What is a free trade agreement (FTA)?

A free trade agreement (FTA) is specifically designed to facilitate international trade by reducing or eliminating trade barriers, such as tariffs and quotas, on goods and services between the participating countries. The primary goal of an FTA is to promote increased trade and economic cooperation by allowing for a more fluid exchange of products and services across borders, ultimately enhancing economic growth for the member nations.

Trade barriers can significantly hinder free trade, leading to higher prices for consumers and less competitive markets. By entering into an FTA, countries can create a more open market environment, which encourages competition and can lead to lower prices and more choices for consumers. FTAs also typically include provisions regarding the standards and regulations governing trade, aiming to create a level playing field for businesses involved in international exchange.

Other options present concepts that do not align with the definition of an FTA. For example, increasing tariffs would actually restrict trade rather than promote it, a strategy for bilateral negotiations does not necessarily imply the elimination of trade barriers, and regulations on foreign investments do not directly relate to the fundamental purpose of an FTA, which is focused on the exchange of goods and services.