The trade is one of important part of economy. We cannot imagine without trade on economy. When we started trade we might have lots of problems among the countries, so we need to have duties and regulations for the problems. Fro the solve problem we established organizations and agreements.
The all over the world the each country joined one or more the trade organizations. One biggest organization is WTO (World Trade Organization). The 136 countries joined to WTO right now. The principle of WTO is Most-Favoured-Nation Treatment: Treating other people equally under the WTO agreements. Countries cannot normally discriminate between their trading partners, Grant someone a special favour and you have to do the same for all other WTO members. But some exceptions are allowed; the representative of example is the FTA.
What is FTA?
The FTA is abbreviation of Free Trade Agreement; this agreement will remove most barriers to trade and investment among the countries. We also called the FTA to the Regional Trade Agreement, because usually the FTA contracted among the close regional countries: for example, EU and NAFTA.
The special feature on the FTA is that among the members remove trade barriers and tariff, bur for the nonmembers, they apply different tariff to each countries.
The beginning of the trade agreement was about the tariff negotiation for the goods, but the latest of the trade agreement trends are extension to a service, an investment, a labor and etc.
The FTA started in 1950; the beginning countries were Western Europe and USA. After in 1950 the FTA coexists with GATT (General Agreement on Tariff and Trade) and in crease gradually, but after WTO Established, the FTA became diffusion to all over the world rapidly.
Why the FTA continuously increases, even though the WTO exists?
First of all, the USA adhered a negative position in FTA, but after 90’ they come turned to positive position. After the USA changed their position they propelled free trade agreement contracting. The USA is the center country of the world economy so the changing their position is enough to call the ripple effect to other countries.
The second, the WTO is the multilateral trade system so they have so many members, so they took long time for the entente among nations. Consequently they couldn’t confront immediately to rapidity change in trade liberalization. They preferred the FTA instead WTO because the FTA is more ease to negotiation and it reached an agreement in shorter time.
The third, on these days the economies run by each industry not by government anymore. The globalization of enterprises created transnational enterprises, so they want to remove most trade barriers or reduced tariff with strong-point nation instead trade with worldwide. These are why the countries more interested on the FTA.
What kind of the economic effect for the FTA Contract?
The FTA contract contained two big economic...