Trade agreement
A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common trade agreements are of the preferential and free trade types, which are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories. The logic of formal trade agreements is that they outline what is agreed upon and the punishments for deviation from the rules set in the  agreement. Trade agreements therefore make misunderstandings less likely, and create confidence on both sides that cheating will be punished; this increases the likelihood of long-term cooperation. An international organization, such as the IMF, can further incentivize cooperation by monitoring compliance with agreements and reporting third countries of the violations. Monitoring by international agencies may be needed to detect non-tariff barriers, which are disguised attempts at creating trade barriers. Trade pacts are frequently politically contentious since they may change economic customs and deepen interdependence with trade partners. Increasing efficiency through "free trade" is a common goal. For the most  part, governments are supportive of further trade agreements. There have been however some concerns expressed by the WTO. According to Pascal Lamy, Director-General of the WTO, the proliferation of regional trade agreements (RTAs) "...is breeding concern — concern about incoherence, confusion, exponential increase of costs for business, unpredictability and even unfairness in trade relations." The position of the WTO is that while the typical trade agreements (called "preferential" or "regional" by the WTO) are useful to a degree, it is much more beneficial to focus on global agreements in the WTO framework such as the negotiations of the current Doha  round. The anti-globalization movement opposes such agreements almost by definition, but some groups normally allied within that movement, e.g. green parties, seek fair trade or safe trade provisions that moderate real and perceived ill effects of globalization. Classification of trade pacts. By number and type of signatories. There are three different types of trade agreements. The first is "unilateral" trade agreement, this is what happens when a country wants certain restrictions to be enforced but no other countries want them to be imposed. This also allows countries to decrease the amount of trade restrictions. That is also something that  does not happen often and could impair a country. The second is classified as "bilateral" (BTA) when signed between two sides, where each side could be a country (or other customs territory), a trade bloc or an informal group of countries (or other customs territories). Both countries loosen their trade restrictions to help businesses, so that they can prosper better between the different countries. This definitely helps lower taxes and it helps them converse about their trade status. Usually, this revolves around subsided domestic industries. Mainly the industries fall under automotive, oil, or food industries. A trade agreement signed between  more than two sides (typically neighboring or in the same region) is classified as "multilateral". These face the most obstacles- when negotiating substance, and for implementation. The more countries that are involved, the harder it is to reach mutual satisfaction. Once this type of trade agreement is settled on, it becomes a very powerful agreement. The larger the GDP of the signatories, the greater the impact on other global trade relationships. The largest multilateral trade agreement is the North American Free Trade Agreement between the United States, Canada, and Mexico. By geographical region. These are between countries in a certain  area. The most powerful ones include a few countries that are near each other in a geographical area. These countries often have similar histories, demographics and economic goals. The North American Free Trade Agreement (NAFTA) was established on January 1, 1989, between the United States, Canada, and Mexico. This agreement was designed to reduce tariff barriers in North America. The Association of Southeast Asian Nations (ASEAN) was formed in 1967 between the countries of Indonesia, Malaysia, the Philippines, Singapore, and Thailand. It was established to promote political partnership and maintain economic stability throughout the region. By level of integration. There  are a variety of trade agreements; with some being quite complex (European Union), while others are less intensive (North American Free Trade Agreement). The resulting level of economic integration depends on the specific type of trade pacts and policies adopted by the trade bloc: By the World Trade Organization. Typically the benefits and obligations of the trade agreements apply only to their signatories. In the framework of the World Trade Organization, different agreement types are concluded (mostly during new member accessions), whose terms apply to all WTO members on the so-called most-favored basis (MFN), which means that beneficial  terms agreed bilaterally with one trading partner will apply also to the rest of the WTO members. All agreements concluded outside of the WTO framework (and granting additional benefits beyond the WTO MFN level, but applicable only between the signatories and not to the rest of the WTO members) are called "preferential" by the WTO. According to WTO rules, these agreements are subject to certain requirements such as notification to the WTO and general reciprocity (the preferences should apply equally to each of the signatories of the agreement) where unilateral preferences (some of the signatories gain preferential access to the  market of the other signatories, without lowering their own tariffs) are allowed only under exceptional circumstances and as temporary measure. The trade agreements called "preferential" by the WTO are also known as "regional" (RTA), despite not necessarily concluded by countries within a certain region. There are currently 205 agreements in force as of July 2007. Over 300 have been reported to the WTO. The number of FTA has increased significantly over the last decade. Between 1948 and 1994, the General Agreement on Tariffs and Trade (GATT), the predecessor to the WTO, received 124 notifications. Since 1995 over 300 trade agreements  have been enacted. The WTO is further classifying these agreements in the following types: See also. Lists: