Regional Trade Agreements and Preferential Trade Agreements – for Businesses
What is a regional trade agreement or preferential trade arrangement?
A regional trade agreement (RTA) or a preferential trade arrangement (PTA) is a treaty or contractual agreement that governments use to manage their trade relationships and market access conditions. Through trade agreements, governments agree on a range of conditions such as preferential tariffs for goods, market access for services, intellectual property rights, competition and investment measures, among other things.
How can trade agreements affect my business?
Regional trade agreements (RTAs) provide preferential market access, such as full or partial relief from tariffs for goods traded between the RTA parties. They also include chapters related to trade facilitation, SPS and TBT measures, and intellectual property rights, all of which may impact your business.
Preferential trade arrangements (PTAs) are usually provided by developed nations that are members of the World Trade Organization (WTO), to members in developing nations, in the form of reduced tariffs for goods. Businesses can claim these benefits by meeting Rules of Origin and other conditions stated in the text of these arrangements. The Trade4MSME guide on Rules of Origin contains more information.
What are the different types of RTAs and PTAs?
PTAs are unilateral, or one-sided, meaning an arrangement where one government provides preferential access to imports from one or more governments without receiving anything in return.
RTAs may involve multiple governments, in the same region, or across different regions, or they may be on a bilateral between two governments.
Both the World Trade Organization and International Trade Centre websites have more information on trade agreements.
- Unilateral agreements: also known as preferential trade arrangements, or PTAs, these provide trade preferences to the markets of the member that developed the PTA, without requiring that beneficiary economies grant the same preferences in return. These preferences often come in the form of zero or lower import tariffs for products, and only cover trade in goods. One example of a PTA is the Generalized System of Preferences scheme GSP, under which developed economies grant preferential tariffs to imports from developing economies. PTAs can also involve more limited schemes such as the United States’ African Growth and Opportunities Act (AGOA) or the European Union’s Everything But Arms (EBA) scheme. These are subject to a waiver granted by WTO Members and subject to review.
- Reciprocal agreements: Reciprocal agreements are also known as regional trade agreements or RTAs, and these cover the rules and conditions that apply to trade in both goods and services. These include free trade agreements (FTAs), Customs unions, and partial scope agreements. Governments signing these agreements provide each other with preferences and benefits in terms of lower trade barriers and market access. In addition, RTAs can include provisions on investment, Customs cooperation and trade facilitation, trade and environment, trade and labour, and other areas.
How do I know if my products benefit from preferential treatment under an RTA or PTA?
Trade agencies, industry associations, and chambers of commerce can provide information on how businesses can benefit from trade agreements. For example, the World Trade Organization has an online RTA Database and PTA Database, which provides information on tariff preferences and other provisions such as Customs procedures, SPS and TBT measures, which are under any RTAs and PTAs notified to the WTO.
Businesses can also visit the Rules of Origin Facilitator, an online tool that identifies preferential tariffs under trade agreements, so long as these goods meet the rules of origin requirements included under these agreements. Through the Facilitator, businesses can find opportunities for preferential market access under trade agreements that can apply to their products.
Links to Supporting Information
Trade4MSME Guide Rules of Origin
World Trade Organization (WTO) Regional Trade Agreements WTO | Regional Trade Agreements – scope of RTAs
International Trade Centre Rules of Origin Facilitator – Introduction to Trade Agreements Rules of Origin Facilitator
African Growth and Opportunity Act (AGOA) African Growth and Opportunity Act (AGOA) | United States Trade Representative
European Union’s Everything But Arms (EBA) scheme Everything but Arms (EBA) | Access2Markets