Top 5 Regional Trade Agreements in the World

In general countries make the majority of their international trade with their close neighbors.

For example the USA makes 29% percent of its total exports to Canada and Mexico while 27% of its total imports from these two close neighboring countries.

Similarly the UK makes 25% percent of its total exports to Germany, France and Netherlands while 26% of its total imports from these three close neighboring countries. These examples can be extended.

Regional Trade Agreements have been set up between close countries with the aim of increasing trade between member states by reducing or eliminating tariffs, quotas and other non-tariff barriers.

WTO’s infamous rule of equal treatment for all trading partners which is also known as most-favored-nation regulation contradicts with the setting up a customs union or free trade area. But GATT’s Article 24 allows regional trading arrangements to be set up as a special exception, provided certain strict criteria are met as stated below.
  • The arrangements should help trade flow more freely among the countries in the group without barriers being raised on trade with the outside world.
  • If a free trade area or customs union is created, duties and other trade barriers should be reduced or removed on substantially all sectors of trade in the group.
  • Non-members should not find trade with the group any more restrictive than before the group was set up.

As of 31 July 2013, 379 Regional Trade Agreements were in force according to WTO. The only country that is not being a member of any trade agreement was Mongolia at that time. Most of these trade agreements do not make any considerable affect on global trade but some of them have significant effects. I would like to bring Top 5 Trade Agreements that affect the international business most on this article.

Top 5 Regional Trade Agreement
North American Free Trade Agreement (NAFTA)
Members: Canada; Mexico; United States of America
Date of entry into force: 01-Jan-1994

NAFTA members’ exports reached 2.371 billion USD in year 2012. This constitutes 13% of total global exports.

European Union (EU27)
Members: Austria; Belgium; Bulgaria; Cyprus; Czech Republic; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Ireland; Italy; Latvia; Lithuania; Luxembourg; Malta; Netherlands; Poland; Portugal; Romania; Slovak Republic; Slovenia; Spain; Sweden; United Kingdom
Date of entry into force: 01-Jan-2007

EU27 members’ exports reached 2.167 billion USD in year 2012. This constitutes 12% of total global exports.

The Association of Southeast Asian Nations (ASEAN)

Members: Brunei Darussalam; Cambodia; Indonesia; Lao People's Democratic Republic; Malaysia; Myanmar; Philippines; Singapore; Thailand; Viet Nam
Date of entry into force: 28-Jan-1992


ASEAN members’ exports reached 1.253 billion USD in year 2012. This constitutes 7% of total global exports.

Southern Common Market (MERCOSUR)
Members: Argentina; Brazil; Paraguay; Uruguay
Date of entry into force: 29-Nov-1991

MERCOSUR members’ exports reached 340 billion USD in year 2012. This constitutes 2% of total global exports.

Southern African Development Community (SADC)
Members: Angola; Botswana; Lesotho; Malawi; Mauritius; Mozambique; Namibia; South Africa; Swaziland; Tanzania; Zambia; Zimbabwe
Date of entry into force: 01-Sep-2000

SADC members’ exports reached 208 billion USD in year 2012. This constitutes 1% of total global exports.
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