FTA stands for Free Trade Agreement. It is a treaty or agreement between two or more countries that establishes preferential trade terms and reduces or eliminates barriers to trade. The primary objective of an FTA is to promote economic integration between participating nations by encouraging the flow of goods, services, and investments across borders.
The key characteristic of an FTA is the reduction or elimination of tariffs, which are taxes or duties imposed on imported goods. Under an FTA, countries agree to lower these tariffs, making it easier and more cost-effective for businesses to trade with one another. This reduction in tariffs stimulates trade and increases market access for businesses, benefiting both importers and exporters within the member countries.
In addition to tariff reduction, FTAs also address non-tariff barriers to trade, such as quotas and technical regulations. These agreements may involve provisions related to intellectual property protection, investment, services, government procurement, and other areas.
FTAs promote economic growth by creating a more conducive environment for trade, encouraging foreign investments, and enhancing market efficiency. They also facilitate the exchange of ideas, knowledge, and technology, thus fostering innovation and competitiveness. By promoting trade liberalization and economic integration, FTAs aim to enhance economic cooperation and strengthen relationships between participating nations.
Overall, the purpose of an FTA is to establish a framework that promotes freer and fairer trade, enhances economic opportunities, and benefits the economies of the member countries.
