Preferential trade agreements (PTAs) refer to agreements amongst countries that aim to reduce trade barriers between them. PTAs may take various forms, including free trade agreements, customs unions, and regional trading blocs. The history of preferential trade agreements dates back several centuries, with the first known PTA, the Cobden-Chevalier Treaty, signed in 1860 between the United Kingdom and France.
From the mid-19th to the mid-20th centuries, PTAs were viewed as a way to secure favorable trade arrangements for individual countries. European countries formed colonial trade agreements in the late 1800s, which boosted their trade with their colonial territories. In the 1930s, amidst the Great Depression, countries, including the United States, began signing reciprocal trade agreements with other nations, which provided lower tariffs for goods imported and exported between the participating countries.
After World War II, the GATT (General Agreement on Tariffs and Trade) was created in 1947 to promote free trade and reduce trade barriers between member countries. The GATT was replaced by the World Trade Organization (WTO) in 1995. Since the inception of the GATT, PTAs expanded in number and scope.
One of the earliest regional PTAs was the European Economic Community (EEC), formed in 1957, which promoted trade between European countries and eventually evolved into the European Union (EU) in 1993. The EU became one of the largest trading blocs in the world, with a population of over 500 million people. Other regional PTAs include the North American Free Trade Agreement (NAFTA), formed in 1994 between the United States, Canada, and Mexico, and the Association of Southeast Asian Nations (ASEAN), formed in 1967.
Despite the benefits of PTAs, including increased trade and lowered barriers, critics argue that they can also create trade diversion, where trade is redirected away from countries not included in the agreement. Furthermore, PTAs can affect industries negatively, leaving them unable to compete with cheaper imported goods.
In conclusion, the history of preferential trade agreements is a long and complex one, with PTAs being used as a way to secure favorable trade arrangements for individual countries for centuries. While PTAs have helped to promote free trade and economic growth, there are also potential downsides that must be considered. As global trade continues to evolve, it will be interesting to see how PTAs continue to play a role in international commerce.