Bilateral trade is the exchange of goods between two nations, which encourages trade and investment. Both countries will reduce or eliminate tariffs, import quotas, export restrictions and other trade barriers to promote trade and investment. In the United States, the Office of Bilateral Trade Minimizes Trade Deficits by negotiating free trade agreements with new countries, supporting and improving existing trade agreements, encouraging economic development abroad, and taking other measures. The economies of the United States, Mexico and Canada grew significantly in the first 10 years of NAFTA. However, many economists say it is difficult to say how the agreement has improved growth and efficiency in all three countries. In a 2003 report, the Congressional Budget Office said that expanded trade resulting from NAFTA had increased U.S. gross domestic product “very slightly.” Each agreement covers five areas. First, it eliminates tariffs and other trade taxes. This allows companies in both countries to gain a price advantage. The best way to operate is for each country to specialize in different sectors. Jeffrey Schott, senior fellow for international trade policy at the Institute for International Economics, said free trade agreements play an important role in promoting improvement in developing and emerging countries. “These agreements are essentially aimed at bringing about internal reforms in partner countries that facilitate further liberalization at the multilateral level by introducing more market-oriented reforms into their domestic policies,” Schott said. The agreements reached with Morocco, Jordan and Bahrain, as well as an upcoming agreement with Oman, are seen by some experts as a strengthening of the United States` strategic position in the Middle East and a contribution to the economic strengthening of its partners.
Douglas Holtz-Eakin, who directs the Maurice R. Greenberg Center for Geoeconomic Studies at CFR, says the same idea applies to the United States. Measures to strengthen trade relations with some of China`s neighbors. “If it surrounds [U.S. competitors] with free trade agreements, the U.S. gets broad strategic gains,” he says. In the absence of a breakthrough in multilateral talks, the Bush administration has encouraged smaller bilateral free trade agreements to secure preferential agreements and strengthen relations with strategic countries in the Middle East, Pacific and Latin America. The government, which uses special authority to negotiate trade deals without congressional interference, has obtained Congressional approval for nearly a dozen such deals, including several others in the absence.
Proponents argue that the agreements, known as free trade agreements, help developing state partners carry out reforms and improve their ability to negotiate in regional and global discussions. They also highlight the improvement in trade flows. However, critics say such deals undermine attempts to remove trade barriers in general and divert negotiators from the United States and other countries from larger global trade negotiations, which have greater potential to boost economic growth. The People`s Republic of China has concluded bilateral trade agreements with the following blocs, countries, and their two special administrative regions: Latin America, in particular, has seen in recent years a counter-reaction to Western-led economic reforms, which have led to a number of left-wing populist leaders and politicians. Their rise is partly linked to resentment over the effects of privatization and other Washington-led market reforms, as well as rising inequality and poverty. CFR`s Holtz-Eakin, however, argues that it`s wrong for the region to target free trade.