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':''This is article is on free international trade. For information on special economic zones within countries, see [[Free trade zone]]. {{trading blocs}} '''Free trade area''' is a type of [[trade bloc]], a designated group of countries that have agreed to eliminate [[tariff]]s, [[quota share|quota]]s and preferences on most (if not all) [[good (economics)|goods]] and services traded between them. It can be considered the second stage of [[economic integration]]. Countries choose this kind of economic integration form if their economical structures are complementary. If they are competitive, they will choose [[customs union]].{{Citation needed|date=August 2009}} ==Description== Unlike a customs union, members of a [[free trade]] area do not have a [[common external tariff]] (same policies with respect to non-members), meaning different quotas and [[customs (tax)|customs]]. To avoid evasion (through [[re-exportation]]) the countries use the system of certification of origin most commonly called [[rules of origin]], where there is a requirement for the minimum extent of local [[material]] inputs and local transformations adding [[Value (economics)|value]] to the goods. Goods that don't cover these minimum requirements are not entitled for the special treatment envisioned in the free trade area provisions. Cumulation is the relationship between different FTAs regarding the rules of origin — sometimes different FTAs supplement each other, in other cases there is no cross-cumulation between the FTAs. A free trade area is a result of a free trade agreement (a form of [[trade pact]]) between two or more countries. Free trade areas and agreements (FTAs) are cascadable to some degree — if some countries sign agreement to form free trade area and choose to negotiate together (either as a [[trade bloc]] or as a forum of individual members of their FTA) another free trade agreement with some external country (or countries) — then the new FTA will consist of the old FTA plus the new country (or countries). Within an industrialized country there are usually few if any significant barriers to the easy exchange of goods and services between parts of that country. For example, there are usually no trade [[tariff]]s or import quotas; there are usually no delays as goods pass from one part of the country to another (other than those that distance imposes); there are usually no differences of taxation and regulation. Between countries, on the other hand, many of these barriers to the easy exchange of goods often do occur. It is commonplace for there to be import duties of one kind or another (as goods enter a country) and the levels of sales tax and regulation often vary by country. The aim of a free trade area is to so reduce barriers to easy exchange that trade can grow as a result of specialisation, division of labour, and most importantly via (the theory and practice of) [[comparative advantage]]. The theory of comparative advantage argues that in an unrestricted marketplace (in equilibrium) each source of production will tend to specialize in that activity where it has comparative (rather than absolute) advantage. The theory argues that the net result will be an increase in income and ultimately wealth and well-being for everyone in the free trade area. However the theory refers only to aggregate wealth and says nothing about the distribution of wealth. In fact there may be significant losers, in particular among the recently protected industries with a comparative disadvantage. The proponent of free trade can, however, retort that the gains of the gainers exceed the losses of the losers. ==List of free trade areas== {{See also|List of free trade agreements|List of bilateral free trade agreements}} [[File:Free Trade Areas.PNG|thumb|300px|Current FTAs]] This is list of free trade areas between three or more countries, mainly notified to the [[General Agreement on Tariffs and Trade]]/[[World Trade Organization]] and [http://www.wto.org/english/tratop_e/region_e/eif_e.xls in Force.] Every [[customs union]], trade [[common market]] and [[economic and monetary union]] has also a free trade area. Smaller agreements, that are part of larger one are not listed. {| {{table}} ! Agreement!!Date (in force)!!Recent reference |- | [[African Free Trade Zone]] (AFTZ)||colspan="2" |''signed, but yet to be ratified by all countries'' |- | [[ASEAN–China Free Trade Area|ASEAN — China]]||01/10/2010|| |- | [[ASEAN–India Free Trade Area|ASEAN — India]]||01/10/2010|| |- | [[Asia-Pacific Trade Agreement]] (APTA)||06/17/1976||[http://docsonline.wto.org/DDFDocuments/t/WT/COMTD/N22.doc WT/COMTD/N/22] |- | [[Central European Free Trade Agreement]] (CEFTA)||05/01/2007||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/233N1R1.doc WT/REG233/N/1/Rev.1] |- | [[Commonwealth of Independent States|Commonwealth of Independent States Free Trade Agreement]] (CISFTA)||12/30/1994||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/82N1.DOC WT/REG82/N/1] |- | [[Dominican Republic – Central America Free Trade Agreement]] (DR-CAFTA)||03/01/2006||[http://docsonline.wto.org/DDFDocuments/t/S/C/N365.doc WT/REG211/N/1] |- | [[Economic and Monetary Community of Central Africa]] (CEMAC)||06/24/1999||[http://docsonline.wto.org/DDFDocuments/t/WT/COMTD/N13.doc