Trade Agreement Preferential Tariff

Second, the term “preferential trade agreements” can be used for agreements with a partial scope. These agreements provide preferential market access by reducing import tariffs to a limited amount of goods. First, it is one of the names that are sometimes used for free trade agreements, to emphasize their preferential nature, in contrast to trade liberalization under the WTO or unilateral reduction of tariffs. While preferential tariffs are often set at 0%, it is important to note that free trade agreements do not offer duty-free access to all products (i.e. all tariff positions in the HS classification). Preferred rates can be set at any level between the MFN rate and 0%. In addition, tariff liberalization can also take place gradually over several years. For example, a product duty can be lowered by 8% of the three-year MFN rate: 5% in the first year, 3% in the second year to 0% in the third year. These tariff preferences have led to many departures from the principle of normal trade relations, namely that members of the World Trade Organization (WTO) should apply the same tariff to imports from other WTO members. [1] Most of the reciprocal agreements covered by the instrument are free trade agreements. Free trade agreements (FTAs) remove barriers to trade between members and provide preferential access to markets on a reciprocal basis. In addition to trade in goods, free trade agreements generally cover trade in services and investment rules and remove tariff and non-tariff barriers. They may also include a number of provisions relating to customs cooperation and trade facilities, as well as harmonising standards and promoting regulatory cooperation in various areas.

In principle, we can distinguish between unilateral trade agreements and systems (offered from one side to the other) and reciprocal trading systems (negotiated and approved by both parties). Since the beginning of the 20th century, several hundred bilateral THPs have been signed. The Canada Research Chair in International Political Economy`s TREND project[6] lists approximately 700 trade agreements, the vast majority of which are bilateral. [7] Under an ESTV, the preferential tariffs applied by members may be different for the same product – the preferential import duty offered by one party to the ESTV may be different from the tariff offered by another product. Discounted tariffs are called preferential tariffs because they offer preferential treatment to members of free trade agreements. They are negotiated separately under each agreement and differ considerably between the agreements. As has already been said, these are rules under which a country unilaterally offers preferential rights to another country or group of countries. The country that offers preference removes or reduces import duties on imports from these countries without the same preferences.

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