Free Trade Agreement Flashcards, test questions and answers

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What is Free Trade Agreement?

A Free Trade Agreement (FTA) is an international agreement between two or more countries that eliminates trade barriers, such as tariffs and quotas, for certain goods and services. The purpose of a FTA is to lower the cost of goods and services for all participating countries by allowing them to freely trade with each other without having to pay additional taxes or face other restrictions. FTAs may also include provisions on investment protection, labour standards, environmental protection, intellectual property rights and government procurement rules. FTAs are an important tool used by governments to reduce economic barriers to international trade and encourage economic growth.The benefits of a FTA can be significant. By reducing or eliminating tariffs on goods traded between participating countries, it can increase efficiency in production and distribution while increasing consumer choice through more competitive pricing. FTAs also provide investors with greater confidence in entering new markets since they are assured that their investments will not be subject to sudden changes in regulations due to political instability or policy shifts by one of the trading partners. Finally, a FTA can improve access to new markets for businesses from the participating countries as well as help local businesses become more competitive in their own home market through increased exports.However, there are drawbacks associated with FTAs that should be considered before entering into one. For example, reducing tariffs may lead to job losses in some industries due to increased competition from foreign firms who now have easier access into domestic markets. Additionally, some critics argue that FTAs favor large multinational corporations over small local businesses since they often have better resources needed for navigating complex bureaucratic processes associated with certain agreements like IP protections or government procurements rules found in many FTAs today. In conclusion, Free Trade Agreements have both advantages and disadvantages which must carefully weighed before making any decision about whether or not participate in a FTA with another country or group of countries. While they may offer great potential economic benefits such as improved consumer choice through more competitive pricing and better access into foreign markets for domestic business owners; there are risks which must be taken into consideration such as job losses due to increased competition from abroad and favoring large multinationals over small local firms when it comes down specifics like IP protections found within the agreement itself.