If a group of countries agrees to abolish all trade
restrictions and barriers and charge very low rates of tariffs among them in
carrying out international trade, such a group is called „free trade area‟.
These countries impose trade barriers with regard to trade with the countries
other than the member countries of the group, independently. Member countries
are free to levy their own external tariffs on goods from outside the free
trade area. Thus, each member country retains autonomy over trade with external
countries and they maintain an internal tariff-free area.
There are several free trade agreements in practice.
The North American Free Trade Agreement (NAFTA) is the best example. Others
include the European Free Trade Association (EFTA), and the Asian Free Trade Area
(AFTA).
A free-trade
area is the region encompassing a trade bloc whose member countries have signed
a free trade agreement (FTA). Such agreements involve cooperation between at
least two countries to reduce trade barriers—import quotas and tariffs— and to
increase trade of goods and services with each other.[1] If people are also
free to move between the countries, in addition to FTA, it would also be
considered an open border. It can be considered the second stage of economic
integration.