Question

What is the purpose of a bilateral trade agreement?

Question 28 options:

Promote trade by reducing tariffs or trade quotas

Prohibit trade between unfavorable nations

Raise government revenues

Reduce competition and promote monopolies

Answer 1

The correct answre is: "Promote trade by reducing tariffs or trade quotas"

If trade barriers are removed between two countries, such as tariffs and quotas, a common market is created where producers from the two countries that have signed the bilateral trade agreement compete in equal conditions.

Therefore, this market integration process enhances competition and the firms that operate in the common market are forced to produce more efficiently than if they were protected by trade barriers, if they want to survive and to earn profits.