What Is a Multilateral Trade Agreement?

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Multilateral trade agreements are agreements on trade issues between three or more countries. They are difficult to negotiate because of their complexity, but once agreed upon, they are very powerful and beneficial for the nations involved, giving each nation equal status in terms of trade.

An example of a multilateral free-trade agreement is the North American Free Trade Agreement, or NAFTA, created to facilitate trade between the United States, Mexico and Canada. A controversial accord, it took the combined efforts of three U.S. presidents to get it started. Tariffs between the three countries were eliminated, making North America the world's largest free-trade zone. The Association of Southeast Asian Nations, or ASEAN, encompasses 10 nations in Southeast Asia and was set up to stimulate the economic growth of its members. The Central American-Dominican Republic Free Trade Agreement, or CAFTA-DR, was created by the United States and six other countries. Its purpose was to open up trade in the Central American area. Through drastically reducing tariffs, it increased trade between the member nations.

The World Trade Organization was set up to promote global free trade and administer existing trade agreements. Every member of the organization receives most favored nation status, which stimulates trade by lowering tariffs. The WTO also settles trade disputes and helps with new trade agreement negotiations.