Trade Agreements

Galactic trade is a delicate science, and is very specific, filled with precise tariff reductions on literally hundreds and thousands of commodities. Therefore, the form it takes in this game is very simplified, consisting of basic agreements with other planets. There are three trade agreements. 

General Trade Agreement (GTA): this represents a treaty between the planets on how trade affairs will be dealt with. The GATT (Galactic Trade Organization document) is an example of a General Trade Agreement or GTA. This represents some economic integration, but not extensive, and almost always involves some tariff reductions. 

Free Trade Agreement (FTA): the FTA is a closer economic cooperation between two or more planets where all tariffs and non-tariff boundaries to trade (such as subsidies) are regulated and eventually removed. An FTA will often increase the amount of trade between two planets, since it is much easier for businesses to operate across their borders. When Nation A & Nation B sign an FTA, they replace their GTAs. If Nation B then signs an FTA with Nation C, the FTA zone grows to include all 3. So nations that are part of a Free Trade Zone need to be aware of this.

Customs Union Agreement (CUA): a customs union is the merger of two or more planets into one customs zone. These planets will effectively act as one in galactic trade. A customs union means that there are no tariffs between the planets, taxes on commodities are standardized between the planets, and all third-country tariffs are standardized as well. A Customs Union Agreement (CUA) will solidify economic ties and make the planets very much interdependent.

Galactic trade arrangements can have a significant effect on the economies of the involved planets. Generally, the greater the economic integration, the closer the planets' growth rates will become. This is known as the trade magnet effect, wherein two or more planets with increasing trade integration will be increasingly attracted to one another's growth.

In a real world example, take the former North American Free Trade Agreement (NAFTA). Say, in 2006, that Mexico had a growth rate of 2.1%, the United States had a growth rate of 2.4%, and Canada had a growth rate of 2.7%. These nations all have a very high level of economic integration with one another, and they will be attracted to each other's growth. The mean growth rate is 2.4%, so all of the nations will trend towards that amount. Mexico may have a growth rate of 2.3%, the United States 2.4%, and Canada 2.5%. This will vary greatly, however, depending on world events.

Before signing a trade agreement, you should answer several questions about the pending agreement.

1. Do I want closer political/economic ties with this planet? Trade agreements often have political motives behind them, as it increases relations between your planets. Political priorities should be considered, even in trade.

2. Will I be able to secure free trade with this planet? In closely bound economies, the most powerful economy in the group often takes control and begins to homogenize the other economies to its standards. This is not an attack of any kind, it is merely an effect caused by disproportionate economic size. Be sure to seek closer relations with planets with which you can have fair dealings.

3. Do we have a significant amount of trade between our planets? If your economies are almost completely unconnected, such as those of Talus and Csilla, there will be no benefit in a trade agreement. If your planets are compatible -- you export what they import and vice versa -- then they are good candidates for further trade agreements.

If you are confident in furthering trade, make a proposal to the leader of the other involved planets, and then draft a treaty on the subject. Finally, send that treaty as an action for approval and ratification.