{"id":89770,"date":"2026-02-25T12:02:12","date_gmt":"2026-02-25T06:32:12","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=89770"},"modified":"2026-02-25T12:02:12","modified_gmt":"2026-02-25T06:32:12","slug":"nature-of-trade-agreements","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/nature-of-trade-agreements\/","title":{"rendered":"The Evolving Nature of Trade Agreements &#8211; Explained"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><strong>Trade Agreements Latest News<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The evolving nature of trade agreements has gained attention after the United States signed several \u201c<\/span><b>Agreements on Reciprocal Trade<\/b><span style=\"font-weight: 400;\">\u201d (ARTs), including a proposed deal with India, raising questions about their compatibility with WTO rules.\u00a0<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Trade Agreements and Global Trade Governance<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Trade agreements formalise economic relations between countries by reducing tariffs, setting regulatory standards, and facilitating market access.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Traditionally, international trade governance has revolved around the multilateral framework established under the <\/span><b>General Agreement on Tariffs and Trade<\/b><span style=\"font-weight: 400;\"> (GATT) and later the <\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/world-trade-organisation\/\" target=\"_blank\"><b>World Trade Organisation<\/b><\/a><span style=\"font-weight: 400;\"> (WTO).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, recent developments indicate the emergence of new forms of trade arrangements that differ from conventional Free Trade Agreements (FTAs).\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The U.S., under President Donald Trump, has labelled its recent deals as \u201cAgreements on Reciprocal Trade\u201d (ARTs), creating what appears to be a new typology in international trade law.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This shift has significant implications for global trade multilateralism.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Multilateral Trade Framework under GATT and WTO<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The GATT, established in 1947, laid the foundation for a non-discriminatory global trading regime.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Its core principle is the <\/span><b>Most-Favoured-Nation<\/b><span style=\"font-weight: 400;\"> (MFN) rule, which mandates that any trade concession granted to one member must be extended to all other WTO members.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The formation of the WTO in 1995 institutionalised this framework by:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Expanding coverage from goods to services (GATS) and intellectual property (TRIPS).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Creating a binding dispute settlement mechanism.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Adopting a one-country-one-vote decision-making principle.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For developing countries, the WTO system provides a platform to negotiate collectively and challenge unfair trade practices.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Multilateralism, therefore, is designed to ensure predictability, transparency, and fairness in global trade.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Preferential Trade Agreements and WTO Exceptions<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While the WTO is built on non-discrimination, it permits certain exceptions under Article XXIV of GATT. These include Free Trade Agreements (FTAs) &amp; Customs Unions (CUs).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Such arrangements allow countries to grant preferential tariff treatment to specific partners without extending the same to all WTO members. However, these agreements must meet strict conditions:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">They must cover \u201csubstantially all trade\u201d between members.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Customs unions must adopt a common external tariff.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Over the past three decades, FTAs have proliferated. Examples include large regional groupings such as the <\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/regional-comprehensive-economic-partnership\/\" target=\"_blank\"><b>Regional Comprehensive Economic Partnership<\/b><\/a><span style=\"font-weight: 400;\"> (RCEP).\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Many modern FTAs are WTO-plus, meaning they extend beyond tariff reductions to include labour standards, environmental commitments, and investment protection.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Although FTAs deviate from MFN principles, they are notified to the WTO, allowing scrutiny and transparency.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Agreements on Reciprocal Trade<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The ARTs introduced by the U.S. represent a departure from established WTO-compatible FTAs. Key features include:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">They are not signed under Article XXIV of GATT.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">They are not notified to the WTO.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">They operate independently of multilateral oversight.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">ARTs reflect an \u201cAmerica First\u201d trade policy. While the U.S. continues to impose tariffs that may not align with WTO commitments, partner countries are reportedly pressured into reducing or eliminating tariffs on U.S. goods.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This asymmetry raises concerns about fairness and legal legitimacy.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>WTO-Plus and One-Sided Provisions<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">ARTs also contain WTO-plus and unilateral clauses that expand obligations for partner countries. For instance:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Certain provisions reportedly require partner countries to adopt complementary trade restrictions if the U.S. invokes national security measures.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Some ARTs restrict data sovereignty by prohibiting customs duties on electronic transmissions.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These provisions may bind smaller economies more tightly to U.S. strategic and economic interests.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Unlike WTO-compliant FTAs, ARTs do not provide an institutional mechanism for third-party review or dispute settlement within the WTO framework. This reduces transparency and weakens global oversight.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Implications for India and Developing Countries<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India has traditionally supported multilateralism while simultaneously pursuing bilateral FTAs with partners such as the EU, the U.K., and Australia.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed India-U.S. trade deal raises important policy questions:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Should India enter into an ART-style agreement that may fall outside WTO norms?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">How can India safeguard tariff policy autonomy and digital sovereignty?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">What are the long-term implications for developing countries if multilateral rules are bypassed?<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Developing countries benefit from the WTO\u2019s collective bargaining structure. A shift toward unilateral or reciprocal trade arrangements may fragment global trade governance and reduce policy space for smaller economies.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Broader Trends in Trade Governance<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The global trading system is witnessing three parallel trends:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Multilateral stagnation<\/b><span style=\"font-weight: 400;\"> due to deadlock in WTO negotiations and weakening of the dispute settlement system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Rise of bilateral and regional FTAs<\/b><span style=\"font-weight: 400;\">, many of which are comprehensive and WTO-plus.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Emergence of unilateral reciprocal deals<\/b><span style=\"font-weight: 400;\">, which may not conform to WTO norms.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This evolution reflects geopolitical competition and strategic economic policymaking.<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If ART-style agreements become widespread, they may undermine the foundational principle of non-discrimination and erode the legitimacy of the WTO.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source:<\/b> <strong><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/the-evolving-nature-of-trade-agreements\/article70672677.ece\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The evolving nature of trade agreements highlights tensions between WTO-based multilateralism and new reciprocal trade deals that challenge global trade rules.<\/p>\n","protected":false},"author":21,"featured_media":89795,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,5701,22,59],"class_list":{"0":"post-89770","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-mains-articles","9":"tag-trade-agreements","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/89770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=89770"}],"version-history":[{"count":3,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/89770\/revisions"}],"predecessor-version":[{"id":89814,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/89770\/revisions\/89814"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/89795"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=89770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=89770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=89770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}