Within weeks, the Trump administration rejected the troubled Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership (TTIP) and announced plans to renegotiate the terms of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Trade advisers in the new government led by economist Peter Navarro say a greater reliance on bilateral – and non-multilateral – trade agreements will allow U.S. negotiators to create provisions that would bring maximum benefits to U.S. exporters and consumers. What are the arguments for and against such an approach? An interactive list of bilateral and multilateral free trade instruments can be find on the TREND Analytics website.  Similarly, Hufbauer argues that bilateral agreements also have a second major drawback: “The different [bilateral] agreements could have slightly different provisions, for example on digital trade, on state-owned enterprises or other. And so the field ends with a more confusing set of agreements that companies have to deal with with different countries. Economic agreements, such as free trade agreements (FTA) or foreign direct investment (FDI), signed by two states, are a common example of bilateralism. Since most economic agreements are signed according to the specifics of the States Parties, in order to give each other preferential treatment, it is not necessary to adopt a general principle, but a differentiation of situations.
Thus, the bilateral will allows States to benefit from more personalized agreements and obligations that apply only to certain States Parties. However, states will face a compromise because they are more expensive than the multilateral transaction cost strategy. As part of a bilateral strategy, a new treaty must be negotiated for each participant. It therefore tends to be preferred when transaction costs are low and the surplus of members, which corresponds to the “production surplus” in economic terms, is high. Moreover, this will be effective if an influential state wants to control small states from the point of view of liberalism, because the establishment of a number of bilateral agreements with small states can increase the influence of a state.  It also seems likely that the United States will attempt to renegotiate the U.S.-Korea Free Trade Agreement (KORUS), which came into force in 2012, through a similar process.