How do international trade agreements impact macroeconomic performance?

International trade agreements significantly enhance macroeconomic performance primarily by reducing tariffs and promoting access to larger markets. When countries enter into trade agreements, they often agree to lower or eliminate tariffs on goods and services traded between them. This reduction in trade barriers allows for a more efficient allocation of resources, as countries can specialize in producing goods in which they have a comparative advantage.

As tariffs decrease, imported goods become cheaper, benefiting consumers and businesses that rely on foreign products. This promotes competition, which can lead to lower prices and improved quality of goods and services. Additionally, increased access to larger markets opens up opportunities for domestic producers to expand their sales outside their national borders, potentially leading to higher economic growth, job creation, and innovation.

Overall, the facilitation of trade through agreements tends to stimulate the economy by fostering a more integrated and competitive international economic environment, ultimately contributing positively to macroeconomic performance.