In today`s global economy, free trade agreements play a vital role in facilitating trade between nations. A free trade agreement (FTA) is a treaty that is signed between two or more countries, which establishes preferential trading conditions between them. By eliminating tariffs and non-tariff barriers to trade, FTAs help promote economic growth and job creation in the participating countries.
There are numerous free trade agreements in force globally, with members ranging from the largest economies in the world to smaller, developing countries. Let`s take a closer look at some members of the most significant FTAs.
North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement (NAFTA) is a trade agreement between the United States, Canada, and Mexico, which came into force in 1994. The agreement eliminated tariffs on most goods traded between the three countries and established rules for investment, intellectual property, and dispute resolution.
NAFTA has been instrumental in promoting trilateral trade between the three countries. Mexico and Canada are significant trade partners of the United States, with the US exporting $292 billion worth of goods in 2020 to Canada and $235 billion to Mexico.
European Union (EU)
The European Union (EU) is a political and economic union of 27 member countries, primarily located in Europe. The EU`s internal market is the largest in the world, and the union is a significant player in international trade.
The EU has signed FTAs with many countries around the world, including Canada, Japan, and South Korea. The EU also has a customs union with Turkey, which allows for the free movement of goods between the two economies.
Trans-Pacific Partnership (TPP)
The Trans-Pacific Partnership (TPP) was a trade agreement between 12 countries in the Asia-Pacific region, including the United States, Japan, Australia, and Canada. The agreement aimed to remove trade barriers and establish rules for labor and environmental standards.
The TPP was signed in 2015 but was never ratified by the United States. However, the remaining 11 countries went on to sign a similar deal, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in 2018.
African Continental Free Trade Agreement (AfCFTA)
The African Continental Free Trade Agreement (AfCFTA) was signed in 2018 and aims to create a single market for goods and services in Africa. The agreement has been signed by 54 of the 55 African Union member states and is expected to boost intra-African trade.
The AfCFTA will eliminate tariffs on 90% of goods traded between African countries, making it easier and cheaper for businesses to trade within the continent.
In conclusion, free trade agreements have become an essential tool for promoting economic growth and job creation. By eliminating trade barriers and establishing common rules, FTAs enable countries to trade more efficiently and competitively. The members of the FTAs mentioned above are just a few examples of the many countries that are benefiting from these agreements. As global trade continues to grow, it is likely that we will see more FTAs being signed in the future.