Advantages and Disadvantages of Bilateral Trade

Compared to multilateral trade agreements, bilateral trade agreements are easily negotiated, because only two nations are party to the agreement. Bilateral trade agreements initiate and reap trade benefits faster than multilateral agreements..... When negotiations for a multilateral trade agreement are unsuccessful, many nations will negotiate bilateral treaties instead. However, new agreements often result in competing agreements between other countries, eliminating the advantages the Free Trade Agreement (FTA) confers between the original two nations.

Bilateral trade agreements also expand the market for a country's goods. The United States vigorously pursued free trade agreements with a number of countries under the Bush administration during the early 2000s. In addition to creating a market for US goods, the expansion help spread the mantra of trade liberalization and encouraged open borders for trade. However, bilateral trade agreements can skew a country's markets when large multinational corporations, which have significant capital and resources to operate at scale, enter a market dominated by smaller players. As a result, the latter might need to close shop when they are competed out of existence.
 

 

Examples of Bilateral Trade

In October 2014, the United States and Brazil settled a longstanding cotton dispute in the World Trade Organization (WTO). Brazil terminated the case, relinquishing its rights to countermeasures against U.S. trade or further proceedings in the dispute. Brazil also agreed to not bring new WTO actions against U.S. cotton support programs while the current U.S. Farm Bill is in force, or against agricultural export credit guarantees under the GSM-102 program. Because of the agreement, American businesses are no longer subject to countermeasures such as increased tariffs totaling hundreds of millions of dollars annually.

In March 2016, the U.S. government and the government of Peru reached an agreement removing barriers for U.S. beef exports to Peru that had been in effect since 2003. The agreement opened one of the fastest-growing markets in Latin America. In 2015, the United States exported $25.4 million in beef and beef products to Peru. Removal of Peru’s certification requirements, known as the export verification program, assured American ranchers expanded market access.

The agreement reflects the U.S. negligible risk classification for bovine spongiform encephalopathy (BSE) by the World Organization for Animal Health (OIE). The United States and Peru agreed to amendments in certification statements making beef and beef products from federally inspected U.S. establishments eligible for export to Peru, rather than just beef and beef products from establishments participating in the USDA Agricultural Marketing Service (AMS) Export Verification (EV) programs under previous certification requirements.