Why do countries trade?

This blog is part of our ‘Beginner’s Guide’ series; insightful, accessible explainers of all things trade. The author of this instalment is Pinar Gunes, an Assistant Professor in Trade and CITP researcher at the University of Sussex. In this piece, Pinar delves into how trade shapes economic growth and explains why understanding trade matters more than ever. If you wish to deepen your knowledge on trade policy, check out the CITP's Online Diploma in International Trade Policy.  International trade is often reduced to headlines about tariffs, deficits, and trade wars. It is frequently discussed as a political choice—something governments decide to allow or restrict. Yet beneath this political noise lies a fundamental force that has shaped the world for centuries—the desire to exchange goods and services with others for mutual benefit. Long before money, modern borders, or governments existed, people exchanged goods through barter: trading what they had for what they needed. Because no individual or community could produce everything on their own, exchange became a practical way to survive and prosper. Today, this exchange takes place across national borders on an unprecedented scale, creating a deeply interconnected global economy. Countries trade because they are different The most straightforward reason [...]

By |2026-04-08T08:58:24+01:008 April 2026|Begginer's Guides, Blog|0 Comments
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All roads lead to Geneva: Insights from MC14

From 26 March to the early hours of 30 March 2026, ministers from WTO Members met in Yaoundé, Cameroon, for the 14th WTO Ministerial Conference. The goal was to review the past two years of negotiations and deliver outcomes on the MC14 agenda. Coined the Reform Ministerial, most discussions focused on the WTO's future amidst existing challenges and opportunities. And because it was held in an African country, the MC14 strongly emphasised development-related issues. However, the current geopolitical context affected expectations for MC14, resulting in broad and vague ministerial documents and declarations. WTO negotiations depend on what WTO Members can agree on by consensus. Conflicting interests and diverging interpretations of even cornerstone rules, such as the most-favoured-nation (MFN) principle, made significant progress difficult. MC 14 outcomes MC14 outcomes were reached in advance and only formalised in Yaoundé. WTO Members agreed to continue negotiating fisheries subsidies, with a goal to achieve a comprehensive Agreement on Fisheries Subsidies (AFS2) during MC15. Since AFS1 entered into force on 15 September 2025, Members have until September 2029 to adopt AFS2. Failure to do so will result in the current agreement being terminated (unless the General Council decides otherwise). Ministers also adopted two decisions on [...]

By |2026-03-31T14:30:54+01:0031 March 2026|Blog, International Trade|1 Comment
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Free Trade with MERCOSUR: An attractive opportunity for the UK?

After a negotiation process characterised by long periods of stagnations and disagreements[1], on the 17th of January, a Partnership Agreement was signed between the European Union and the four founding members of the Southern Common Market (MERCOSUR, as known in Spanish): Argentina, Brazil, Paraguay and Uruguay[2]. This free trade agreement is meant to eliminate tariffs on 91% of EU exports to the South American bloc. This will be done over a 15-year phase-in period, paired with the removal of duties on 92% of MERCOSUR goods sold to the EU, within a 10-year timeframe. There is uncertainty regarding the ratification and implementation of this deal, due to a recent decision by the European Parliament to refer the agreement to the EU Court of Justice. Nevertheless, the economic size of the parties involved (estimated at 18% of the world’s GDP), along with the current context in which traditional large trading partners are becoming less reliable, has generated global interest. Such deal could constitute an example for other economies seeking to secure free trade with like-minded partners. It would allow them to diversify their trade portfolio and diminish their dependence on potentially problematic counterparts. If the deal goes ahead, EU exporters will secure [...]

