International trade agreements

0:00- [Narrator] In other videos, we have already talked about free trade, or maybe I should say freer trade. And the arguments in favor of free trade is it can increase global standards of living, economic growth, lower prices. So it can fight inflation. You can get a larger variety of things.

0:21It makes the globe more intertwined and dependent on each other. You're less likely to maybe go to war with a trading partner. On the other hand, people have argued that it can hurt domestic industries. It could make you over-reliant on other countries. And in certain cases, countries might get locked into maybe lower skilled parts of the global economy.

0:42But generally speaking, if we can overcome those negatives, many economists tend to be in favor of free trade. And to get us to a freer trade world, they try to introduce, and not just economists, but we're talking about governments try to introduce international trade agreements.

1:01And there is many examples of this, but you can imagine, let's say we have Mexico. Try my best to draw Mexico, something like that. You have the United States over here. You have, and then you have Canada. This is my very badly hand-drawn version. The United States also of course includes Alaska up here.

1:24And then you have Canada up here. And in the past when you have goods that are going from one side of a border to another, may be manufactured in one place and then going to another place, there is a tendency for countries to want to protect their own industries, to protect their own manufacturing, to protect their own agriculture.

1:47But the more that they do that it slows down or it shuts down trade, and it increases cost. Countries might impose tariffs on each other's goods. And so for example, in North America, you had something called the North American Free Trade Agreement, that has now been replaced with something known as the US Mexico Canada Agreement.

2:11Which the whole goal of this is to reduce tariffs, to make sure that there are fair trade practices. 'Cause it might sound good to have free trade, but what if one country has lower labor standards or lower environmental standards than the other country. So they can unfairly produce at a lower cost.

2:30So these free trade agreements aren't just about lowering the barriers, lowering tariffs. They're also about making sure that say intellectual property is protected and that there are regulations or standards to make sure that a country does not trade in an unfair way.

2:45And North America is not the only place that has an international trade agreement. You have one in Europe. The European Union is economic and trade-based. It also has other principles to it. It has a shared currency which makes trade even easier. You have trade agreements in Africa, in the Pacific.

3:05So generally you have a lot of this notion that countries are trying to make it easier to trade with each other. Doesn't mean that they have completely free trade, that they haven't completely eliminated trade barriers, but they generally try to move in that direction, or at least the last few decades, folks have generally tried to move in that direction.

3:23Now there is a global body known as the World Trade Organization, often known as WTO for short, that most countries in the world are members of. And this is a body that actively tries to help countries lower trade barriers. And to do things like protect intellectual property and have similar banking standards.

3:42So lower trade barriers.