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Free Trade Agreements

Definition

Free Trade Agreements (FTAs) are treaties between two or more countries to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances.

Analogy

Think of FTAs as a group of friends who agree not to charge each other for borrowing items. Just like these friends, countries under an FTA don't impose charges (tariffs) on each other's goods and services.

Related terms

Tariffs: These are taxes imposed on imported goods and services. They're like the entrance fee you pay at a theme park - it's the price you pay to bring something into the country.

Bilateral Trade Agreement: This is an agreement between two countries to reduce trade barriers and increase trade of goods and services with each other. It's like two friends making a pact to share their toys freely.

Trade Blocs: These are groups of countries that have reached a specific trade agreement among themselves. Imagine if all your neighborhood friends agreed to share their toys freely only within your neighborhood - that's what a trade bloc does for its member countries.