Free Trade Agreement: What Is Its Function?

A Free Trade Agreement (FTA) is a deal between two or more countries enabling them to trade goods and services freely, with few restrictions. The primary function of an FTA is to promote economic growth, encourage business expansion, and increase employment opportunities in participating countries.

Here are a few significant benefits of Free Trade Agreements:

1. Boosting economic growth and employment opportunities

FTAs eliminate most tariffs, quotas, and other barriers that restrict the trade of goods and services between countries. This leads to more business transactions, increased exportation and importation of goods, which, in turn, boost economic growth and generate employment opportunities.

2. Facilitating access to new markets

FTAs help businesses expand, gain access to new markets, and create new partnerships. Reduced tariffs and quotas open up new opportunities to sell goods and services in foreign markets without incurring high costs.

3. Enhancing consumer choices and lowering prices

FTAs increase competition, which typically leads to lower prices and better quality goods and services. Consumers benefit from a broader range of choices and lower prices as businesses compete to sell their products in a free trade environment.

4. Strengthening diplomatic relationships

FTAs help strengthen diplomatic relationships between the signing countries and foster better understanding and cooperation. When countries trade more, they become more interdependent, increasing the incentives to maintain peaceful and productive relationships.

5. Promoting sustainability through regulated trade

Some FTAs include language that promotes environmental and labor standards to ensure that businesses operate sustainably and ethically. These regulations help encourage responsible business practices that benefit communities and the environment.

In conclusion, FTAs are essential in promoting economic growth, facilitating access to new markets, reducing prices, promoting sustainability, and strengthening diplomatic relationships. By promoting free trade, FTAs provide businesses with new opportunities for growth and expansion, resulting in increased economic activity and employment opportunities for citizens.