A free-trade agreement is a treaty or a mutual understanding between two or more countries to create an open trade space. This facilitates the exchange of goods and services without tariffs and other hindrances compromising capital or labor. According to these agreements, a uniform tariff may be imposed when trades occur with non-member countries.
Free-trade agreements are beneficial for all participating members of the union as the exchange of products and formalities are carried out in a more harmonious manner. Hence, there already exist free-trade agreements between the world’s largest countries down to the smallest ones.
Types of free trade agreements
Free-trade agreements are actually divided into two kinds:
- Bilateral agreements (FTAs between two sides that can vary from countries or trade blocs)
- Multilateral agreements (FTAs between several countries).
The largest bilateral agreement present is the ASEAN FTA, that involves all the countries in SouthEast Asia. The ASEAN FTA is further expounded to agreements between Australia, New Zealand and countries in the Central America.
The largest multilateral agreement ever established was by the World Trade Organization. This agreement spans almost all of the business related districts of all countries, and includes agriculture, customs valuations, IT agreements and the European Agreement.
While these multilateral agreements have already been announced at the global level, some trade plans are in need of further discussion. This list includes the Union of South American Nations (USAN) of 2014, proposed agreement of the Pacific Island Countries (PICTA) and African Free Trade Zone between the Southern and Eastern parts of Africa.
FTAs with the European union
The European Union, one of the largest existing multilateral agreements in the global scene, has established agreements including a trade component with many countries worldwide. Within the continent’s neighboring countries, agreements are already enforced. Provisions are applied to enforce agreements with Europe and countries in the Central America by the European Union.
Europe and ASEAN trade agreement
The European Council is working to extend hands not only to the general ASEAN population but also to each specific country.
The two blocks are aiming to achieve connectivity in the areas like Political-Security, Economic-Trade and Socio-Cultural Cooperation. The marketing plan for the Europe and ASEAN Trade Agreement is line with the Joint Actions of the ASEAN-EU Enhanced Partnership Action Plan, active until 2017. It focuses on three dimensions – physical, institutional and people-to-people framework. The principle of the Master Plan is that connecting the countries of the ASEAN community will be further achieved if there are regulatory committees and a shared identity. The Asia-Europe Meeting (ASEM) is a discussion forum that dwells on the issues of the agreement. It also includes non-member countries like Australia and Bangladesh.
The free trade agreements that exist in union with countries worldwide are a perfect example that the world is open to global business transactions. With continued enforcement, we will experience smoother international penetration and wider scope to expand your business plans. Keep yourself updated on the latest free trade agreements through professional export plan.