Trade agreements lower barriers to trade, enabling low-cost inputs for producers and greater choices for consumers. They also help businesses plan and operate by providing stability and predictability in a complex economic landscape.

In the aftermath of World War II, the United States and a club of noncommunist countries negotiated multilateral agreements under the General Agreement on Tariffs and Trade (GATT) that substantially reduced tariffs throughout the world and led to the explosion in global trade that fueled the post-war economic boom. These agreements were built upon the tenets of reciprocity, most-favored-nation status, and national treatment, and they set the stage for the global economy as we know it.

Since then, nations and trade blocs have pursued FTAs with a range of partners. Many of these agreements expand trade liberalization beyond lowering tariffs, by including provisions such as intellectual property protection, investments, and labor practices. Some, like the African Continental Free Trade Area and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are large-scale regional agreements that connect a broad array of nations. Others, such as the Turkey-EU partial customs union and the European Union–Mercosur agreement, are smaller bilateral agreements that limit their scope to a limited number of sectors.

In some cases, these agreements can reinforce mercantilist views of trade—exports are a benefit, imports are a cost—and even lock in protectionism. For example, the USMCA includes a rules-of-origin clause that requires that 40 percent of an automobile be manufactured in the United States or Canada to qualify for preferential tariffs. This ensures that a significant share of auto production continues to occur in the high-wage United States, rather than in Mexico, which pays workers far less.