Free trade area

A free trade agreement is an international agreement aimed at ensuring the free trade between the Contracting States (or subjects of international law ). It is a first step towards economic integration between countries.

Subject of free trade agreements

With the agreement of free trade is secured in the field of customs and accessibility of trade between the contracting parties. Tariffs and non-tariff barriers ( such as import bans or export bans and import quotas ) be abolished. If necessary, prohibit free trade agreements, other government interventions, such as subsidies. In more recent free trade agreements are often Contracts for Intellectual Property and Restrictions on state investments included in enterprises or economic sectors.

For a number of free trade agreements or multilateral agreements FTAs can arise. Free trade agreements and free trade zones represent the first stage of economic integration, because unlike a customs union maintained the party to a mere free trade area their national tariffs against third countries. For the prevention of traffic, relocation of production and competition distortions, therefore, contain all FTA rules of origin to ensure that goods are eligible for preferential treatment and thus can be introduced into the State party duty-free. This shall be demonstrated with a preference paper. However, economic groupings on a higher level of integration ( customs union, common market, economic and monetary union ) are always free trade zones.

Goal of free trade agreements and free trade zones

The aim of the free trade agreement of both parties is to reach by the free trade advantages in the distribution of goods and an increase in foreign trade. They therefore comply with the principles of the ( neo) classical trade theory, which is based on the model of comparative advantage by David Ricardo, after which welfare gains for all participating states can be reached by free trade between States.

The World Trade Organization (WTO ) promotes this reason, the formation of free trade areas and the conclusion of free trade agreements.

Developmental significance of free trade agreements to open developing countries' access to the markets of developed countries; leads to this end the EU with countries in Africa, the Caribbean and the Pacific negotiations that should lead to the conclusion of free trade agreements (see Economic Partnership Agreement ).

The full liberalization of world trade would be realized by a World Bank study (2005) 2015 250 billion euros a year in additional income.

Criticism of free trade agreements

Against the assumptions with which FTAs are established, the criticism is directed, for example, critics of globalization. The actual realization of the welfare gains according to the model of comparative advantage put forward accordingly, for example, that factors of production can be moved from one sector to another at will, which is often not given the short term in reality especially. Therefore, whether in the creation of regional free trade areas as well as at a global trade liberalization always the question of which countries and groups of people, at least in the short and medium term are among the winners and losers.


Typical multilateral free trade agreements are based, for example, NAFTA, EFTA and the EEA or Mercosur. Other examples of free trade agreements are:

  • EU - Korea FTA, new trade agreement since 2010 with an estimated value of up to 19 billion euros by the abolition of all tariffs and many non-tariff barriers.
  • Total American Free Trade Agreement (FTAA )
  • Dominican Republic- Central America Free Trade Agreement (DR -CAFTA )
  • Alternativa Bolivariana para los Pueblos de Nuestra América ( ALBA ), the Latin American Economic Community
  • Central American Common Market ( CACM )
  • Central European Free Trade Agreement ( CEFTA)
  • Common Market for Eastern and Southern Africa (COMESA )
  • Southern African Development Community ( SADC)
  • Greater Arab Free Trade Area ( GAFTA )
  • South Asian Association for Regional Cooperation ( SAARC)
  • Free Trade Area of the Association of Southeast Asian Nations (AFTA )
  • Australia New Zealand Closer Economic Relations Trade Agreement ( ANZCERTA )
  • New Zealand- China Free Trade Agreement
  • ASEAN -China Free Trade Agreement
  • Trans-Pacific Strategic Economic Partnership (TPP, since 2006)

Currently negotiating free trade agreements are:

  • Transatlantic Free Trade Agreement ( TAFTA ) since July, 2013: Negotiations on a Transatlantic trade and investment partnership between the European Union and the United States TTIP (Trans Atlantic Trade and Investment Partnership)
  • Comprehensive Economic and Trade Agreement ( CETA )
  • " Japan FTA EU "

Currently planned free trade agreement are:

  • EU-Morocco Free Trade Agreement