Preferential trading area
Encyclopedia
A Preferential trade area (also Preferential trade agreement, PTA) is a trading bloc which gives preferential access to certain products from the participating countries. This is done by reducing tariff
s, but not by abolishing them completely. A PTA can be established through a trade pact
. It is the first stage of economic integration
. The line between a PTA and a Free trade area
(FTA) may be blurred, as almost any PTA has a main goal of becoming a FTA in accordance with the General Agreement on Tariffs and Trade
.
These tariff preferences have created numerous departures from the normal trade relations
principle, namely that World Trade Organization
(WTO) members should apply the same tariff to imports from other WTO members.
s is basically a preferential trade area with increased depth and scope of tariffs reduction all free trade area
s, customs union
s, common markets, economic union
s, customs and monetary union
s and economic and monetary union
s are considered an advanced forms of a PTA.
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s, but not by abolishing them completely. A PTA can be established through a trade pact
Trade pact
A trade pact is a wide ranging tax, tariff and trade pact that often includes investment guarantees. The most common trade pacts are of the preferential and free trade types are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.-By...
. It is the first stage of economic integration
Economic integration
Economic integration refers to trade unification between different states by the partial or full abolishing of customs tariffs on trade taking place within the borders of each state...
. The line between a PTA and a Free trade area
Free trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...
(FTA) may be blurred, as almost any PTA has a main goal of becoming a FTA in accordance with the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
.
These tariff preferences have created numerous departures from the normal trade relations
Most favoured nation
In international economic relations and international politics, most favoured nation is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must, nominally, receive equal trade advantages as the...
principle, namely that World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(WTO) members should apply the same tariff to imports from other WTO members.
List of preferential trade areas
As a free trade areaFree trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...
s is basically a preferential trade area with increased depth and scope of tariffs reduction all free trade area
Free trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...
s, customs union
Customs union
A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...
s, common markets, economic union
Economic union
An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production and a common external trade policy.The countries...
s, customs and monetary union
Customs and Monetary Union
An customs and monetary union is a type of trade bloc which is composed of a customs union and a currency union. The participant countries have both common external trade policy and share a single currency....
s and economic and monetary union
Economic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...
s are considered an advanced forms of a PTA.
Multilateral
- Asia-Pacific Trade AgreementAsia-Pacific Trade AgreementThe , previouslyknown as the and renamed 2 November 2005, was signed in1975. It is the oldest preferential trade agreement between developing countries in the Asia-Pacific region....
(1976) - Economic Cooperation OrganizationEconomic Cooperation OrganizationThe Economic Cooperation Organization is an intergovernmental organization involving seven Asian and three Eurasian nations, part of the South-central Asian Union. It provides a platform to discuss ways to improve development and promote trade, and investment opportunities. The ECO is an ad hoc...
(ECO) (1992) - Generalized System of PreferencesGeneralized System of PreferencesThe Generalized System of Preferences, or GSP, is a formal system of exemption from the more general rules of the World Trade Organization ,...
- Global System of Trade Preferences among Developing CountriesGlobal System of Trade Preferences among Developing CountriesThe Global System of Trade Preferences among Developing Countries is a preferential trade agreement signed on 13 April 1988 with the aim of increasing trade between developing countries in the framework of the United Nations Conference on Trade and Development...
(GSTP) (1989) - Latin American Integration AssociationLatin American Integration AssociationThe Asociación Latinoamericana de Integración is a Latin American trade integration association, based in Montevideo. Its main objective is the establishment of a common market, in pursuit of the economic and social development of the region...
(LAIA/ALADI) (1981) - Melanesian Spearhead GroupMelanesian Spearhead GroupThe Melanesian Spearhead Group is an intergovernmental organization, composed of the four Melanesian states of Fiji, Papua New Guinea, Solomon Islands and Vanuatu as well as the FLNKS of New Caledonia. It was founded as a political gathering in 1983...
(MSG) (1994) - Protocol on Trade NegotiationsProtocol on Trade NegotiationsThe Protocol on Trade Negotiations is a preferential trade agreement signed on 9 December 1971 with the aim of increasing trade between developing countries in the framework of the General Agreement on Tariffs and Trade...
(PTN) (1973) - South Asian Preferential Trade Arrangement (SAPTA) (1999)
- South Pacific Regional Trade and Economic Cooperation AgreementSouth Pacific Regional Trade and Economic Cooperation AgreementThe South Pacific Regional Trade and Economic Co-operation Agreement is a nonreciprocal trade agreement in which Australia and New Zealand offer duty-free and unrestricted access for specified products originating from the developing island member countries of the Pacific Islands Forum...
(SPARTECA) (1981)
Bilateral
- European UnionEuropean UnionThe European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
– ACP countriesACP countriesThe African, Caribbean and Pacific Group of States is a group of countries , created by the Georgetown Agreement in 1975. The group's main objectives are sustainable development and poverty reduction within its member states, as well as their greater integration into the world's economy...
, formerly via the trade aspects of the Cotonou AgreementCotonou AgreementThe Cotonou Agreement is a treaty between the European Union and the African, Caribbean and Pacific Group of States . It was signed in June 2000 in Cotonou, the largest city in Benin, by 78 ACP countries and the then fifteen Member States of the European Union...
, later via Everything But ArmsEverything but ArmsEverything but Arms is an initiative of the European Union under which all imports to the EU from the Least Developed Countries are duty free and quota free, with the exception of armaments. EBA entered into force on 5 March 2001. There are transitional arrangements for bananas, sugar and rice...
(EBA) agreements - IndiaIndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
– AfghanistanAfghanistanAfghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
(2003) - India – MauritiusMauritiusMauritius , officially the Republic of Mauritius is an island nation off the southeast coast of the African continent in the southwest Indian Ocean, about east of Madagascar...
- India – NepalNepalNepal , officially the Federal Democratic Republic of Nepal, is a landlocked sovereign state located in South Asia. It is located in the Himalayas and bordered to the north by the People's Republic of China, and to the south, east, and west by the Republic of India...
(2009) - India – ChileChileChile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
(2007) - India – MERCOSURMercosurMercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...
(2009) - ASEAN – PR China (2005)
- LaosLaosLaos Lao: ສາທາລະນະລັດ ປະຊາທິປະໄຕ ປະຊາຊົນລາວ Sathalanalat Paxathipatai Paxaxon Lao, officially the Lao People's Democratic Republic, is a landlocked country in Southeast Asia, bordered by Burma and China to the northwest, Vietnam to the east, Cambodia to the south and Thailand to the west...
– ThailandThailandThailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
(1991)
See also
- Trade and Investment Framework AgreementTrade and Investment Framework AgreementA Trade and Investment Framework Agreement is a trade pact which establishes a framework for expanding trade and resolving outstanding disputes between countries....
(TIFA) - Bilateral Investment TreatyBilateral Investment TreatyA bilateral investment treaty is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. This type of investment is called foreign direct investment . BITs are established through trade pacts...
(BIT)