Preferential trade refers to preferential trading agreements between governments whereby trade between the signatories is freer than trade with the rest of the world. Within such trade blocs, tariffs, quotas and other trade restrictions are reduced or eliminated. The purpose of such preferential trading agreements is to promote business between the countries involved and to improve the region’s capacity to compete in the global market by making it easier and cheaper to produce, import and export products.
A Free Trade Area (FTA), for example, is a kind of preferential trading agreement / trade bloc that allows each country to have preferential market access for goods originating from it into the other country’s market at tariff rates that are lower than those charged to the rest of the world. Each country maintains its own level of external tariff with respect to trade with the rest of the world. Countries therefore take advantage of their own strengths and take measures to reduce the cost of cross-border trade, thus making the region more competitive and increasing trade amongst themselves.
TMSA provides administrative, technical and financial support to the COMESA-EAC-SADC Tripartite in the establishment of a grand Free Trade Area trade bloc among the 26 member states of the three Regional Economic Communities - the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East Africa Community (EAC). TMSA also assists the Tripartite to build regional trade policy development and implementation capacity.
Other examples of preferential trading agreement within the COMESA-EAC-SADC region of Africa include bilateral trade agreements, customs unions and common markets, all of which differ with regards to degree of regional economic integration.