The full form of FTA stands for Free Trade Agreement. It is a pact between two countries to reduce barriers of import and export among them. Under a free trade policy, there are little to no government tariffs, quotas, subsidies, or prohibitions that prevent the exchange of products and services across international borders.
In the modern world, a formal and mutual agreement between the participating countries is frequently used to achieve free trade policies. A free-trade policy, however, can just be the lack of any trade limitations.
Pros and Cons of Free Trade
- Allows buyers to buy the lowest things on the global market
- Allows countries with relatively cheap labour or resources to benefit from overseas exports
- According to Ricardo’s idea, countries can produce more things together by trading on their various advantages
- Competition from international exports may result in local job losses and business failures
- Industries may transfer to less regulated areas, producing environmental damage or abusive labour practices
- Countries may become overly reliant on the global market for critical goods, putting them at a strategic disadvantage during times of crisis
Real-World Example of Free Trade
Today, the European Union is a shining example of free commerce. For trade purposes, the member nations create a practically borderless unified entity, and the adoption of the euro by the majority of those nations smoothes the path even further. It should be highlighted that this system is governed by a bureaucracy based in Brussels that must deal with the numerous trade-related concerns that arise between officials from member countries.
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For more information, keep reading about various full-forms in our general knowledge section!