Indicator ECO1.6.1 Trade agreement analysis reports

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Bilateral and Multilateral agreements between states and other countries Vanuatu has signed concerning trade relationships.

Trade agreements are made between two or more nations that agreed on the terms of trade between them. They determine the tariffs and duties that countries impose on imports and exports. All trade agreements affect international trade. Imports are goods and services produced in a foreign country and bought by domestic residents Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties.

Trade agreements aim to strike a balance between flexibility and commitments. If there is too much flexibility, the value of the commitment is undermined. If there is too little flexibility, countries may refuse to make deep commitments or may easily renege on such commitments. This section explores how this trade-off works. It reviews the economic rationale for international trade cooperation and explains the reason for the inclusion of flexibilities in a trade agreement. It is important to highlight the distinction between the initial motivations for introducing flexibilities and the consequences of using such flexibilities. This section focuses on the reasons for including flexibilities while the effects of specific measures are examined in Sections

Economists have identified several rationales for the existence of trade agreements, such as those embodied in the WTO, and its antecedent, the General Agreement on Tariffs and Trade (GATT).

Two main approaches can be distinguished.

1. The first states that in the absence of a trade agreement, a country may be tempted to manipulate the terms-of-trade (i.e. the price of its exports relative to its imports) in order to increase its national income at the expense of its trading partners.
2. The economic and political difficulties that governments face in setting trade policies. “Trade agreements allow governments to escape terms-of-trade conflicts and/ or to resist pressures from the private sector and special-interest groups urging the government to deviate from a liberal trade policy.”

10.a.1 (Tier 1)

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