Free Trade Agreement:

Free trade refers to trade between countries without government interference and protective duties. An agreement between various countries to trade goods and services without preferences, quotas, tariffs or excise duties is known as an FTA or a free trade agreement. A free trade agreement minimizes certain complications involved in commercial exchange to boost trade based on comparative advantage. Comparative advantage is the ability of a country to produce goods at a cost lower than another country. There are a number of things that make free trade agreements important. Obstacles to trade, such as taxes, quotas and tariffs are removed. Second, the inability to distort trade policies gives every player an equal opportunity in the global market. The absence of government interference prevents the formation of monopolies and oligopolies. Free trade agreements also permit capital to move freely across territorial borders. There is free access to markets and market information and greater opportunities of employment, with the free movement of labor between countries as a result of free trade agreements. Free trade agreements among various nations of the world include the North American Free Trade Agreement (NAFTA) between Mexico, Canada and the US, European Economic Area (EEA) between EU and non-EU members of Europe, ASEAN Free Trade Area (AFTA) between Southeast Asian nations, Latin American Integration Association (ALADI) between South American countries and the Commonwealth of Independent States Free Trade Agreement (CISFTA). Free trade agreements generally tend to strengthen the political relations between countries apart from benefiting them commercially. Free trade agreements (FTAs) have proved to be one of the best ways to open up foreign markets to U.S. exporters. Free trade agreement countries include all countries with free trade agreements with the United States (Australia, Bahrain, Canada, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, and Singapore).