Why do countries enter into trade agreements?

• A. To limit the exchange of goods and services between nations
• B. To encourage monopolies within domestic markets
• C. To increase tariffs and restrict foreign competition
• D. To reduce barriers to trade and promote economic growth

Answer: (D)

Verified step by step guidance

1. Understand the purpose of trade agreements: They are designed to facilitate trade between countries by reducing or eliminating barriers such as tariffs, quotas, and import restrictions.
2. Recognize that reducing trade barriers lowers the cost of importing and exporting goods and services, which can increase the volume of trade between member countries.
3. Consider how increased trade can lead to economic growth by allowing countries to specialize in producing goods where they have a comparative advantage, improving efficiency and productivity.
4. Note that trade agreements often include rules to ensure fair competition and protect intellectual property, which can encourage investment and innovation.
5. Conclude that the main goal of trade agreements is to promote economic growth and cooperation by making it easier and more profitable for countries to trade with each other, rather than limiting trade or encouraging monopolies.