Why is geography important to most regional trade agreements? Provide examples of RTAs to illustrate your answer.
Answer: There are a number of reasons why geography matters in the case of RTAs. Neighboring countries often, though not always, share a common history, language, culture, and currency. Unless the countries are at war with each other, they usually have already developed trading ties. Close proximity reduces transportation costs, thereby making traded products cheaper in general. Armenia has RTAs in force with Kazakhstan, Moldova, the Russian Federation, Turkmenistan, and Ukraine. India has a number of trade agreements with most of the countries in its region. Germany, a member of the European Union, exports 62.9 percent of its merchandise exports to other EU members and imports 58.3 percent from them. Switzerland, which is not a member of the EU but which has a trade agreement with the EU, exports 59.7 percent of its merchandise exports to EU countries and imports 78 percent from them. NAFTA includes Canada, the United States, and Mexico.