Free Trade Area - A Basic Overview

A free trade area is a group of countries that have agreed to reduce or eliminate tariffs and limitations on goods. It is designed to reduce importation taxes and is governed by the World Trade Organization. In layman's terms, this means that the trades Canada, the United States, the United Kingdom and the other thirty one countries have entered into will not involve raised prices on the items in question, nor will it affect the skilled trades.

Okay, that was a bit on the technical side and may have seemed a bit dry. Let us try to break it down into terms that are a bit easier to understand. Goods and services are produced within a country in surplus. That means that we produce more than we need so we want to sell the remaining products to make money. People in another country want to buy our product. If there is no trade deal in place, then the product is taxed. It is then left up to the importing country to make up the difference in pricing, to generate revenue. For free trade to work, it means that there will be lower taxes and tariffs on goods so the people of that country can buy the product at a lower price.

There is far more to a free trade area than meets the eye. If you are an economist, then you know the stages of economic integration and that trade areas are only the second part of the six phase process towards total economic integration. But for the layman, you probably do not need to know all of that. You simply need to know the basics about trading and how it affects you in your daily life.