Free trade agreement (FTA)
Part of: Prelims and GS-II – International Relations
Context Recently, the Union minister for Commerce & Industry has said that India is looking to have a free trade agreement (FTA) with 5 countries – UAE, UK, Australia, Canada and Israel.
What is a free trade agreement (FTA)?
- FTA, also called Regional Trade Agreement (RTA) is a pact between two or more nations to reduce barriers to imports and exports among them.
- Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
- The concept of free trade is the opposite of trade protectionism or economic isolationism.
- FTA is implemented by means of a formal and mutual agreement of the nations involved.
- However, a free-trade policy may simply be the absence of any trade restrictions.
- There are two types of trade agreements – bilateral and multilateral.
- FTA is an example of a Bilateral trade agreement.
- Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.
- FTAs determine the tariffs and duties that countries impose on imports and exports with the goal of reducing or eliminating trade barriers, thus encouraging international trade.