A free trade agreement (FTA) is a legally binding arrangement entered into by two or more countries, where the signatories agree to remove or reduce tariff and non-tariff barriers to trade on goods and services. The purpose of an FTA is to promote cross-border trade, increase investment, and foster economic growth between the signatory countries.
Free trade agreements typically include provisions on trade in goods such as rules of origin, product standards, and customs procedures. They also usually cover trade in services, including provisions for market access, national treatment, and protection of intellectual property rights. In addition, they may include provisions on investment, competition policy, and government procurement.
FTAs are often seen as an alternative to multilateral trade agreements such as the World Trade Organization (WTO) agreements, which involve a larger number of countries and seek to create a level playing field for global trade. FTAs, on the other hand, are more flexible and allow for deeper integration between the signatory countries.
Benefits of free trade agreements can include increased foreign investment and job creation, as well as decreased prices for consumers. However, critics of FTAs argue that they can lead to job losses in certain industries and create an unequal playing field between developed and developing countries.
Notable examples of FTAs include the North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership (TPP), and the Korea-US Free Trade Agreement (KORUS FTA).
In conclusion, a free trade agreement is a legally binding arrangement designed to remove or reduce trade barriers between two or more signatory countries. By promoting cross-border trade and economic growth, FTAs can have significant benefits for the signatory countries. However, they are not without criticism, and their impact on individual industries and developing countries should be carefully considered.