In today`s globalized world, free trade is becoming the norm rather than the exception. Free trade agreements (FTAs) are agreements between countries that promote trade and eliminate barriers such as tariffs, quotas, and other trade restrictions.
But why do countries join free trade agreements? There are several reasons why countries opt to join FTAs.
To Promote Economic Growth
Free trade agreements are designed to increase trade between countries, leading to increased economic growth. Increased trade means increased markets, which leads to more jobs and more profits. Importantly, FTAs can open up new markets for a country`s products and services, which can greatly benefit its economy.
To Secure Access to Resources
Some countries join FTAs to secure access to resources that they cannot produce domestically. This is especially important for countries that rely heavily on imports. By joining an FTA, these countries can access resources at a lower cost, making their products more competitive on the global market.
To Reduce Dependence on a Single Market
Joining an FTA can help a country reduce its dependence on a single market. This is particularly important for small countries that rely heavily on one trading partner. Joining an FTA can open up new markets, reducing the country`s dependence on a single trading partner, thus reducing the risk of economic disruption.
To Improve Political Relations
FTAs can also help improve political relations between countries. When countries trade with each other, they develop diplomatic relations that can be beneficial in times of crisis. Joining an FTA can also send a message to the international community that a country is open to trade and collaboration.
To Counterbalance Regional Powers
Finally, some countries may join FTAs to counterbalance the power of regional powers. For example, smaller Asian countries may join an FTA with the US to counterbalance the growing economic power of China in the region.
In summary, countries join free trade agreements to promote economic growth, secure access to resources, reduce dependence on a single market, improve political relations, and to counterbalance regional powers. FTAs are becoming increasingly popular in today`s globalized world, and understanding their benefits can help countries make strategic decisions when it comes to trade.