Commercial treaty

A commercial treaty is a formal agreement between states for the purpose of establishing mutual rights and regulating conditions of trade. It is a bilateral act whereby definite arrangements are entered into by each contracting party towards the other—not mere concessions.^[1] According to Britannica, a treaty is a binding formal agreement, contract, or other written instrument that establishes obligations between two or more subjects of international law, primarily states and international organizations. The rules governing treaties between states are outlined in the Vienna Convention on the Law of Treaties (1969), while those pertaining to treaties between states and international organizations are specified in the Vienna Convention on the Law of Treaties Between States and International Organizations or Between International Organizations (1986). In essence, a treaty is a legally binding document that creates rights and responsibilities among parties. It is expected to be executed in good faith, adhering to the principle of pacta sunt servanda (Latin for “agreements must be kept”), which is arguably the oldest principle of international law.

It is important to recognize that trade agreements offer important advantages. For example, Amadeo explains that free trade agreements contribute to foreign investment. Investors will flock to the country. This adds capital to expand local industries and boost national businesses. He also contributes US dollars to many previously isolated countries (2022).