Free Trade Agreements Flashcards, test questions and answers

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What is Free Trade Agreements?

Free Trade Agreements (FTAs) are agreements between two or more countries that remove tariffs and other trade barriers on goods and services traded between them. They are designed to encourage economic growth by allowing countries to specialize in the production of certain goods, while allowing them access to a market with which they can share their products. FTAs allow countries to expand their economies by trading with each other, increasing employment opportunities and stimulating investment.The main objective of FTAs is to reduce tariffs, lower non-tariff barriers and promote fair competition in international markets. This is done through the negotiation of lower tariff rates for goods traded between the countries involved in the agreement; eliminating quantitative restrictions; reducing or removing subsidies; providing protection for intellectual property rights; strengthening dispute resolution mechanisms; and facilitating customs procedures. In addition, FTAs also aim at promoting foreign direct investment (FDI). The reduction of trade barriers allows companies from different countries to invest in each other’s economies, which can be beneficial for both parties involved. However, there can be downsides to Free Trade Agreements as well some argue that they create unfair competition by giving an advantage to larger firms that are able to exploit economies of scale when operating internationally. In addition, it has been argued that these agreements increase inequality as poorer countries may not have the resources needed for negotiations or implementation processes needed for an effective FTA. Moreover, some multinational corporations may use these agreements as a way of avoiding taxes or exploiting labor standards in developing nations where laws are weaker than those found in developed nations. Despite its drawbacks however, Free Trade Agreements remain a key tool used by governments around the world today as they seek new markets and try to promote economic development within their own borders and beyond.