By |2026-03-03T15:21:34+00:003 March 2026|Blog, International Trade, UK - Non EU|0 Comments
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Making trade work for development: Early signs suggest UK’s new trade scheme is working

In the global debate about tariffs, one thing is clear: trade can be critical to making economies grow and societies more resilient. As part of its commitment to international development, the United Kingdom introduced the Developing Countries Trading Scheme (DCTS) in 2023 to make it easier and cheaper for developing countries to export to the UK. The objective is to stimulate trade from beneficiary countries, promote growth, support economic transformation and help reduce poverty. Now, after two years, the UK government has commissioned independent research to determine if the new trading scheme is indeed encouraging more trade and how it can benefit people in developing countries. Positive early findings The research by the UK’s new Trade and Development, Evidence and Innovation Programme (E&I) has found early, positive signs that the DCTS is succeeding in encouraging developing countries to make greater use of trade preferences. Through the DCTS, which is offered unilaterally by the UK, 65 developing countries can benefit from lower tariffs than countries that are outside the scheme and cannot use other UK trade agreements. So the DCTS can make the goods imported from member countries more competitive. But lower tariffs (or trade preferences) are subject to conditions, which [...]

By , |2026-03-03T10:47:13+00:0027 February 2026|Blog, Trade and Development, Evidence & Innovation Programme (E&I).|0 Comments
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Why does the India-EU FTA matter?

The India-EU Free Trade Agreement (FTA) hailed as the “mother of all deals” by both the EU and India, has been under negotiation since 2007. Since the text of the agreement is not available yet to fully verify this claim, it is worth evaluating what can be gleaned about the agreement from the documents released by both sides so far (the EU and India). The Highlights Goods The biggest immediate gain for both sides appear to be on goods, and both parties’ statements focus on these. The coverage appears significant. The FTA reduces tariffs on textiles, apparel, leather, footwear, chemicals, sports goods, toys, gems, and jewellery by India. For the EU, the gains lie in industrial goods, precision machinery, electrical equipment, aviation components, medical devices and other advanced tech. Beyond that, India reducing the high tariffs on cars (although subject to TRQ) is a significant win for the EU. Removing tariffs on chocolate and olive oil altogether, reducing tariffs on wine and spirits, and apples and pears is the cherry on top for the EU’s agriculture sector. Both sides targeted the low hanging fruits and pushed liberalisation of the more controversial goods for further down the road. Sensitive agricultural products [...]

By , |2026-02-18T14:27:39+00:0018 February 2026|Blog, International Trade|0 Comments
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How to deliver a UK-EU “re-set” that works

Debates about deepening UK-EU relations, including in the current ‘re-set’ negotiations,  often focus on what will the UK gain versus what it must concede.  Yet, what constitutes a win or a loss for the UK is complex – and if Brexit has taught us anything, it’s that people have diverse, and sometimes polarized, views. This is why an effective re-set of UK-EU relations requires thinking about an aspect of negotiations that is often overlooked, or viewed as a technical consideration: how the UK implements the re-set domestically. More specifically, the UK needs to address the democratic deficit in UK treaty-making, and establish bespoke arrangements on EU regulatory alignment, now and in the future. The surest way to future-proof a closer relationship with the EU is to create a sense that the UK public, and particularly those affected by regulation, have a say in this decision. The importance of domestic implementation Despite its renowned tradition of direct democracy, Switzerland aligns its regulations with the EU across numerous sectors. For example, it recently concluded an EU-Swiss Common Food Safety Area, in which it agreed to align with EU food law across a wide range of areas. At first glance, this decision may [...]

By |2026-01-07T14:56:29+00:0026 November 2025|Blog, International Trade, UK- EU|0 Comments
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A few important steps forward: the UK-EU strategic partnership

The current UK Government is focused on delivering economic growth and positioning the UK as an important economic and diplomatic player internationally. The relationship with the EU is probably the most crucial bit in this jigsaw, and the deal struck on Monday, outlined in a “Common Understanding”, indicates the direction of travel: cautiously and selectively rebuilding closer relations with the EU along a number of dimensions, first and foremost on security and defence matters, but also including energy, environmental, and some economic aspects. We will discuss three particular areas that are related to trade in the ‘common understanding’: fisheries and trade in agri-food products, youth mobility, and cooperation on energy markets and carbon emissions, respectively.  We explain why the deal delivers in two out of three areas.  More could have been done, and with firmer commitments.  The document essentially represents a negotiating agenda with mostly aspirational language, whereby the two parties agree to “work towards” certain outcomes and everything has to be finally negotiated.  Yet every journey starts with a single step, and the one taken on Monday is a sensible step in the right direction. Fish and food: Significant departures from Brexit A core, perhaps the main, EU demand [...]

