the most effective way of
liberalizing trade in an interdependent global
economy 12
13. Plurilateral Trade Agreement
• A Plurilateral Trade Agreement (PTA) is a special type
of MTA
• The primary difference between a PTA and other MTA
is that the availability of reservations is more limited
under a PTA
• Due to the limited nature of a PTA, the full co-
operation of the parties to the agreement is required
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14. Unilateral Trade Agreements
• Trade incentives an importing country offers in order to
encourage the exporting country to engage in international
economic activities that will improve the exporting country’s
economy
• Intensives offered to developing countries
• The incentives typically include - Reduced duty rates
• The most common program is the General System of
Preferences
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15. Bilateral Trade Agreements
• Related to Sri Lanka
China -Sri Lanka Rubber Rice Agreement
Indo-Lanka Free Trade Agreement (ISFTA)
Bangladesh mulls FTA with Sri Lanka
Pakistan-Sri Lanka FTA (PSFTA)
• Other
Canada and USA Trade Agreement
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16. China -Sri Lanka Rubber Rice Agreement
Important Features
Sri Lanka received a fair price for its rubber exported
to China and paying the right price for the rice
imported from them
During low price it helps to country to selling rubber
production at a decent price
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17. Indo-Lanka Free Trade Agreement (ISFTA)
Important Features
Complete or phased elimination of tariffs
Does not remove all tariffs on all goods at once
Negative Lists to protect national interests of both
countries
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18. The Rules of Origin criteria to ensure a minimum local
content
Adequate safety clauses to protect domestic and
national interests of both countries
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19. Pakistan-Sri Lanka Free Trade Agreement (PSFTA)
Important Features
Establishment of a Free Trade Area through complete
or phased elimination of tariffs
Does not remove all tariffs on all goods at once
Negative Lists to protect national interests of both
countries
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20. Canada and USA Trade Agreement
Important Features
Canada - wheat, cattle, processed potatoes, and sugar
exports to the United States,
USA exports of corn to Canada
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21. Multilateral Trade Agreements
• Related to Sri Lanka
South Asian Free Trade Area (SAFTA
Asia– Pacific Trade Agreement (APTA) -Formerly the
Bangkok Agreement
• Other
North American Free Trade Agreement (NAFTA)
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22. South Asian Free Trade Area (SAFTA)
Important Features
The agreement outlines a 10 year schedule for trade
liberalization
Reducing and eliminating customs duties on cross-
border trade
SAFTA was focus appeared to implement measures
to improve intra South Asian economic links
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23. Asia– Pacific Trade Agreement (APTA)
Important features
• Formerly the Bangkok Agreement
• APTA, is a window into the massive Chinese and Korean
markets as it is the only trade agreement of Sri Lanka with
these two countries
• This covers around 50 % of Sri Lanka’s total exports into
China
• Exchanging the sports training skills
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24. North American Free Trade Agreement (NAFTA)
Important Features
NAFTA, have substantially reduced trade barriers for
agricultural commodities, manufactured goods, and
services in North America
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25. Merits of trade agreements
1. Removal of disputes
2. Expanded Markets for Exports
3. Specialization of Labour and Capital
4. Foreign employment and economic growth
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27. Demerits of trade agreements
1. Removing a trade barrier on a particular good hurts
the shareholders and employees of the domestic
industry who produces that good
2. Some of the groups that are hurt by foreign
competition wield enough political power to obtain
protection against imports
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28. 3. Increased domestic economic instability from
international trade cycles, as economies become
dependent on global markets
4. With the removal of trade barriers, structural
unemployment may occur in the short term
5. Pollution and other environmental problems
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29. Conclusion
• Trade agreement is a type of economic integration
• Trade agreements can be classified based on number
of states and based on articles in the agreement
• Sri Lanka has also joined to many trade agreements
with many countries
• There are both merits and demerits of trade
agreements
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30. Suggestions
• Should be beneficial to each side
• Specific trade difficulties should to be resolved
• Illegal trading activities should be banned
• Should be concerned to protect the domestic
economy
• Should be used to develop relationship between
each side 30