A trade agreement is a diplomatic agreement between two countries to not compete economically. This means your merchants will respect each other's positions and not work to put each other out of business in the Center of Trade both of you occupy.
AI nations tend to start sending trade agreement requests to you if you are becoming successful in CoT's where they are trading too.
- You will no longer have to compete against the nation you sign an agreement with, which could mean you need to send fewer merchants to maintain your market share. For this reason, your toughest competitor is the best choice for a trade agreement if you want one.
- Diplomacy. Successful trade nations tend to get spammed by a lot of requests for Trade Agreement, sometimes many dozen per year. However, once you have signed a trade agreement with anybody, the number of requests will go down considerably. If you take into account that every denied request gives -5 to relations, it becomes clear that not having a TA could become a diplomatic disaster. Small HRE nations might not be able to afford keeping relations up with gifts, and diplomats are limited too. In such a situation, keeping your friends might be worth a slight decrease in trade efficiency.
- Once monopolies are enabled, a Trade Agreement with nation X could render you unable to break their monopoly. Also, just having these agreements reduces your trade efficiency slightly, which in turn reduces profits and compete chances.
- -2% Trade Efficiency per trade agreement