The pros and cons of free trade agreements have effects on jobs, business growth and living standards: a free trade agreement (FTA) is a treaty between two or more countries to facilitate trade and remove barriers to trade. It aims to completely eliminate tariffs from day one or over a number of years. Economists have tried to assess the extent to which free trade agreements can be considered public goods. They address a key element of free trade agreements, namely the system of embedded courts that act as arbitrators in international trade disputes. These serve to clarify existing statutes and international economic policies, as reaffirmed in trade treaties. [18] Unlike a customs union, parties to a free trade agreement do not have common external tariffs, which means that they apply different tariffs and other policies towards non-members. This feature allows non-parties to obtain footsp preferences under a free trade agreement by entering the market with the lowest external tariffs. Such a risk requires the introduction of rules for determining which originating products are eligible for preferences under a free trade agreement, a need that does not arise in the context of the creation of a customs union. [20] In principle, a minimum volume of processing is required, resulting in a “substantial transformation” of the goods in order for them to be considered originating. In defining the products originating in the ATP, the preferential rules of origin distinguish between originating and non-originating products: only the former are entitled to the preferential duties set by the FREE TRADE AGREEMENT, the latter must pay the most-favoured-nation duties. [21] As soon as the agreements go beyond the regional level, they need help. The World Trade Organization is intervening on this point. This international body contributes to the negotiation and implementation of global trade agreements.
Both the creation of trade and the diversion of trade are crucial effects observed during the establishment of a free trade agreement. The creation of businesses will lead to the relocation of consumption from an inexpensive producer to an inexpensive producer, which will increase trade. On the other hand, trade diversion will have the effect of shifting trade from a lower-cost producer outside the area to a more expensive one under the free trade agreement. [16] Consumers will not benefit from such a deferral under the free trade agreement, as they will be disinterested in the possibility of buying cheaper imported goods. However, economists find that trade diversion does not always harm aggregate national welfare: it can even improve aggregate national welfare if the volume of diverted trade is low. [17] The good thing about a free trade area is that it promotes competition, which increases a country`s efficiency to be on an equal footing with its competitors. . . .