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In: Economics

Answer the following questions: Describe the difference between a unilateral and multilateral trade agreement. Give 2...

Answer the following questions:

  1. Describe the difference between a unilateral and multilateral trade agreement.
  2. Give 2 examples of a multilateral trade approach.
  3. How is NAFTA classified?

Your answer should be a short typed paper

Solutions

Expert Solution

Multilateral trade agreements are signed between two or more countries to boost member countries 'economies through the exchange of goods and services among them.
Unilateral trade agreements are negotiations between two nations with a view to the exchange of goods and the mutual benefit of both countries

Unilateral Trade.That is the trade deal in which one nation imposes limits on another nation and is not reciprocated. For ex a nation, imports from that nation can impose tariffs or raise tax rates. This form may improve the conditions of the local market as it restricts imports, thereby boosting the demand for those goods from the locally produced goods.
Multilateral trade A trade deal includes 3 or more parties. The key goal is to reduce tariffs in order to increase imports and exports. So what is the main problem here is, one country can not make various types of proposals on the same field to different countries, say, licensing agreements or issues relevant to the market.

When many parties and companies are interested in this process, trade rises and exports are cheaper. Framing so that every group participates equally and no one feels oppressed is complicated and time consuming. Ex: BRICS, TPP, etc.

This is multilateral to certain international trade arrangements. The biggest of which is the North American Free Trade Agreement, signed on 1 January 1994. NAFTA lies between the U.S., Canada and Mexico. It quadrupled trade from 1993 to 2018.

The Free Trade Agreement between the Centro American and Dominican Republic was signed on 5 August 2004. CAFTA-DR phased out tariffs on more than 80% of U.S. exports to six nations. Those include Costa Rica, Guatemala, The Dominican Republic, Honduras, Nicaragua, and El Salvador. In 2019, trade rose from $2.44 billion in January 2005 to $4.97 billion in November 2019 in 104 percent.

The North American Free Trade Agreement (NAFTA) was established to provide for preferential tariff rates for goods traded between Canada, Mexico and the United States. NAFTA only offers incentives and reduces tariffs on products eligible under NAFTA Rules of Origin.

Unassembled products and products classified as their parts in the same Harmonized System number, which do not comply with the original Annex 401 rule (tariff shift), but contain ample North American regional value content that qualifies as originating.

Where a rule of origin is based on a tariff classification adjustment, each of the non-originating materials used in the manufacture of the products must undergo the relevant change as a result of manufacture occurring entirely in the NAFTA region. This means that the non-originating products are classified under one tariff rule before processing, and classified under another after processing has been completed. The basic rule of origin specifies precisely what tariff classification adjustments will take place in order for the products to be regarded as originating.


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