Explain The Concept Of A Free Trade Agreement


A free trade agreement helps create a level playing field for American workers and businesses to succeed. These agreements create a more responsible and equitable trade relationship between two or more countries. They promote the fairness of all countries by reducing trade barriers, reducing tariffs, i.e. taxes on imported products, and creating a set of fair rules. The creation of free trade zones is seen as an exception to the most privileged principle of the World Trade Organization (WTO), since the preferences of the parties to the exclusive granting of a free trade area go beyond their accession obligations. [9] Although GATT Article XXIV authorizes WTO members to establish free trade zones or to conclude interim agreements necessary for their establishment, there are several conditions relating to free trade zones or interim agreements leading to the creation of free trade zones. In addition, free trade is now an integral part of the financial and investment systems. U.S. investors now have access to most foreign financial markets and a wider range of securities, currencies and other financial products. First, the parties that signed a free trade area applicable to trade with non-parties to that free trade area at the time of the creation of that free trade area must not be higher or more restrictive than tariffs and other rules applicable in the same signatory countries prior to the creation of the free trade area. In other words, the creation of a free trade area to give preferential treatment to their members is legitimate under WTO law, but parties to a free trade area are not allowed to treat non-parties less favourably than before the creation of the territory.

A second requirement under Article XXIV is that tariffs and other trade barriers must be eliminated primarily for all trade within the free trade area. [10] All of these agreements still do not collectively add up to free trade in its laissez-faire form. Bitter interest groups have successfully imposed trade restrictions on hundreds of imports, including steel, sugar, automobiles, milk, tuna, beef and denim. This helps increase U.S. exports to the rest of the world, where 95% of our potential customers live. Increased U.S. exports are driving up business turnover, boosting our economy and adding to the 38 million U.S. jobs currently dependent on trade.

Free trade policy has not been as popular with the general public. Key issues include unfair competition from countries where lower labour costs are reducing prices and the loss of well-paying jobs for producers abroad. These agreements between three or more countries are the most difficult to negotiate. The larger the number of participants, the more difficult the negotiations. They are, by nature, more complex than bilateral agreements, insofar as each country has its own needs and requirements. The Doha Round would have been the world`s largest trade agreement if the United States and the EU had agreed on a reduction in their agricultural subsidies. As a result of its failure, China has gained ground on the world`s economic front through cost-effective bilateral agreements with countries in Asia, Africa and Latin America. There are pros and cons of trade agreements.

By removing tariffs, they reduce import prices and consumers benefit from them. However, some domestic industries are suffering. They cannot compete with countries with lower standards of living. This allows them to leave the store and make their employees suffer. Trade agreements often require a trade-off between businesses and consumers. Free trade agreements, which are free trade zones, are generally outside the scope of the multilateral trading system.

Pin It