A free trade zone, also known as a free trade area, is an designated geographical area or region where goods, services, and investments can be traded without any restrictions, tariffs, or quotas imposed by the participating countries. It is an economic zone created with the aim of promoting international trade by allowing the members to engage in unhindered commerce within the zone.
In a free trade zone, participating countries agree to eliminate or significantly reduce trade barriers such as tariffs, import duties, and taxes, which would otherwise apply to foreign goods or services. This effectively removes barriers to trade, facilitating the flow of goods and services between the member countries. Free trade zones can be bilateral or multilateral arrangements, involving two or more countries.
The establishment of a free trade zone encourages economic integration by promoting special economic activities, attracting foreign direct investments, and stimulating economic growth. It also provides opportunities for domestic industries to leverage advantages such as cost competitiveness, specialization, and economies of scale in order to enhance their international competitiveness.
In addition to trade liberalization, free trade zones may incorporate regulations related to labor and environmental standards, investment protection, intellectual property rights, and dispute resolution mechanisms to ensure fair and equitable trading practices within the zone. The main objective of a free trade zone is to promote cross-border trade and investment, foster economic development, and strengthen international economic cooperation among the member countries.
