What is Free Trade Agreement (FTA) ?



Free Trade Agreement

What is a Free Trade Agreement?

A Free Trade Agreement is a multinational treaty or pact between two or more cooperating nations to reduce trade barriers to imports and exports between them. Under these policies, goods and services can be purchased and sold across participating international borders with limited government tariffs, subsidies, and taxes to restrain their exchange.  

Free Trade Agreements have proven to be one of the most efficient ways to open up foreign markets to exporters of goods and services. They don’t only reduce trade barriers, but they also protect the interests of businesses, enhancing the rule of law in FTA partner countries.  

What is the USMCA Trade Agreement? 

Possibly the most important Free Trade Agreement that the U.S. holds with foreign nations is known as the USMCA, or the United States-Canada-Mexico Trade Agreement (formerly known as NAFTA).  

USMCA is a trilateral agreement which allows for duty-free imports and exports between the three countries. According to USCMA terms, for goods to qualify for a duty-free importation in these countries, a significant portion of the ingredients or parts of the goods must be manufactured in one of the three countries.  

The rules that determine the ‘origin’ of the country are known as “Rules of Origin” and they vary from agreement to agreement.  

Some other important trade agreements:  

  • AUSTA: United States-Australia Trade Agreement
  • Israel-United States Free Trade Agreement
  • United States-Korea Free Trade Agreement
  • CAFTA-DR- Central America Free Trade Agreement, Dominican Republic
  • United States-Panama Free Trade Agreement




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