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.
