Trade agreements reduce tariffs, quotas and other restrictions that restrict the flow of goods and services between countries. The agreements can also include provisions aimed at improving business conditions, such as market access and intellectual property protection. These agreements can make it easier for businesses to operate across borders, such as for ecommerce retailers that are expanding their customer base into overseas markets.
Supporters of free trade argue that it creates a competitive environment where producers strive to offer the lowest prices for their raw materials, which in turn lowers the price of finished products for consumers. However, opponents point to the fact that free trade invites foreign competition with domestic industries, which can result in job loss or encourage manufacturers to move production to countries with lax environmental and labor laws, rewarding companies that abuse workers and pollute the environment.
The most important trade agreement of all is the World Trade Organization Agreement, which sets basic rules and limits the ability of countries to discriminate among themselves in lowering barriers to imports. The agreement includes the principle of most-favored-nation status, in which all members agree to treat each other equally in lowering their barriers to trade.
Congress delegated the power to negotiate such agreements to the executive branch in 1934, and a series of bills has renewed that authority since 1974. Currently, Congress uses the Trade Promotion Authority (TPA) process to approve or reject trade agreements. This expedited procedure allows the president to submit a final deal to Congress with minimal legislative input, including no amendments and limited floor debate.