When two or more countries decide to engage in trade, they often enter into a free trade agreement (FTA). This agreement is designed to eliminate barriers to trade between the participating countries, such as tariffs or quotas. Under an FTA, goods and services can be traded freely, without the usual restrictions that might apply to trade between non-participating countries.

One example of an FTA is the North American Free Trade Agreement (NAFTA). This agreement was signed by Canada, Mexico, and the United States in 1994, and it eliminated tariffs on goods traded between the three countries. NAFTA has since been replaced by the United States-Mexico-Canada Agreement (USMCA), which was negotiated in 2018 and came into force in 2020.

Another example of an FTA is the European Union`s trade agreement with South Korea. This agreement, known as the EU-Korea FTA, was signed in 2010 and came into force in 2011. Under the agreement, the EU and South Korea agreed to eliminate tariffs on 98.7% of goods traded between them over a period of five years. The agreement also includes provisions on intellectual property, services trade, and investment.

FTAs can benefit participating countries in a number of ways. By eliminating barriers to trade, they make it easier and cheaper for businesses to sell their goods and services in other markets. This can lead to increased economic growth and job creation. FTAs can also help countries to diversify their trade relationships, reducing their dependence on any one market or country.

However, FTAs can also have drawbacks. Some critics argue that FTAs can lead to job losses in certain industries, as companies move their operations to countries with lower labor costs. FTAs can also make it more difficult for governments to regulate certain industries, such as agriculture or pharmaceuticals.

Overall, FTAs are an important tool for countries looking to promote trade and economic growth. While they have their pros and cons, they can help to create new opportunities for businesses and consumers alike. As trade continues to evolve in the global economy, FTAs are likely to play an increasingly important role in shaping the future of commerce.