All About Free Trade Agreements

What Is A Free Trade Agreement?

A free trade agreement or FTA is an arrangement between two or more countries to reduce trade barriers to encourage easier imports & exports. Under an FTA, a group of countries signs a trade agreement according to which goods & services can be imported and exported with little or no government tariffs, import quotas, or subsidies, etc. Here, two or more countries agree on certain obligations that affect the trading of goods & services across the borders and determine tariffs & duties on imports & exports. The main agenda of an FTA is to facilitate uninterrupted trade and commercial ties between participating nations. To put it simply, free trade agreements are treaties to regulate tariffs, taxes, and duties that are imposed by countries on their imports & exports.

Types Of Trade Agreements 

There are usually three types of trade agreements which are:

1. Unilateral

2. Bilateral

3. Multilateral

1. Unilateral Trade Agreement - A unilateral agreement is a type of agreement that is imposed by a nation without regard to others. In simple words, it takes place when a country imposes trade restrictions without entertaining the responses of other countries. It only benefits the imposing country and is not negotiable.

2. Bilateral Trade Agreements - As the name implies, it is an agreement that involves two countries where they both agree on loosening trade barriers to encourage & expand their trading opportunities globally. They lower tariffs, import quotas, export restraints, and other trade barriers that further promote trade & investments. 

3. Multilateral Trade Agreements - It can be understood by its name as it involves three or more countries. But since the number of participating countries has increased, it makes the negotiations difficult. They are more complex than bilateral agreements as each country differs in needs, & opinions.

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