Tariffs have long been part of the history of international trade. Countries have imposed duties in order to protect domestic industries or in order to gain revenue. In the past, tariffs were the dominant means of controlling the flow of goods across international borders. However, beginning in the 1950’s, many countries began entering into trade agreements in order to reduce tariffs and protect their domestic industries. These trade agreements, called free trade agreements, are designed to remove tariffs on qualifying goods and services within a designated region.
The most widely known free trade agreement is the North American Free Trade Agreement (NAFTA), which went into effect in 1994 and established a free trade area in North America among the United States, Canada, and Mexico. Under NAFTA, the parties significantly reduced or eliminated tariffs on qualifying goods and services, removed trade barriers such as quotas, and established common standards for trade measures. NAFTA also established a set of rules for other issues such as investment, intellectual property, and dispute resolution.
While NAFTA has been successful in reducing tariffs and opening markets, it has faced criticism from some quarters. Critics contend that cultural, economic, and environmental standards have suffered and that those nations outside the agreement are disadvantaged.
In response to such criticisms, a new generation of free trade agreements, known as “new generation” agreements, have been developed. These agreements contain many of the same provisions found in traditional agreements such as NAFTA but they also include provisions that address labor rights, environmental protection, and intellectual property.
For example, the recently-signed U.S.-Korea Free Trade Agreement (KORUS) contains strong provisions on intellectual property protection including protection for patents, trademarks, and copyrights. It also contains safeguards against unfair trading practices such as dumping and “buyback” agreements between producers and importers.
In addition, the KORUS agreement contains provisions that address labor issues such as minimum wages, working hours, and labor rights. These provisions are designed to ensure that labor standards in both countries are roughly equivalent so that workers in either country are not disadvantaged. The agreement also contains environmental protections including provisions that seek to promote sustainable development and ensure protection of the environment.
The KORUS Agreement is an example of the type of modern trade agreements that the United States and other countries are now developing in order to promote fair trade and protect the environment. While tariffs still remain an important economic tool in some cases, these new generation trade agreements are increasingly being used to promote better international cooperation and bring greater economic benefits to all countries involved.
