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Free Trade Agreement Essay

2785 words - 11 pages

IntroductionOne of the very first concerns of the recent international business participants has been stressed in the context of Free Trade Agreement (FTA) since more and more countries pursue it in the regional or multilateral trade initiatives with large benefits derived from it.Free trade is a trade between nations where the government exerts minimal influence on the exporting and importing decisions or a firm or individual (Mahoney, Trigg, Griffin and Pustay, 2001, p. 244). Free Trade Agreement (FTA) is by definition a trade agreement negotiated by countries involved, in purpose of eliminating trade barriers, promoting freer trade activities in international business literature. Free trade agreements are legally binding agreements between two or several states to remove all, or nearly all, barriers to trade between countries (AAR, 2004). They are instruments for trade liberalizations and economic integration. They are usually differentiated from multilateral trade agreements that are managed by the World Trade Organization (WTO), which is the only global international organization dealing with the rules of trade between nations (WTO official website, http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm).There are quite a few FTAs existing in different sorts of economies like North America FTA (NAFTA) and some ones are being negotiated such as FTA between China and New Zealand, all of which are playing significant roles in regional or multilateral trade liberalization. A bilateral FTA could bring forward the benefits from international trade liberalization, underpin cooperation relationship between countries, provide customers with lower prices and variety of goods and services, help international business enhance its competition, increase job opportunities, and eventually reach the goal of mutually economic growth.The view that difference between FTAs and WTO'S rules will be discussed, followed by introductions of some existing and ongoing FTAs with the benefits from these existing FTAs. I will highlight the case of China-New Zealand FTA negotiation through background information of both countries agreeing to negotiate the framework of FTA. Furthermore, analysis will also be given for both China and New Zealand's gains from a bilateral FTA. Finally, the paper will conclude that for achieving a successful FTA, any party should make "concessions" in opening up their markets and consider negotiation based on a long-term benefits.DiscussionInternational FTA ContextBefore we discuss the benefits from Free Trade Agreement (FTA), it is necessary to clarify the importance of international trade. International trade is defined as a "voluntary exchange of goods, services, assets or money between a person or organization located in one country and a person or organization located in another country" (Mahoney et al, 2001, p.98).The long-standing international trade policy of supporting trade liberalization adopted by one country is consistent with...

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