In most modern economies, there are many possible coalitions of interested groups and the diversity of possible unilateral barriers is important. In addition, some trade barriers are created for other non-economic reasons, such as national security or the desire to protect or isolate local culture from foreign influences. It is therefore not surprising that successful trade agreements are very complicated. Some commonalities of trade agreements are (1) reciprocity, (2) a clause of the most favoured nation (MFN) and (3) the use of non-tariff barriers. The derogation from the customs union was intended in part to take account of the creation of the European Economic Community (EC) in 1958. The EC, originally made up of six European countries, is now known as the European Union (EU) and has 27 European countries. The EU has gone beyond simply removing barriers to trade between Member States and creating a customs union. It has moved towards greater economic integration by becoming a common market – a regulation that removes barriers to mobility from factors of production such as capital and labour between participating countries. As a common market, the EU also coordinates and harmonizes each country`s tax, industrial and agricultural policies. In addition, many EU Member States have created a single currency area by replacing their national currencies with the euro.
The fourth advantage is that countries can negotiate trade agreements with more than one country at the same time. Trade agreements are subject to a detailed authorisation procedure. Most countries would prefer to ratify an agreement covering many countries at the same time. The GATT also allows free trade zones such as the European Free Trade Area, which consists mainly of Scandinavian countries. Members of free trade agreements remove tariffs on trade with each other, while maintaining autonomy in setting tariffs with non-members. Since Adam Smith published The Wealth of Nations in 1776, the vast majority of economists have accepted the thesis that free trade between nations improves overall economic well-being. Free trade, generally defined as the absence of tariffs, quotas or other government barriers to international trade, allows each country to specialize in products that it can produce cheaply and efficiently compared to other countries. Such specialization allows all countries to earn higher real incomes. In 1995, GATT became the World Trade Organization (WTO), which now has more than 140 member states. The WTO controls four international trade agreements: the GATT, the General Agreement on Trade in Services (GATS) and the Trade-Related Intellectual Property Rights and Trade Investment Agreement (TRIPS and TRIMS).