A preferential trade agreement is an agreement between two or more countries that gives each country preferential access to the other`s markets. This type of agreement is designed to foster economic growth and trade by reducing barriers to trade such as tariffs and quotas.

Under a preferential trade agreement, countries agree to reduce or eliminate tariffs or other trade barriers on certain goods or services traded between them. This can make the cost of these goods or services cheaper for consumers in both countries, making them more accessible and ultimately leading to increased trade between the two countries.

One benefit of preferential trade agreements is that they can help to promote economic development in developing countries by providing them with increased market access to other countries. This, in turn, can help to create jobs and increase standards of living.

There are many examples of preferential trade agreements around the world, such as the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, and the European Union`s Generalized System of Preferences (GSP) which provides preferential access to the EU market for developing countries.

However, there are also criticisms of preferential trade agreements. Some argue that these agreements can lead to a race to the bottom in terms of labor and environmental standards, as countries may lower standards to compete with each other. Additionally, preferential trade agreements can disadvantage countries or industries that are not included in the agreement.

In conclusion, a preferential trade agreement is an agreement between countries to reduce or eliminate tariffs and other trade barriers on certain goods or services traded between them. While these agreements can promote economic growth, they also have potential drawbacks that must be taken into consideration.