Content of the agreements The essential element of each agreement is trade in goods (including the reduction of tariffs and other trade restrictions). These rules govern trade in industrial products (HS Chapter 25-97), fish and processed agricultural products. Trade in unprocessed agricultural products tends to be governed by separate bilateral agricultural agreements. The GATT and GATS provisions essentially recognize five types of potential agreements, so those mentioned in the slide earlier considered the degree of economic integration, but for the record. So they can have a free trade area, so we do not currently have free trade areas to which the United Kingdom belongs, but a free trade area is typical when members of that region are trying to meet their obligations in the WTO and trying to liberalise trade between them. Secondly, you have customs unions which are essential free trade agreements with a common foreign trade policy, and then you have the interim agreements. Thus, you can enter into an interim agreement that you can conclude by believing that you are entering into a preferential trade agreement or a free trade agreement. You have preferential trade agreements, SPAs, which are actually being used in particular to achieve more liberalisation of trade between the less developed countries and, finally, particularly in the area of services, you have what we call economic integration agreements. And what it says is that if you have an FTA, and RTA, a ZEP, you can deviate from the MFN treatment for the signatory parties. Both the creation of trade and the diversion of trade are crucial effects observed during the establishment of a free trade agreement.

The creation of businesses will lead to the relocation of consumption from an inexpensive producer to an inexpensive producer, which will increase trade.