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Free Trade Agreements

Definition

These are treaties between two or more countries to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances.

Analogy

Think of Free Trade Agreements like a group of friends deciding not to charge each other for borrowing clothes. They agree that it's beneficial for everyone if they can freely exchange outfits without any 'fees' (tariffs), making it easier and cheaper to get ready for different occasions.

Related terms

Tariffs: These are taxes imposed on imported goods and services, used by governments to generate revenue or protect domestic industries from competition.

Trade Barriers: These are measures that governments or public authorities introduce to make imported goods or services less competitive than locally produced goods and services.

Economic Integration: This is an arrangement between different regions that often includes the reduction or elimination of trade barriers, and the coordination of monetary and fiscal policies.