Free trade agreements
- Government restrictions that prevent the flow of products and services across international borders, such as tariffs, quotas, subsidies, and bans, are either minor or nonexistent under a free trade policy.
- Protectionism is the resistance to the concept of free trade in the economy or in business.
- Nation’s whose economic systems complement rather than compete with one another often negotiate free trade agreements (FTAs).
What separates free trade from fair trade is:
- Even though the terms free trade and fair trade are frequently used interchangeably, they have some significant differences.
- FTAs are intended to advance international trade liberalisation and increase economic prosperity for all parties.
- The fair trade movement promotes economic fairness on a worldwide scale in order to better the lives and communities of people who manufacture goods in other countries.
How many FTAs has India recently signed?
- India and Sri Lanka signed their first free trade agreement in 1998.
- Similar FTAs existed with Thailand, Singapore, ASEAN, Japan, Malaysia, Nepal, Bhutan, and India.
- India has ratified a number of preferential trade agreements, including
- South American countries also have the MERCOSUR PTA and the Global System of Trade Preferences (GSTP) with India. With Bangladesh, China, India, Lao PDR, Republic of Korea, and Sri Lanka, an Asia-Pacific Trade Agreement is in place (APTA).
Benefits of FTA:
- Taxes on eligible items may be eliminated or lowered. For instance, a country might lower or eliminate its usual 12% import tariff.
- The FTA partner nation recognises the importance of protecting and upholding intellectual property rights.
- Product Standards: The FTA increases the ability of domestic exporters to have an impact on the development of product standards in the FTA partner country.
- Fair treatment of investors is ensured by an FTA, which commits partner nations to treating foreign investments favourably and fairly.
- Elimination of monopolies: FTAs’ increased competitiveness have the effect of removing global monopolies.
Adverse consequences of FTA:
The promotion of offshore employment via free trade agreements is widely criticised. The following are some significant negatives:
- Increased job outsourcing: Companies can expand internationally by decreasing import restrictions. Without taxes, imports from countries with low living expenses are less expensive.
- Underdeveloped nations frequently lack the legal safeguards necessary to prevent the theft of innovative innovations, processes, and patents.
- suffocate domestic industries: Agriculture has traditionally been the main source of employment in many developing countries. The government-supported agribusinesses are too large for these small family farms to handle.
- The offshore of jobs by multinational firms to developing countries may be influenced by insufficient labour protections.
- Degradation of natural resources: Occasionally, emerging-market countries don’t have enough environmental protections. Free trade causes the depletion of natural resources such as minerals, lumber, and other materials.
- When development encroaches on rural regions, Native American traditions risk being eliminated. The native populace was displaced.
