Definition of Preferential Trade Agreements

Preferential trade agreements are a major part of globalization.

Preferential trade agreements (PTAs) are pacts between or among countries that provide preferred trading status for the countries involved. Nearly all member countries of the World Trading Organization (WTO) belong to at least one such agreement.

Origins

Early abolishment or relaxation of internal trading barriers, as found in the interstate commerce clause of the U.S. Constitution and post-Revolution France's abolishment of internal tariffs and duties, inspired PTAs.

History

In 1944, Belgium, the Netherlands and Luxemburg created a customs union, limiting duties and tariffs on trade among the countries. In1952, the European Coal and Steel Community was established.

Growth

The number of PTAs has grown over the years, with the 1990s showing a dramatic increase. In 1947, the WTO listed 109 regional trade agreements, or PTAs based on geographical region. Between 1995 and 2000, another 111 agreements were listed.

Today

Among today's major PTAs are the European Union (EU), North American Free Trade Agreement (NAFTA) and the Common Market of Eastern and Southern Africa (COMESA).

Considerations

Many countries have benefited from membership in PTAs. However, labor organizations and environmental groups, such as the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) and Greenpeace, argue that PTAs drive down workers' wages and working conditions and ignore member countries' environmental-protection laws.

References

• Yale University: Preferential Trade Agreements with Special Reference to Asia
• Businessdictionary.com: Preferential Trade Agreement (PTA)

Resources

• WTO.org: Managing the Challenges of WTO Participation: 45 Case Studies