Preferential Trading Agreement and Service Level Agreement Principles – Explained

In the world of international trade and commerce, agreements play a crucial role in establishing and maintaining relationships between countries and businesses. Two such agreements that hold significant importance are the Preferential Trading Agreement and the Service Level Agreement Principles.

The Preferential Trading Agreement (PTA)

A Preferential Trading Agreement, as defined by Investopedia, is a trade pact that reduces or eliminates certain trade barriers between participating countries. It aims to promote trade and economic cooperation among the signatories by granting preferential treatment to certain products or industries. Preferential Trading Agreements can take various forms, such as Free Trade Agreements (FTAs), Customs Unions, or Common Markets.

One example of a Preferential Trading Agreement is the EU-CH Agreement between the European Union (EU) and Switzerland. This agreement allows for the free movement of goods and services between the two parties, providing various economic benefits for businesses and consumers.

The Service Level Agreement (SLA) Principles

The Service Level Agreement Principles are a set of guidelines and standards that outline the expected level of service between a service provider and its clients. SLAs are commonly used in industries such as Information Technology, Telecommunications, and Outsourcing, where the quality and timeliness of services are critical.

When drafting a power purchase agreement or any other contractual agreement, it is essential to ensure that all parties involved understand the terms and conditions outlined. It is vital to emphasize that a legal binding contract, such as a power purchase agreement, must be entered into willingly and with full understanding of its consequences and obligations, as mentioned in this blog post by Nakati.

The Role of Agreements in Commerce

Agreements, whether they are Preferential Trading Agreements, Free Trade Agreements, or Grid Interconnection Agreements, play a significant role in shaping international trade and commerce. They facilitate the movement of goods and services, promote economic growth, and establish a framework for cooperation and collaboration between nations.

However, not all negotiations result in successful agreements. Sometimes, no agreement is reached, and parties involved must explore alternative options or negotiate further to find a middle ground.


In conclusion, the Preferential Trading Agreement and the Service Level Agreement Principles are crucial frameworks that govern the relationships between countries and service providers and their clients, respectively. These agreements help promote economic growth, establish standards, and ensure the smooth movement of goods and services in an increasingly interconnected world.

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