Reciprocal trade agreement

Reciprocal trade agreement, mutual tariff reduction pact enacted between 2 or more nations. Such agreements began in response to the trend toward protectionism that prevailed throughout most of the 19th century, in which steadily increasing tariffs on imported goods hampered international trade. Bilateral trade agreements were worked out in the early 20th century, when 2 nations consented to lower import duties on certain goods they exchanged. Such pacts were later expanded to include other nations. The United States passed the first Reciprocal Trade Agreements Act in 1934; in 1947, 23 countries ratified the General Agreement on Tariffs and Trade (GAIT), which reduced tariffs on specified goods by rates believed to be beneficial to all the signatory nations. Today, reciprocal trade agreements are universal, although worldwide economic conditions are continually requiring changes in the nature of these agreements. Industrially developed nations have been encouraging developing countries through modified trade agreements.

See also: Tariff.