Free Trade Agreement (FTA) is an agreement between two or more countries that aims to promote trade by reducing barriers such as tariffs, quotas, and regulations. The main goal of an FTA is to increase economic growth and create jobs by opening up markets and increasing international trade.
The impact of FTAs on the economy can be significant. In recent times, the world has seen the rise of many FTAs, and the reason is simple. They provide more opportunities for businesses to expand and sell their products in the global market. This is achieved by reducing trade barriers and customs duties, lowering cost of production and increasing efficiency, which ultimately lead to greater profits.
One of the most important FTAs is the one between the United States, Canada, and Mexico – the North American Free Trade Agreement (NAFTA). NAFTA has been in effect since 1994 and has helped to increase trade and investment amongst its member countries.
However, in 2018, the USA renegotiated NAFTA, resulting in the new USMCA (United States-Mexico-Canada Agreement), which came into effect on July 1, 2020. The new agreement updates the previous NAFTA by including new provisions on digital trade, labor, and the environment.
Another significant FTA is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was signed by 11 countries in March 2018. The CPTPP is a free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Its main objective is to reduce trade barriers and promote economic growth in the region.
The CPTPP aims to eliminate tariffs on goods and services, simplify customs procedures and reduce non-tariff measures which can impede trade. It also includes provisions on intellectual property, labor standards, environmental protection, and state-owned enterprises.
One of the most recent FTAs is the African Continental Free Trade Area (AfCFTA), which was signed by 54 African countries in March 2018. The AfCFTA`s main goal is to create a single market for goods and services in Africa and to increase intra-African trade.
The AfCFTA is expected to promote continental integration by removing tariff barriers and providing a common set of rules for trade and investment among African countries. The agreement will also address the challenges of trade facilitation, infrastructure development, and economic diversification.
In conclusion, FTAs have the potential to provide numerous economic benefits to countries by increasing trade and investment opportunities. As the world becomes more connected, it is essential that countries seek to participate in FTAs to ensure they remain competitive and maximize their economic potential.