What Is International Free Trade Agreement

International Free Trade Agreement: Definition and Importance

International free trade agreements are agreements between countries that establish guidelines and rules for trade of goods and services across borders. These agreements are put in place to reduce barriers, such as tariffs and quotas, and facilitate trade between countries.

The primary objective of international free trade agreements is to promote economic growth by increasing trade between countries, spurring productivity, creating jobs, promoting innovation, and providing consumers with access to a wider range of goods and services at competitive prices.

The importance of international free trade agreements cannot be overemphasized, as they have played a significant role in shaping the global economy over the years. The most notable agreements include the North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership (TPP), and the European Union (EU).

NAFTA, for example, was signed between Canada, Mexico, and the United States in 1994, and aimed to eliminate tariffs and barriers to trade in goods and services. The agreement has facilitated the growth of trade between the parties involved, with trilateral merchandise trade increasing from $290 billion in 1993 to $1.1 trillion in 2016.

Similarly, the TPP was a trade agreement involving 12 countries, including the United States, Australia, Canada, Japan, and Mexico, which aimed to reduce trade barriers and promote economic growth. The agreement was signed in 2016 but was never fully implemented, as the United States withdrew from the agreement in 2017.

The EU is another notable example of an international free trade agreement, established in 1957 to promote the economic and political integration of European countries. The EU has eliminated trade barriers and established a single market, allowing for the free movement of goods, services, capital, and people across the member states.

In conclusion, international free trade agreements are essential for promoting economic growth and facilitating trade between countries. By reducing barriers to trade in goods and services, these agreements open up new markets, stimulate innovation and investment, and ultimately benefit consumers by providing access to a wider range of goods and services at competitive prices.