What it is:
How it works/Example:
One of the most well-known agreements is the controversial North American Free Trade Agreement, which went into effect on January 1, 1994. NAFTA required the elimination of on half of U.S. goods shipped to Mexico and the gradual phase out of other tariffs among the U.S., Canada, and Mexico over a 14-year period.
The World Trade Organization, which was created in 1995 and replaced the General Agreement on Tariffs and Trade, is an international body that acts as a trade-dispute settlement organization and offers a forum to discuss new and existing trade rules and tariffs.
Why it matters:
Import Duties can make it more expensive for Americans to purchase foreign goods, causing a decline in imports, a decline the supply of the good, and a resulting increase in the price of the good. The price increase usually motivates domestic producers to increase their output of the product. Some economists argue that the resulting higher consumer prices, higher producer and profits, and higher government revenues make duties a way to effectively transfer from U.S. consumers to the U.S. Treasury. Some economists also argue that import duties interfere with free ideals by diverting resources to industries in which the U.S. is a less efficient, high-cost producer.are used by governments to generate or to protect domestic industries from competition.