A trade agreement is a set of international rules agreed upon by two or more countries that regulate their economic interactions. The agreement usually focuses on government barriers to trade, either imposed at the border or internally through taxes or regulations. Trade agreements can include provisions to reduce tariffs and quotas on imported goods, establish rules for how domestic regulations cross the line into costly, “disguised” protectionism, provide rights for foreign investment, and lay out intellectual property and other rules that govern trade in services.
While the initial focus of trade negotiations was on lowering industrial goods tariffs, they expanded to address non-tariff barriers in areas such as services and intellectual property. Often, these negotiations resulted in a series of Free Trade Agreements (FTAs) amongst the countries.
The Council authorises the European Commission to negotiate a trade agreement on behalf of the EU, after which it presents its proposals to the European Parliament for consent. Once the European Parliament consents, the Council adopts a decision to conclude the agreement.
An annex or separate chapter of the trade agreement contains detailed commitments for the trade in each category of goods covered by the agreement. It includes schedules that describe to what extent and how quickly the parties will lower or eliminate duties for those goods, with different schedules for goods supplied by different modes of supply. These annexes may also include an explanation of how the trade agreement will enter into force and procedures for amending it in future.