Comparative Analysis of Unilateral and Multilateral Trade Agreements

This case study examines two approaches to achieving free trade: unilateral and multilateral trade agreements. It defines unilateral agreements as those implemented by a single country, often used to aid developing nations or impose sanctions, and highlights their potential for unequal benefits. The study then contrasts this with multilateral agreements, which involve multiple parties negotiating mutual trade benefits, like reduced tariffs and improved market access, as exemplified by NAFTA and the General Agreement on Tariffs and Trade (GATT). The analysis emphasizes the importance of understanding the context, benefits, and potential drawbacks of each type of trade agreement in shaping global economic relations.

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COMPAQ

Trade Agreements : A Brief
A Unilateral Trade agreement is a trade treaty or trade agreement that is usually designed by one
country to be ratified by another. It is not bi-lateral i.e. both countries do not sign a “quid pro quo” trade
agreement. It is often used as an instrument to aid a developing country or a country in need or to
impose sanctions on another country. (Fredette, 2017)
Figure 1 example of Unileral Trade Agreement. Prepared by Author
Unilateral Trade agreements are the reason. The United States Establishes a generalized system if Trade
Agreements, most of which were unilateral , in order to help developing countries. (Fredette, 2017)
Unilateral Trade Agreements could have both pros and cons. They can be instruments of development in
developing countries and an alternative to aid. They can help improve the markets of a developing
country by providing export opportunities for the country. However, given that such trade agreements
are signed without the compulsion of a “quid pro quo”, they can be ‘circumstantially advantageous’ to
one party, (Fredette, 2017) and may not provide proportionate benefits to the other.

(Mankiw, 2017)
Figure 2 Differences between Unilateral and Multilateral Trade Agreements Prepared by Authou. Sources: (Mankiw, 2017)
(Fredette, 2017) (McBride & Sergie, 2018)
A multilateral Trade agreement is a trade agreement or a trade treaty with several parties that may
ratify the agreement, completely or partially. Multilateral Trade agreements, are generally signed on
quid pro quo basis, in which every party agrees to give some trade benefits to the others. (McBride &
Sergie, 2018)For example, all parties may agree to greater access to domestic markets within the
country. Multi lateral agreements do not necessarily have to be symmetric in the benefits they provide.
(Mankiw, 2017) For example, a multilateral trade agreement between France, Germany and India may
have different provisions for each country. India may propose to reduce tariffs for French and German
imports, in return for transfer of technology from these countries. NAFTA is another example of a
multilateral trade agreement or a multilateral Free trade Agreement (McBride & Sergie, 2018). The
regional Free trade Agreement was ratified between USA, Mexico and Canada in 1994 and aimed at
fostering trade relations between the North American countries. Apart from reducing tariffs on a
majority of goods and services, trade relations are also expected to get a boost from other provisions
such as easier resolution of trade disputes, protection if intellectual property etc. (McBride & Sergie,
2018)
Bibliography
Fredette, C. (2017, July 13). WHAT IS A UNILATERAL TRADE AGREEMENT? . Retrieved July 1, 2019, from
The Borgen Project: https://borgenproject.org/what-is-a-unilateral-trade-agreement/
Mankiw, N. G. (2017). Principles of MacroeEconomics with Coursemate. Canberra: Cengage Learning.
UnilateralOnepartyratifiedagreementLowerpossibilityofQuidProQuoGenerallyratifiedinordertohelpcountriesinneedofaidMultilateralRatifiedbymultiplepartiesHigherpossibilityofovertlymutuallybeneficial,quidproquoagreementGenerallyratified,inordertoincreasetradevolumes.Examplesarea)RegionaltradeagreementssuchasNorthAmericanFreeTradeAgreementb)LargertadringblockslikesEuropeanUnionc)Tradeagreementswithlargertradingpartners,excludingsuchpartners,suchasTransPacificPartnershipTPPalsoexist.

McBride, J., & Sergie, M. A. (2018, October 1). NAFTA’s Economic Impact. Retrieved June 30, 2019, from
Council on Foreign Relations: https://www.cfr.org/backgrounder/naftas-economic-impact