Within the European Union, "a […] trade agreement containing tariff provisions more favourable than those of GATT."
(Eurovoc,
Preferential agreement,
EU's multilingual thesaurus, visited 2011-03-15)
"Special licensing practices, quotas, or preferential application of taxes and other measures are sometimes granted. Many such arrangements are non-reciprocal, in which beneficiary members […] are accorded preferential access to markets of preference-granting countries without making similar market access commitments themselves. Because
preferential arrangements violate the most favored-nation principle, a waiver is required for establishing any such arrangement in which GATT members participate."
(Institute for Trade and Commercial Diplomacy (ITCD),
Preferential arrangement,
Terms related to trade policy and negotiations, 2004, visited 2011-03-15)
Preferential Arrangements and the World Trade Organization
"By definition,
preferential trade agreements create a discriminatory environment for non-parties. These may see their exports fall as products are increasingly sourced from parties within the
preferential trade agreement and they might experience a loss of FDI as investment is channelled into the members that have preferential access to a larger market. But,
preferential trade agreements can also lead to the diversion of trade among their partners if imports from an economically inefficient regional trade agreement partner displace more competitive imports produced elsewhere. Only a few
preferential trade agreements actually result in totally free trade among the parties. Often restrictions on sensitive products remain in place and studies have shown that restrictive rules of origin can result in exporters using the multilateral rates rather than preferential rates, especially if the preferential margin is small. […]
Preferential trade agreements may also lead to the creation of political alliances, where the price that must be paid by a developing country for signing a regional trade agreement with a developed country is that it must support the broader policy stance of that country in the WTO or elsewhere."
(World Trade Organization (WTO),
Lamy warns bilateral agreements are not the "easy way out" from the suspended talks, 2006, visited 2011-03-15)