Free Trade Agreements (FTAs)

GS 3: Economy 

Definition:
FTAs reduce trade barriers (tariffs, quotas) to promote economic cooperation between nations.

Key Features:

1. Reduction in Barriers: Encourages trade with fewer restrictions.
2. Formal Agreements: Bilateral or multilateral pacts.

Types of Agreements:

1. Preferential Trade Agreement (PTA): Tariff reductions (e.g., India-MERCOSUR).
2. FTA: Eliminates most tariffs (e.g., India-Sri Lanka FTA).
3. Comprehensive Economic Cooperation Agreement (CECA): Includes goods, services, and investments (e.g., India-Singapore CECA).

Significance:

1. Boosts trade and economic growth.
2. Encourages foreign direct investment (FDI).
3. Benefits small businesses and consumers.

Concerns:

1. Revenue loss due to tariff reductions.
2. Dependency on external markets.
3. Impact on local industries.

Way Forward:

1. Address non-tariff barriers.
2. Expand to new markets (e.g., Africa).
3. Enhance domestic industries for global competition.