Free Trade Zone (FTA)

The free trade zone is a theoretical concept of creating a trade bloc whose member countries sign a free trade agreement (FTA), which excludes tariffs, import quotas and preferences for most (if not all) goods and services traded between these countries. If people can also move freely between countries, in addition to the FTA, then we can assume that an open border is being created. This can be considered the second stage of economic integration. Countries choose this type of economic integration if their economic structures complement each other. If their economic structures are competitive, it is likely that there will be no incentive for them to create an FTA, or only selected goods and services will appear in the agreements between the countries that have signed the FTA.

In contrast to the customs union (the third stage of economic integration), members of the free trade area of ​​the region do not have a single external tariff, that is, they have different quotas and traditions, as well as different policies regarding non-FTZ countries. To avoid tariff evasion (through re-exportation), countries use a certification system for the origin of goods, most often called “rules of origin”, where the need for a minimum degree of local material costs and local transformations to add value to goods is indicated. Only products that meet these minimum requirements are entitled to a special relationship, as provided for in the free trade zone.

A free trade zone is the result of a free trade agreement (a form of trade pact) between two or more countries. Sometimes different FTAs ​​complement each other; in other cases, there is no interaction between the FTAs. Free trade zones and agreements allow cascading to a certain degree. If some countries sign an agreement on the formation of an FTA (as a trade bloc or as a forum for individual members of the FTA) with countries united by another free trade agreement or another country, then the new FTZ will consist of the old FTA plus a new country (or countries).

In an industrialized country, there are usually few, if they exist at all, significant obstacles to the easy exchange of goods and services between parts of this country. For example, there are, as a rule, trade tariffs or import quotas; There is a rule that there should be no delays when the goods arrive from one part of the country to another (except those that impose a distance); There is a rule that there should be no difference in taxation and regulation. Between countries, on the other hand, many of these barriers to the rapid exchange of goods occur frequently. It is common to establish import duties for one or another kind of goods, and the level of sales tax and regulation often depends on the country.

The goal of the free trade zone is to reduce barriers to the exchange of goods or services, so that trade can grow as a result of specialization, division of labor, and most importantly with the help of comparative advantages. The theory of comparative advantage claims that in an unrestricted market (in equilibrium), each source of production will, as a rule, specialize in activities where it has a comparative (rather than absolute) advantage. The theory asserts that the end result will be an increase in income and ultimately wealth and well-being for all participants in the free trade zone. But theory refers only to the totality of wealth and says nothing about the distribution of wealth; in fact, there may be significant losses, particularly in previously protected sectors, which are in a relatively unfavorable position. In principle, the overall benefits of trade can be used to compensate for the effects of lowering trade barriers in relevant sectors of the economy.

Stages of economic integration around the world:

1. Economic and Monetary Union (eg European Union)
2. Economic Union (for example, the Union State of Russia and Belarus)
3. Customs and Monetary Union (for example, West African Economic and Monetary Union or Economic and Monetary Community of Central Africa)
4. Common market (for example, Common Economic Space of the Customs Union of Belarus, Kazakhstan and Russia)
5. Customs Union (for example, MERCOSUR)
6. Multilateral agreement on a free trade zone (for example, NAFTA or Trans-Pacific Strategic Economic Partnership, etc.)

Each customs union, common market, economic union, customs and currency union and economic and currency union have within themselves free trade zones.

List of free trade agreements

Most of these multilateral agreements are signed between neighboring countries, but there are exceptions, such as the WTO and the Trans-Pacific Strategic Economic Partnership, which is regional in accordance with some definitions, but not concluded between neighboring countries.

The following are the free-trade agreements in force between countries of the world:

1. World Trade Organization (WTO) agreements:

• General Agreement on Tariffs and Trade
• Agreement on Agriculture
• Agreement on the application of sanitary and phytosanitary measures
• Agreement on technical barriers to trade
• Agreement on Trade Investment Measures
• Anti-dumping agreement
• Agreement on customs valuation
• Pre-shipment inspection agreement
• European Trade Agreement
• Agreement on rules of origin
• Agreement on import licensing procedures
• Agreement on Subsidies and Countervailing Measures
• Warranty Agreement
• General Agreement on Trade in Services
• Agreement on Trade-Related Aspects of Intellectual Property Rights
• Government Procurement Agreement
• Information Technology Agreement
• Bali Package Agreement

2. Other Free Trade Zone Agreements:

• ASEAN Free Trade Area (AFTA)
• Asia Pacific Trade Agreement (APTA)
• Central American Integration System (SICI)
• Central European Free Trade Agreement (CEFTA)
• Common Market for Eastern and Southern Africa (COMESA)
• G-3 Free Trade Agreement (G-3)
• Large Arab Free Trade Zone (GAFTA)
• Free Trade Agreement between the Dominican Republic and Central America (DR-CAFTA)
• Gulf Cooperation Council (GCC)
• North American Free Trade Zone (NAFTA)
• Pacific Alliance
• South Asia Free Trade Agreement (SAFTA)
• Southern African Development Community (SADC)
• South American Common Market (MERCOSUR)
• Trans-Pacific Strategic Economic Partnership (TLILI)
• Asia-Pacific Economic Cooperation (APEC)
• CIS Free Trade Zone
• Association of Caribbean States (ACS)
• Union of South American Nations (UNASUR)
• Shanghai Cooperation Organization (SCO)
• Free Trade Area of ​​the Americas (ALCA)
• Transatlantic Free Trade Zone (TAFTA)
• Organization for Democracy and Economic Development (GUAM)
• Economic Community of Central African States (ECCAS)
• Community of Sahelo-Saharan states (CEN-SAD)
• Economic Community of West African States (ECOWAS)
• Euro-Mediterranean Free Trade Area (EU-MED FTA, EMFTA)
• Intergovernmental Authority for Development (IGAD)