Navigating Free Trade Agreements: Maximizing Benefits for International Trade

The main aim of Free Trade Agreements is to ensure a safe and secure trade liberalisation. It was anticipated that the FTAs will divert trade instead of encouraging the exporters and importers to carry on more trade. However, records indicate that there is a minimal diversion and the Free Trade Agreements and Regional Trade Agreements are effectively promoting and expanding trade liberalisation. 

One significant benefit of FTAs is that they can be negotiated and concluded smoothly and quickly as compared to multilateral agreements. There are demerits too. If not laid out with an appropriate framework of policies and terms, Free Trade Agreements can reduce instead of increasing and enhancing economic welfare. Also, there are no efficient vehicles to liberalise trade in the industries or sectors where the parties not included in the agreement have a significant influence. We will talk about the advantages and disadvantages of the Free Trade Agreement in detail later here.

To give you a brief, it is a form of agreement or pact between nations to minimise the complexities and barriers to imports and exports. Under the free trade policy, it is easy to sell and purchase goods and services in the international market. There are minimal or no government tariffs, subsidies, quotas, or restrictions to impede the transactions and exchanges. 

In recent times, free trade policy generally comes into practice through mutual agreement between the concerned nations, on a formal platform. Moreover, the free trade policy is all about removing trade restrictions and making cross-border transactions more convenient and hassle-free for exporters and importers.  

It is not mandatory for the government specifically adopt measures to promote free trade. This is termed laissez faire trade or trade liberalisation which hands in a significant amount of freedom to the exporters, importers, and manufacturer exporters to process trade across borders.

Not always do the governments with free trade agreements or policies hand in all the authority of import and exports or neglect every protectionist policy. For instance, a nation may grant permission to practice free trade with another state but not allow the import of animals that are not vaccinated, drugs that are not recognised and approved by the regulating authorities, or food that are not up to the mark.

The state can even have certain principles and policies under which some products are exempted from being tariff-free so that the local producers are protected from the highly competitive manufacturers in their market.

There are numerous advantages of Free Trade Agreements, let us have a look at them.

Free Trade Agreements enhance economic activities and welfare in the nations. It also opens up various job opportunities giving everyone, the big and small enterprises to gain benefit from trade and investments.

There are various additional advantages of Free Trade Agreements such as in-built agendas that promote reforms on a domestic level and trade liberalisation.

FTAs are not just reducing and eliminating tariffs, they also help tackle the barriers faced within the nation that tend to interrupt the flow of goods and services. They help attract investors, and effectively regulate problems such as intellectual property, government procurement, and e-commerce.

Through Free Trade Agreements, buyers and sellers get easy access to a wider range of goods and services that are competitively priced. Consumers and manufacturers get their hands on advanced technology as well as innovative and creative practices.

They attract more advantages through foreign investments. These agreements also encourage regional integration and give shared ways to process trade and investment among the trading partners.

The less developed countries can have an economic boom with the numerous investment opportunities and improved trade Free Trade Agreements attract.

FTAs support links between businesses and people that help improve the bilateral relationships with the partners.

In the absence of Free Trade Agreements, the nations usually protected their local businesses and industries. This led to the creation of a non-competitive and stagnant global market with bare progress. When the protection is removed through FTAs, the market experiences a rise in competitively priced high quality goods and services which enhances global trade.

Global businesses comparatively have more skills and expertise than local businesses to develop domestic resources efficiently. Especially in activities such as oil drilling, mining, and manufacturing. Free Trade Agreements enable global firms to access these business opportunities.

When these multinational companies collaborate with domestic organisations for developing the resources, they teach and train them with the best techniques. Thus, local businesses learn new methods and are enabled to tackle the competitive global market.