Bilateral Trade:

Bilateral Trade Agreements are between on two nations at a time and refers to trade between two countries which give each other specific privileges such as favorable import quotas that are denied to other trading partners. They are fairly easy to negotiate, and give those two nations favored trading status between each other. The EU is firmly committed to the promotion of open and fair trade with all its trading partners. In addition to the WTO's multilateral negotiations, the EU concludes bilateral agreements and devises specific trading policies with third countries and regional areas. Bilateral agreements are agreements between two political entities, thus legally binding these two territories only. Bilateral trade relations are about agreement on custom unions, free-trade, association, co-operation and partnership. These preferential trade agreements are notified under either Article XXIV of the GATT or Article V of the GATS. According to Hummels (1998), the leading determinant of bilateral trade is trade costs, defined as the combination of tariffs and distance. As trade barriers affect the sectoral prices and production or consumption patterns, using GDP-related variables in import equations will lead to biased results. Hence, simple indicators of exporter and importer (the so-called specific effects) may tentatively replace all macro-economic variables and sectoral variables. In this case, bilateral imports at the industry level can be considered as a function of the trade costs alone. According to a WTO report on the trade policies on the EU Pursuing trade liberalization through multilateral, regional and bilateral initiatives, the European Union has maintained its markets largely open except for textiles and agriculture. The EU's position as the world's leading exporter of goods and the second largest importer is testimony both to the importance of trade to the European consumer and producer, and to the significance of the EU as a market for most WTO Members, notably developing countries.