Free Trade Association Flashcards, test questions and answers

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What is Free Trade Association?

A Free Trade Association is an international economic agreement between two or more countries to reduce or eliminate tariffs, quotas and other trade barriers on goods traded between the members. The purpose of a Free Trade Association is to encourage free trade by allowing member countries to benefit from lower costs due to reduced tariffs and other trade restrictions.The concept of free trade has been around for centuries; however, it only became widely accepted after World War II. Since then, many nations have joined together in creating Free Trade Associations. These agreements are designed to increase global economic growth, create jobs, and foster increased competition among trading partners. In addition to reducing tariffs and quotas, many FTA’s also include provisions that protect labor rights and the environment. One example of a successful FTA is the North American Free Trade Agreement (NAFTA). This agreement was signed in 1993 by Canada, Mexico, and the United States and has since expanded with several additional countries joining throughout its history. NAFTA has resulted in increased foreign direct investment into all three countries as well as increased economic activity due to the removal of tariff barriers between them. It has also helped create jobs by making it easier for companies in each country to access new markets that would have been inaccessible before NAFTA was enacted. Free Trade Associations can be beneficial for member countries because they can help spur economic growth through increased competition between trading partners as well as providing more opportunities for businesses within those countries to access new markets abroad without being hindered by high tariffs or other blockades that would otherwise be present if these agreements did not exist. Additionally, FTAs can help strengthen diplomatic relations between member nations which can lead to further cooperation on issues such as security or environmental protection in the future.