Costs of regional trade agreements (2)

1. Transaction Costs: Regional trade agreements reduce transaction costs by eliminating tariffs and other trade barriers, which tend to reduce the cost of trade and foreign investment between member countries. Additionally, the elimination of tariffs and other trade barriers may result in wider access to markets, allowing smaller countries to compete with larger countries more effectively. 2. Compliance Costs: Compliance costs can be significant for countries entering into an agreement, and may include the cost of drafting and enforcing the agreement, maintaining legal framework, and calculating and collecting duties and tariffs. Compliance costs may also continue after an agreement is implemented, as enforcement agencies and businesses have to ensure that the agreement is being followed.