What is Free Trade Agreement (FTA)?

Free Trade Agreements (FTA) are agreements between two or more countries in aims to achieve economic cooperation, reduce trade barriers or taxes, and any terms of trading and tariffs. There are 3 types of trade agreements which includes unilateral, bilateral, or multilateral agreement. A unilateral Trade Agreement is when one country imposes trade restrictions by themselves with no reciprocations. Bilateral Trade Agreements happens when two countries seal the deal to further expand business opportunity or confer as trade allies. Oftentimes, they agree to reduce trade restrictions or lower tariffs while focusing on key protected or government-subsidized domestic industries. Last but not least, Multilateral Trade Agreements occur when three countries or more come to an agreement on a trade deal. However, due to the number of participants, it is rather difficult to negotiate or come to a consensus. Given the number of countries involved in the agreement, Multilateral Trade Agreements proved to be powerful as it covers a larger geographic area, thus it gives a greater competitive advantage on the signatories’ state. It is to be noted that a trade-off between companies and consumers can be fueled by trade agreements and international trade is also impacted strongly.

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