Trade agreements


A trade agreement is defined as an agreement between two or more parties to amend or change their policies in relation to a specified type of trade.

A trade agreement normally involves a range of different terms, and the purpose of trade agreements is to facilitate trade in specified areas between the parties to the said agreement.

What is a trade agreement?

Trade agreements are international agreements between two or more nations, in which the terms regarding how commerce between commercial entities residing in those participating nations will operate are agreed. The most common trade agreements are between nations that occupy the same geographical area.

A trade agreement usually involves an agreement between the parties to remove ‘tariffs’ or ‘tariff quotas’. A tariff is a duty tax which is charged to goods when they are transported from one country to another.

The effect of a trade agreement which provides for the removal of such a tariff is that no duty tax will be charged on goods subject to the agreement. This is provided that the goods are transported between countries that are party to the trade agreement.

A number of trading agreements have been entered into by member states of the European Union and other countries.

  • For example, the EU has entered into ‘free trade agreements’ with some specified countries outside the EU
  • Some trade agreements have also been reached between the EU and some Middle Eastern countries

A solicitor should be instructed to help with the drafting of a trade agreement. This is because the drafting of such an agreement can be a difficult task. It is likely that competition and other areas of law will need to be considered. Legal advice should also be sought in relation to any disputes that arise out of trade agreements.

Trade agreements and competition law

Trade agreements are occasionally highly contested among the more wealthy countries of the region. For example, the North American Free Trade Agreement (NAFTA) eliminated import tariffs on many products from Mexico to America.

This meant that products which were manufactured in Mexico could be sold in America for a similar price to that which they were sold for in Mexico. The American industries feared that this would make it impossible for American brands to compete, since Mexican production was seen to be much cheaper.

In the EU the same concerns were raised regarding the service industry when Eastern European countries were included in the trade agreements.

  • There was a campaign in France for example, which indicated this concern through the use of the example of Polish plumbers arriving in France and allegedly taking all the plumbing jobs away from the locals

Trade law is often a multi-jurisdictional area of law and requires a specialist lawyer who can advise on UK law as well as potentially either EU or international law. It is always recommended to seek legal advice to ensure your trade agreement is enforceable in the desired region.

For more information on tariffs or tariff quotas, see our guidance page on tariffs.

Do you have a dispute surrounding a clause of your trade agreement? Do you need a specialist solicitor to draft you a trade agreement for a competitive rate or a fixed fee? Caven can put you in touch with a specialist commercial lawyer who deals in domestic and international trade matters. Please call us on 08001 221 2299 or complete the web-form above.

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