Final answer:
Reducing taxes like tariffs through trade agreements makes goods less expensive to import and export by lowering trade barriers and encouraging free trade, leading to increased world production and more affordable prices for consumers.
Step-by-step explanation:
One way that a trade agreement can make goods less expensive to import and export is by reducing taxes such as tariffs. To clarify, a tariff is a tax imposed on imported goods and services. Reductions in tariffs, as well as other trade barriers such as quotas and non-tariff barriers, can lead to cost savings for businesses engaged in international trade. These savings can then be passed on to consumers in the form of lower prices. This practice of lowering trade barriers is part of a broader economic policy known as free trade, which aims to encourage international trade and economic integration.
The economic rationale for free trade is that it allows for expanded world production of goods and services. Conversely, restrictions on trade, such as tariffs or quotas, tend to reduce world production and raise prices for consumers. Thus, trade agreements that focus on reducing trade barriers contribute to more affordable imports and exports, benefiting both consumers and businesses.