Difference Between Bilateral and Multilateral Trade

By : Neha Dhyani

Updated : Apr 1, 2022, 8:41

No country can exist in isolation or achieve self-sufficiency in goods and services. Every country on the planet relies on one another for various goods and supplies. Trade is a standard method for nations to exchange goods and services. Nations use trade agreements to agree on applicable terms and conditions to establish a trading relationship. These trade agreements aim to reduce trade barriers and achieve high levels of economic integration between the two countries. Several trade barriers, such as tariffs and export restrictions, are removed due to these agreements.

Trade agreements involve two countries (bilateral trade) or more than two countries (multilateral trade). India has been an active participant in regional, bilateral, and multilateral trade. Currently, India has 11 Free Trade Agreements (FTA) and 6 limited coverage Preferential Trade Agreements (PTA) with more than 50 countries.

The Main Difference Between Bilateral and Multilateral Trade is the number of nations involved in exchanging goods. However, a few other factors are also different in bilateral and multilateral trade. The following table lists their differences.

Important UPSC Topics
UPSC ExamUPSC Exam Date
UPSC NotificationUPSC Eligibility
UPSC Online ApplicationUPSC Exam Pattern
UPSC SyllabusUPSC Previous Year Question Papers
UPSC Cut OffUPSC Preparation Strategy
UPSC BooksUPSC Exam Analysis
UPSC Admit CardUPSC Results

Difference Between Bilateral and Multilateral Trade

Feature

Bilateral Trade

Multilateral Trade

Definition

A trade agreement between two countries is referred to as bilateral trade.

Trade agreements between more than two countries are referred to as multilateral trade.

Type of Nations Involved

Big and powerful nations are involved in bilateral trade.

Several small nations are involved in multilateral trade.

Type of Exchange

Only commodities are exchanged.

Goods and services are both exchanged.

Type of Commodity

In bilateral trade between two countries, the commodity is mostly complementary. A product that adds value to the other. For example, DVDs and a DVD player.

In a multilateral trade, commodities can be raw materials, services, or finished goods, making the trade supplementary.

Level of Complexity

Less complex

More complex

Type of Market

Smaller market

Larger market

Time is taken for Negotiations

Less amount of time is taken for negotiations as only two countries are involved in this type of trade.

The time taken for negotiations in this type of trade is longer.

Promotes

Economic cooperation between the two countries involved

Globalization

Examples

Agreement between India and Finland

India Malaysia agreement on economic partnership

NAFTA (North American Free Trade Agreement)

SAFTA (South Asian Free Trade Area) of South Asian Association for Regional Cooperation (SAARC)

The Difference Between Bilateral and Multilateral Trade is defined by the number of nations involved in a trade. A bilateral trade agreement involves two countries and is thus less complex, leading to faster negotiations, and benefits the economic growth of the two countries involved. On the other hand, multilateral trade agreements are more complex and take longer to negotiate because they involve multiple nations.

More Current Affairs Topics
44th Amendment ActAdjournment Sine Die
Difference Between Asian and African ElephantsAge of Enlightenment
Agri Market Infrastructure Fund [AMIF]21st Century Maritime Silk Road
42nd Amendment Act 1976African Union [AU]
Difference Between Axis and Central PowersDifference Between Battle and War

FAQs on the Difference Between Bilateral and Multilateral Trade

Q.1. What is the Main Difference Between Bilateral and Multilateral Trade?

The Main Difference Between Bilateral and Multilateral Trade is that the former is a trade agreement between two nations while the latter is between more than two nations.

Q.2. Is there a Difference Between Bilateral and Multilateral Trade commodity exchange?

Yes. Bilateral trade usually involves complementary commodity exchange, while multilateral trade involves supplementary commodity exchange.

Q.3. Is there a Difference Between Bilateral and Multilateral Trade benefits?

Yes. Under bilateral trade, economic benefits are attained only by the two nations involved. Global economic boost is established under multilateral trade.

Q.4. Is there a Difference Between Bilateral and Multilateral Trade negotiation times?

Yes. Bilateral trade takes less time for negotiations, while multilateral trade negotiations take a long time as multiple nations are involved.