Trump Brings Several Trade Deal Terminologies To The Fore

Chennai: The past few months have seen a slurry of events happening in the global trade front involving the US and its trade partners. These developments also have thrown in several terminologies related to trade deals.

Trade agreements vary in scope, scale, and objectives, catering to the specific needs and strategic goals. Broadly there are three types of trade agreements with respect to the number of the parties involved. Bilateral Trade Agreements are deals between two nations designed to expand market access and boost trade. They cover trade of goods and services as well as investment and intellectual property rights.

Multilateral Trade Agreements involve three or more countries and aim to reduce trade barriers and promote trade liberalization among a larger group of nations and Regional Trade Agreements are formed by countries within a specific geographic region.

Within bilateral agreements, Free Trade Agreements allow free flow of trade between the trading partners. They eliminate tariffs and other trade barriers in most of the trade segments.

Compared to Free Trade Agreements, Preferential Trade Agreements have a lower level of commitment. The trading partners reduce tariffs on certain goods for each other, but they don't eliminate all trade barriers.

In case of the trade deals that are currently being negotiated by the US with its trade partners, the President has not received fast-track authority from the US Congress. Hence, they are termed as ‘mini’ trade deals or "Trade Executive Agreements" (TEAs), which are negotiated and implemented by the US Executive alone.

Mini deals are smaller, targeted agreements with foreign partners and cover standards and rules which do not need congressional approval.

They have become a fixture of the trade law landscape of the US over the last three decades and the Trump administration has brought it to the fore. More than 1,200 such agreements govern the movement of goods and services in and out of the United States from and to 130 countries. The members of Congress have hardly raised questions about such TEAs.

These agreements often slip under the radar of ordinary accountability and monitoring regimes. Their obscurity has enabled them to grow quietly in importance as a means to achieve trade and regulatory policy aims. They suffer from a lot of procedural flaws.

While a Bilateral Trade Agreement (BTA) is more comprehensive and covers, goods, services, investment and intellectual property, mini deals are limited in nature. Most of the deals currently negotiated only involve goods trade. A BTA has a more structured form and has a longer tenure, while mini deals are for short to medium term and only address specific issues instead of broad trade liberalisation. In the current scenario, the purpose of the mini deals is to address the trade deficit of the US. While a bilateral trade agreement has a stipulated tenure before both parties review it, mini deals face the threat of frequent changes.

Further, the Trade Framework Agreement entered by the US with China just defines the broad contours of a trade deal. They can be termed as a foundation for resolving trade issues. TIFAs can lead to further negotiations on bilateral FTAs or other trade agreements.

Usually, TIFA Councils meet at least once a year and discuss issues identified within the framework. In case of the framework agreement purportedly entered with China, US claims that the former has reduced the barriers in the export of rare earth metals and magnets. On the other hand, the US has removed the visa restrictions on Chinese students.

However, the deals announced by the US President have created a lot of confusion. In the strictest sense they cannot be termed as trade deals as the US has not reciprocated for the concessions provided by the partners. Further, the announcements do not reflect the tariffs agreed upon by the negotiating teams. The threat of frequent changes and revisions also overshadow the deals.