Īnother controversy surrounding PTAs are their apparent contradiction with the principles of the World Trade Organization. In the United States certain industries, such as automobile and electronics manufacturers, favor RTAs because such agreements allow these industries to exploit low manufacturing costs in other countries in the hemisphere, while avoiding the competition from European and Japanese producers that they would face in a multilateral agreement. Ī Regional Trade Agreement (RTA) is an example of a PTA. Ideally, trade creation should outweigh trade diversion. The basic principles behind these two arguments are that while PTAs may foster trade that would otherwise not exist, they also have the potential to capture trade that would otherwise take place with members outside of the PTA and away from the lowest cost producer. There is much debate as to whether PTAs increase or divert trade. When trade agreements are constructed in this regional manner, they are sometimes referred to as Regional Trade Agreements, or RTAs. In many cases, these benefits are the product of proximity countries close to one another are better able to conduct trade both because of lower transportation costs and greater possibilities for transparency.

Preferential Trade Agreements, or PTAs, are formal arrangements of trade between countries that see benefits from trade amongst themselves.

Preferential treatment definition