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A treaty between participating economies setting conditions to reduce or remove specified barriers to their trade.
Save conceptA free trade agreement, or FTA, is a treaty through which participating economies set conditions intended to reduce or remove specified barriers to trade. Agreements differ in their coverage: some focus on goods, while others also include services, investment or related rules. The title alone does not describe every commitment.
Governments negotiate which products or activities are covered, what conditions apply and when changes take effect. Businesses must meet applicable eligibility requirements before using preferential terms. The agreement can address border charges and procedures as well as rules about how products are treated in a market. Negotiation, signature and entry into force are separate stages.
Imagine a hypothetical manufacturer selling a product to a partner economy. An agreement may provide a lower import charge if the product meets the stated origin requirements. The business still needs appropriate documents and must comply with the destination’s product rules. Goods that do not qualify may face the ordinary terms even though the exporting country is a treaty participant.
An FTA does not mean every barrier disappears or that every participant benefits equally in every sector. It is also distinct from a customs union with common external trade arrangements. Reviewing an existing agreement begins a process of negotiating changes; an announced review or timetable does not itself implement revised rules.
India and ASEAN set deadlines for unfinished goods-pact review