WT/COMTD/N/13] |- | [[European Economic Area]] (EEA)||01/01/1958||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/138-2.doc WT/REG138/2] |- | ''-EC — [[Andorra]]''||07/01/1991||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/53M3.doc WT/REG53/M/3] |- | ''-EC — [[CARICOM]]''||11/01/2008||[http://docsonline.wto.org/DDFDocuments/t/S/C/N469R1.doc WT/REG255/N/1/Rev.1] |- | ''-EC — [[Special Member State territories and the European Union|OCTs]]''||01/01/1971||[http://docsonline.wto.org/DDFDocuments/t/G/L/689.doc WT/REG106/R/B/3] |- | ''-EC — [[Switzerland]] and [[Liechtenstein]]''||01/01/1973||[http://docsonline.wto.org/DDFDocuments/t/G/L/360.doc WT/REG94/R/B/1] |- | ''-EC — [[Turkey]]''||01/01/1996||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/22M4.doc WT/REG22/M/4] |- | [[Economic Community of West African States]] (ECOWAS)||07/24/1993||[http://docsonline.wto.org/DDFDocuments/t/WT/COMTD/N21.doc WT/COMTD/N/21] |- | [[EFTA]] — [[SACU]] ||05/01/2008||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/256N1.doc WT/REG256/N/1] |- | [[Council of Arab Economic Unity#Greater Arab Free Trade Area|Greater Arab Free Trade Area]] (GAFTA) ||01/01/1998||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/223N1.doc WT/REG223/N/1] |- | [[Latin American Integration Association]] (ALADI)||03/18/1981||[http://www.wto.org/gatt%5Fdocs/English/SULPDF/91000006.pdf LI5342] |- | [[North American Free Trade Agreement]] (NAFTA)||01/01/1994||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/4W1.doc WT/REG4/enwiki/w/1] |- | [[South Asia Free Trade Agreement]] (SAFTA)||12/07/1995||[http://docsonline.wto.org/DDFDocuments/t/WT/COMTD/N26.doc WT/COMTD/N/26] |- | [[South Pacific Regional Trade and Economic Cooperation Agreement]] (SPARTECA)||01/01/1981||[http://docsonline.wto.org/DDFDocuments/t/WT/COMTD/N29.doc WT/COMTD/N/29] |- | [[Trans-Pacific Strategic Economic Partnership]] (TPP)||05/28/2006||[http://docsonline.wto.org/DDFDocuments/t/WT/REG/229M1R1.doc WT/REG229/M/1/Rev.1] |} == Qualifying for a free trade agreement == To determine eligibility for a free trade agreement (FTA), importers must obtain product information from all the suppliers within the [[supply chain]]. An automated solution should be in place for an importer to solicit his/her suppliers. Once supplier documentation is received the importer must determine the eligibility of the product based on the many rules of origin surrounding the products [[Harmonized Schedule Number]]. Each free trade agreement will qualify an importer's products in different ways, however the basis of the qualification surrounds the idea that the finished product must have a minimum percentage of local/regional content. Under the [[North American Free Trade Agreement]] (NAFTA), qualifying rules include De Minimis, Regional Value Content, and Tariff Shift. * De Minimis states that the finished good must be less than or equal to 7% of the transaction value of the product * Regional Value Content is a calculated percentage of the value of the product that represents its North American content * Tariff Shift is a substantial transformation that takes place in a NAFTA country A finished good must qualify under one of these rules to be eligible for free trade under NAFTA. This is just one example of a qualification for a free trade agreement. If a certificate of origin is present from a supplier demonstrating that the good originated in a country under the associated free trade agreement, no further calculations are needed. When qualifying products for an FTA, the use of an automated system allows importers to stay up-to-date on international compliance regulations, as well as solicit suppliers via the web instead of manually. A functional solution should also perform the required calculations for the associated FTA during the [[Bill of Material]] (BOM) analysis, ensuring correct eligibility. ==External links== * [http://www.bilaterals.org/ bilaterals.org] - "Everything that's not happening at the WTO" * [http://www.fightingftas.org/ fightingftas.org] * [http://www.wto.org/english/tratop_e/region_e/eif_e.xls FTAs submitted to the WTO] * [http://www.sice.oas.org/tbt/FTA_e.asp Americas FTAs] * [http://app.fta.gov.sg/asp/index.asp Singapore official FTA site] * [http://www.efta.int/content/free-trade EFTA official site] * [http://www.dfat.gov.au/trade/ftas.html Australia's FTAs] * [http://usliberals.about.com/od/theeconomyjobs/i/FreeTradeAgmts.htm About.com's Pros & Cons of U.S. Free Trade Agreements] * [http://www.worldtradelaw.net/fta/ftadatabase/ftas.asp Bilateral and Regional Trade Agreements Notified to the WTO: developed by WorldTradeLaw.net and Bryan Mercurio] * [http://www.ptas.mcgill.ca/ ptas.mcgill.ca] {{DEFAULTSORT:Free Trade Area}} [[Category:Trade blocs|*]] [[Category:Lists of organizations]] [[Category:Free trade agreements|*]] [[Category:Economic integration]] [[ca:Àrea de lliure comerç]] [[de:Freihandelsabkommen]] [[es:Tratado de libre comercio]] [[fr:Zone de libre-échange]] [[ko:자유 무역 협정]] [[it:Area di libero scambio]] [[lt:Laisvosios prekybos sritis]] [[ms:Kawasan perdagangan bebas]] [[ja:自由貿易協定]] [[no:Frihandelsområde]] [[pl:Strefa wolnego handlu]] [[pt:Área de livre comércio]] [[ru:Зона свободной торговли]] [[th:เขตการค้าเสรี]] [[vi:Hội nhập kinh tế#Hiệp định thương mại tự do]] [[zh:自由贸易区]]'