FTA

An FTA, or Free Trade Agreement, is a treaty between two or more countries that aims to reduce or eliminate barriers to trade in goods and services among the member states. FTAs typically include tariff elimination or reduction, improved access to markets for services, and rules governing investment, intellectual property, competition, and government procurement. They also establish dispute settlement mechanisms and institutional arrangements to monitor implementation. Unlike a customs union or common market, FTAs generally preserve each member's independent external tariffs with non-members.

Key features include negotiations on tariff schedules, rules of origin to determine eligibility for tariff preferences, and commitments on non-tariff barriers such as technical standards and regulatory cooperation. FTAs may cover services trade, investment protection, labor and environmental standards, state-owned enterprises, and digital trade. They can be bilateral or regional and may be part of larger mega-regional agreements that link many economies.

Examples: USMCA between the United States, Canada, and Mexico (replacing NAFTA in 2020); EU–Canada CETA; EU–Japan EPA; CPTPP; and various regional agreements within ASEAN, Mercosur, and other blocs.

Economic effects: FTAs can raise trade and investment, enhance efficiency and consumer choice, and stimulate growth, though benefits depend on factors such as competition, supply chains, and policy complementarities. Critics warn of trade diversion, unequal gains, and potential loss of policy autonomy, as well as concerns about labor, environment, and digital rights in some agreements. Negotiations can be lengthy and complex, with ratification requiring domestic approval.