Free trade area

Commerce

We speak of a free trade area as a place where a trade agreement has been made between two or more countries, which focuses on the elimination of trade barriers within the area delimited by the countries. Looking for greater harmonization between their economies.

Within the different levels of economic integration between countries, the free trade area is considered one of the initial or least advanced states. This elimination of trade barriers (such as tariffs, for example) is proof of this.

However, despite the establishment of common measures to promote their exchange of capital and work, the members of this relationship continue to maintain their own individual national barriers against third countries, so there is still a long way to go in terms of integration or harmonization economical. In the same vein, each individual country will continue at the same time to preserve its own monetary and fiscal autonomy.

Objectives of a free trade area

The main objective of the creation of a free trade area is to stimulate trade and the exchange of production factors among the signatories. As the bases of international trade indicate, this fact normally serves to take advantage of comparative advantages of each region and to reach more efficient market situations.

Examples of free trade area

There are different examples of this type of trade agreement in the world, such as the Common Market of the South or Mercosur (it brings together Argentina, Brazil, Paraguay and Uruguay since 1995) or the NAFTA (North American Free Trade Agreement in Spanish) that has brought together Canada, the United States and Mexico since 1994.

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