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'{{about|free international trade|information on special economic zones within countries|Free trade zone}} {{unsourced|date=January 2011}} {{trading blocs}} '''Free trade area''' or '''"Free Trade Agreement"''' ('''FTA''') 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 and they bitched 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 are more likely to 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. Only goods that meet these minimum requirements are entitled for the special treatment envisioned by 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 reduce barriers to exchange so that trade can grow as a result of specialisation, division of labour, and most importantly via [[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. In principle, the overall gains from trade could be used to compensate for the effects of reduced trade barriers by appropriate inter-party transfers. ==Criticism on FTA's== In 2011 the EU signed a new FTA with Peru and Colombia. There was a lot of opposition to this.<ref>[http://www.tni.org/sites/www.tni.org/files/download/EU-Colombia-Peru-FTA%20Policy%20Brief.pdf] "''Why EU–Colombia/Peru Free Trade Agreements should not be ratified''". Briefing by the [[Transnational Institute]]</ref> Arguments against it are: * it would reward the Colombian and Peruvian government while they are known to violate human rights. Colombia is one of the most deadly countries for trade unionists <ref>[http://survey.ituc-csi.org/+-Colombia-+.html] ''Annual survey of violation of trade union rights'' by the ITUC.</ref> * increase investments that also increase [[land grabbing]] and forced displacement of people from their homes. * undermine the rights of indigenous citizens * undermine the regional integration in Latin America's oldest regional trading block * prevent Peru and Colombia from boosting employment in local industries. ==Lists of free trade areas== [[File:Economic integration stages (World).png|thumb|right|334px|Stages of [[economic integration]] around the World:<br>(each country colored according to the most advanced [[trade pact|agreement]] that it participates into.) {{legend|#008000|[[Economic and Monetary Union]] ([[CARICOM Single Market and Economy|CSME]]/[[Eastern Caribbean Currency Union|EC$]], [[Economic and Monetary Union of the European Union|EU]]/[[Eurozone|€]])}} {{legend|#00FF00|[[Economic union]] ([[CARICOM Single Market and Economy|CSME]], [[Single market of the European Union|EU]])}} {{legend|#00FFFF|[[Customs and Monetary Union]] ([[Economic and Monetary Community of Central Africa|CEMAC]]/[[Central African CFA franc|franc]], [[West African Economic and Monetary Union|UEMOA]]/[[West African CFA franc|franc]])}} {{legend|#804000|[[Common market]] ([[European Economic Area|EEA]], [[European Free Trade Association|EFTA]])}} {{legend|#FF8040|[[Customs union]] ([[Andean Community|CAN]], [[Customs Union of Belarus, Kazakhstan and Russia|CUBKR]], [[East African Community|EAC]], [[European Union Customs Union|EUCU]], [[Southern Common Market|MERCOSUR]], [[Southern African Customs Union|SACU]])}} {{legend|#FF0000|[[List of multilateral free trade agreements|Multilateral Free Trade Area]] ([[ASEAN Free Trade Area|AFTA]], [[Central European Free Trade Agreement|CEFTA]], [[Common Market for Eastern and Southern Africa|COMESA]], [[Greater Arab Free Trade Area|GAFTA]], [[Gulf Cooperation Council|GCC]], [[North American Free Trade Agreement|NAFTA]], [[South Asia Free Trade Agreement|SAFTA]], [[Central American Integration System|SICA]], [[Trans-Pacific Strategic Economic Partnership|TPP]])}}]] * [[List of bilateral free trade agreements]] * [[List of multilateral free trade agreements]] ''Every [[customs union]], trade [[common market]], [[economic union]], [[customs and monetary union]] and [[economic and monetary union]] has also a '''free trade area'''''. <!-- listed are free trade areas only - see respective articles for lists of preferential trade areas; common markets; customs unions; economic unions; customs and monetary unions; economic and monetary unions --> == Qualifying for a free trade agreement == {{main|Rules of Origin|Cumulation}} 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 a finished good will not be disqualified from preferential treatment if the non-originating content of that finished good is 7% or less of the transaction value of the good on an FOB basis (or its weight, depending on the type of good). * 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. ==See also== *[[List of free trade agreements]] *[[List of bilateral free trade agreements]] * EU-[[African, Caribbean and Pacific Group of States|ACP]] [[Economic Partnership Agreements]] *[[United States free trade agreements]] *[[European Union free trade agreements]] *[[Euro-Mediterranean free trade area]] *[[Free trade areas in Europe]] ==References== {{reflist}} ==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://ec.europa.eu/enterprise/policies/international/facilitating-trade/free-trade/index_en.htm EU FTAs] * [http://www.acp-eu-trade.org/index.php?loc=epa/ EU-ACP countries Economic Partnership Agreements (EPA) Negotiations: Where do we stand?] * [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] * [http://www.wto.org/english/tratop_e/region_e/eif_e.xls Agreements notified] to the [[General Agreement on Tariffs and Trade]]/[[World Trade Organization]] {{DEFAULTSORT:Free Trade Area}} [[Category:Trade blocs|*]] [[Category:Lists of organizations]] [[Category:Free trade agreements|*]] [[Category:Economic integration]] [[ar:منطقة التجارة الحرة]] [[be-x-old:Прастора вольнага гандлю]] [[ca:Àrea de lliure comerç]] [[de:Freihandelsabkommen]] [[es:Tratado de libre comercio]] [[fr:Zone de libre-échange]] [[he:אזור סחר חופשי]] [[ko:자유 무역 협정]] [[io:Kontrakto pri libera komerco]] [[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:Hiệp định thương mại tự do]] [[zh:自由贸易区]]'