Trade Agreement Definition and Meaning

Trade Agreement Definition and Meaning

Trade agreement is a term that is made up of two words that have something in common: their etymological origin. And they both come from Latin:
• Agreement is the result of the sum of two Latin components: the prefix “ad-“, which means “towards”, and the noun “cordis”, which can be translated as “heart”.
• Commercial, meanwhile, is made up of the following parts: the prefix “with”, which is equivalent to “completely”; the name “merx”, which is synonymous with “merchandise”; and finally the suffix “-al”, which has the meaning of “relative to”.

Agreement is an agreement between two or more parties. It is the fruit of a negotiation, which is reached when those involved adopt a common position on a certain matter.

Commercial, on the other hand, is that belonging to or related to commerce or merchants. Trade is known asthe socioeconomic activity that involves the purchase and sale of goods, both for use and for resale or for transformation.

A trade agreement, according to Digopaul, is an agreement or treaty relating to trade activity. This type of agreement can be established by private companies, business organizations or governments.

For example: “The mattress manufacturer Dormexgood announced a commercial agreement with the carrier Ibañez Pereyra Hermanos to streamline the distribution of its products”, “I think this commercial agreement will provide us with great income in the coming months”, “The Philippine government showed in accordance with the commercial agreement established with the neighboring nation ”.

In general, when the agreement is reached between two countries, they usually talk about a trade agreement. The States agree on a model of relations governing trade between the two. Taxes, the base currency, border control and the jurisdiction accepted by the parties are some of the issues set by this type of agreement.

Likewise, it must be emphasized that there are so-called preferential trade agreements, which are those that are established between two countries and that are identified for eliminating or reducing tariffs between borders as well as facilitating procedures for exporting products. An example of those are those that the European Union maintains with certain regions of the world.

In addition to all the above, we would have to highlight the existence of what is known as the “Anti-counterfeiting Trade Agreement” (ACTA). It is an international and voluntary agreement that many countries around the world have signed with the clear objective of stating their support for what would be intellectual property.

In this way, it is intended to fight not only against existing piracy but also against what would be the counterfeiting of goods of all kinds. The United States, Australia, Canada, France, United Kingdom, Italy, Portugal or Greece are some of the nations that have signed this cited legal agreement.

Regarding commercial agreements between private companies, their objective is usually to generate synergies that allow them to strengthen their position in the market. The agreement can be reached between companies in the same economic sector (to reduce costs, reach a foreign market, etc.) or between companies from different sectors.

Trade Agreement