eli5: How do trade deals between countries work and why do they take significant amounts of time and are difficult to achieve?

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I have no experience in this, but, couldn’t they just agree to export and import all the things they need just like that and that’s it?

In: Economics

4 Answers

Anonymous 0 Comments

You are thinking about this from the perspective of a post-free-trade-deal world. For example basically every western country has honest courts. So if we are thinking about making a trade deal and you say ‘Hey, what happens if one of my businesses gets screwed by a business partner in your country?” and I respond with “well they could sue them. We have courts just like you and our rules of business conduct are basically the same as yours,” we have settled that “issue” in about ten seconds.

China doesn’t have honest courts. So that question – with China – is a HUGE sticking point in trade negotiations.

Among western nations trade deals take time mostly because every country has a few industries they treat better than they should. America for example REALLY likes aerospace companies. America gives its aerospace industry a lot of help. Canada meanwhile really likes dairy farmers and gives that industry a huge amount of help. It isn’t really fair for Canadian aerospace companies competing against US ones, and it isn’t really fair for American dairy farmers competing against Canadian ones. Instead of governments deciding to drop their favoured treatment of these industries they negotiate and Canada gets to help dairy and the US won’t complain, and the US gets to help aerospace and Canada won’t complain. That takes time though.

The REAL time suck however is when two countries favour the same industry, or when one country has a big problem with how another country is helping its local industry. Copyright, drug prices, steel, are all common examples of this that really slow down negotiations.

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