A free trade agreement or FTA , refers to a legal agreement that two countries sign in order to regulate the commercial relations that they will execute from that moment on. The main idea of this type of treaty is based on the free exchange of both products and services . In this sense, the rules of said exchange of products are put on the table clearly and precisely.
With a free trade agreement between two countries, it seeks to promote and contribute to the growth of the economic sectors of both countries. Among the negotiations that are established in this type of treaty, there is talk of:
- Intellectual protection standards.
- The treatment that should be given to foreign investors.
- Labor laws.
- State purchases.
- Environmental legislation, among others.
Once this type of agreement is signed, being the result of discussions and debates regarding mutual benefits for the governments, it must be ratified by part of the congresses that make up each country involved.
Importance of the free trade agreement
The Free Trade Agreements are part of a long – term business tactic that seeks to strengthen markets for products in order to develop a competitive export host, which in turn generate more and better jobs. Experience has taught us that the countries that have been able to evolve and grow the most in recent years are those that have successfully associated themselves with international trade, thus increasing the size of the market for their companies.
The paucity of promoting commercial unification as a device for expanding and applying market analysis is clear enough, whose local markets, due to their small size, offer few business opportunities and, therefore, job creation opportunities.
Impact on the population
In general, free trade agreements tend to lower the price of products, including those of the family basket, because imported products cost less thanks to the elimination of tariffs .
It is important to note that as a result of the Free Trade Agreements , inflation tends to reach international levels, which are generally lower than those of developing countries.
With these agreements there are more and better jobs. To create more jobs we need to invest and produce more, and to produce more we need markets bigger than ours.
- Avoid and if possible, eliminate tariff restrictions that may exist between nations in order to develop trade freely.
- Establish fair conditions so that there can be healthy competition between national and international producers and entrepreneurs.
- Establish guidelines to guarantee intellectual protection.
- To stimulate in a healthy and safe way the production between both nations.
- Have spaces where conflict resolution is achieved in a healthy and safe way.