By , , , , |2025-05-21T18:45:18+01:0021 May 2025|Blog, International Trade, UK- EU|0 Comments
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The rise of China in the US backyard amid Trump Tariffs

The uncertainty caused by the trade policy actions undertaken by the Trump administration poses a serious challenge to the world, but particularly to regions that historically relied on the United States both as a commercial and political ally, such as Latin America. The Trump 2.0 regime has levied a baseline 10% tariff on most Latin American countries[1], including those that have a Free Trade Agreement (FTA) with the US, such as Chile (2003), Peru (2009), Colombia (2012), and Panama (2012). The uncertainty surrounding the permanence of such measure (and the potential for further protectionist actions) will encourage these countries to seek and consolidate more secure trade links with like-minded partners, with more predictable trade policies. Such a shift has already been happening. The US has gradually been losing its relevance as the main trading partner for some Latin American countries, particularly those in the south, with one key actor playing a central part in this story: China. China’s penetration in the South American market over this century has been taking place at different levels. Regarding trade, China has Free Trade Agreements in force with Pacific countries like Chile (2006), Peru (2010) and more recently with Ecuador (May 2024). Trade and [...]

By , |2025-05-02T15:32:44+01:002 May 2025|Blog, International Trade|0 Comments
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The real Donald Trump: A free trader in protectionist clothing or vice versa?

This blog was originally published in 2018. We are republishing now because it is striking how much of its analysis and assessment of President Trump’s approach to trade and tariffs resonates today. Importantly, looking back in this way helps to give a longer run historical perspective on the Trump approach to trade policy, which may also help to shape thinking about the future, and responses to that future. Note from the author: In 2018, I described the tug-of-war between the mercantilist and Reaganite factions of the Republican party as the key to understanding the trade policy fluctuations of Trump's first term. This time around, the mercantilists have clearly won. The explicit tying of Trump's "reciprocal" tariffs to U.S. bilateral trade deficits, along with a baseline ten percent tariff, indicates that trade deals alone are not the goal. Trump wants to end trade deficits, pursue import substitution in manufacturing and bring back a 19th century tax system based on customs revenue. These are disastrous goals in themselves; moreover, nothing America's trading partners can do with their own trade policies can satisfy them. This is why the markets have melted down. Perhaps as the effects take hold in the real economy, Trump [...]

By |2025-04-09T14:53:12+01:009 April 2025|Blog, International Trade, UK - Non EU|0 Comments
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Blinded by the light: The trouble with today’s trade policy

Trade policy is more difficult today that it was three months ago, and significantly more so than five years ago. The former is due to the actions of the new US administration, but the latter is a more complicated story that has dramatically changed trade policy across the world. Over the last 30 years or so trade policymakers have largely focused on efficiency gains - more open markets leading to better productivity and economic growth. This was more or less taken for granted, backed by considerable evidence. The distributional implications and broader concerns beyond economic growth have been seen as beyond the purview of trade policy, perhaps too easily. Once again, trade policy makers and analysts either took for granted that these issues were not so important in the trade context, or if they were, they would be dealt with by other areas of government policy. However, in today’s world even efficiency and equity considerations fail to adequately capture the concerns of trade policy. Unforeseen events – Covid-19, the Russian invasion of Ukraine, extreme weather, and semi foreseen events such as Trump tariffs – have underpinned increasing concerns about economic security, supply chain resilience and national security, and the threats [...]

By |2025-05-02T11:25:34+01:004 April 2025|Blog, International Trade|0 Comments
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