What Is Unilateral Trade Agreement
The derogation from the customs union was intended in part to take account of the creation of the European Economic Community (EC) in 1958. The EC, originally made up of six European countries, is now known as the European Union (EU) and has 27 European countries. The EU has gone beyond simply removing barriers to trade between Member States and creating a customs union. It has moved towards greater economic integration by becoming a common market – a regulation that removes barriers to mobility from factors of production such as capital and labour between participating countries. As a common market, the EU also coordinates and harmonizes each country`s tax, industrial and agricultural policies. In addition, many EU Member States have created a single currency area by replacing their national currencies with the euro. A unilateral trade agreement is a trade agreement imposed by one nation with no regard for others. It benefits only one country. It is one-sided because other nations have no choice in this matter. It is not ready to negotiate. The World Trade Organization similarly defines a unilateral trade preference. It occurs when a nation has a trade policy that is not retorted.
This is the case, for example, when a country imposes a trade restriction, such as. B a tariff, to all imports. Several factors may explain this lack of success in unilateral preferences. First, some authors have suggested that the costs associated with these agreements can be offset by tariff concessions by strict rules of origin (see Carrere and Melo  and Cadot et al. ). Second, some authors suggest that, given the successive liberalization of OECD countries and the resulting erosion of preferences (see Hoekman et al. ), the preferential margin has been significantly reduced, so that it no longer offers a competitive advantage to certain products. Finally, it is not necessarily true that the price range is passed on to exporters. Due to the market power on the import side, much of the price level induced by preferences can be acquired by importers and not by exporters (Olarreaga and Ozden  and Ozden and Sharma ).
Unilateral trade preferences are tariff concessions granted by developing countries that do not require reciprocity from recipient countries. There are several reasons for justifying these preferences (see Hoekman and Ozden  for a comprehensive investigation). The main reason for this is the concept of special and differentiated treatment (SDT) for developing countries (DC) in multilateral trade agreements. The SDT principle is based on the widely influential idea in the 1950s and 1960s that DC must protect its markets to support young industry and develop industrial export sectors.1 A trade agreement (also known as the trade pact) is a large-scale tax, customs and trade agreement, often involving investment guarantees. It exists when two or more countries agree on conditions that help them trade with each other. The most frequent trade agreements are preferential and free trade regimes to reduce (or remove) tariffs, quotas and other trade restrictions imposed on intermediaries.