What is meant by a free trade agreement?

A free trade agreement (FTA) is a formal agreement between two or more countries or regions to facilitate and promote trade by reducing or eliminating barriers and restrictions on the exchange of goods and services. The primary objective of a free trade agreement is to create a more open and efficient international trading system.

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Key features of free trade agreements include:

Tariff Reduction or Elimination: FTAs often involve the reduction or elimination of tariffs, which are taxes imposed on imported goods. By lowering or removing these tariffs, countries aim to promote the free flow of goods across borders.

Trade Liberalization: FTAs aim to liberalize trade by reducing non-tariff barriers, such as quotas, licensing requirements, and other restrictions. This helps in creating a more open and competitive market.

Market Access: FTAs provide participating countries with improved access to each other's markets. This increased market access can lead to expanded opportunities for businesses to sell their products and services internationally.

Rules of Origin: FTAs typically establish rules of origin to determine the national source of a product. These rules help prevent non-member countries from benefiting from the agreement by simply transshipping goods through a member country.

Intellectual Property Protection: Many FTAs include provisions for the protection of intellectual property rights. This can involve rules related to patents, trademarks, copyrights, and other forms of intellectual property.

Regulatory Cooperation: FTAs may encourage cooperation and alignment of regulations and standards between member countries to reduce barriers to trade resulting from differences in technical standards and regulations.

Dispute Resolution Mechanisms: FTAs often include mechanisms for resolving disputes that may arise between member countries. These mechanisms aim to ensure the effective enforcement of the agreement.

Services and Investment: Some FTAs go beyond the trade in goods and include provisions for the liberalization of services and investment, allowing businesses to operate more freely across borders.

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