The benefits of free trade were outlined in On the Principles of Political Economy and Taxation, published in 1817 by economist David Ricardo. Despite the potential tensions between the two approaches, it appears that multilateral and bilateral/regional trade agreements will remain characteristics of the global economy. However, both the WTO and agreements such as NAFTA are controversial among groups such as alter-globalists, who argue that such agreements serve the interests of multinationals and not workers, while free trade was a proven method of improving economic performance and increasing overall income. To counter this opposition, pressure has been exerted for labour and environmental standards to be included in these trade agreements. Labour standards contain provisions relating to the minimum wage and working conditions, while environmental standards would prevent trade if there were fears of environmental damage. The advantage of these bilateral or regional agreements is to promote stronger trade between the parties to the agreement. They can also accelerate global trade liberalization when multilateral negotiations find themselves in trouble. Reluctant countries that are excluded from bilateral agreements and therefore do not participate in the increase in trade they involve may then be tasked with joining accession and removing their own trade barriers. Proponents of these agreements have called the process “competitive liberalization,” in which countries are challenged to reduce trade barriers in order to stay in touch with other countries. Thus, shortly after nafta was implemented, the EU sought and finally signed a free trade agreement with Mexico to ensure that European products were not at a competitive disadvantage in the Mexican market as a result of NAFTA. The 1990s opened a defensive snag with the United States on competitiveness and a broad political consensus on the need for the United States to be more aggressive in promoting its trade interests. This attitude changed dramatically over the decade, when the United States regained its international dominance in sectors that have formed as engines of growth and macroeconomic performance. By the late 1990s, America had established one of the most impressive records in decades on the exchange of trade agreements with important regional and bilateral partners and on the management of the multilateral trading system, which has a profound impact on economic and foreign policy.
Free trade allows the total import and export of goods and services between two or more countries. Trade agreements are forged to reduce or eliminate import or export quotas.