Understanding Free Trade Agreements

Once negotiated, multilateral agreements are very powerful. They cover a wider geographic area, giving signatories a greater competitive advantage. All countries also give themselves the status of the most favoured nation – the granting of the best conditions of mutual exchange and the lowest tariffs. First, maintaining tariffs and other rules in each of the signatories to a free trade area in force at the time of the creation of this free trade area, trade with non-parties in that free trade area must not be higher or more restrictive than tariffs and other rules that exist in the same signatories prior to the creation of the free trade area. zone. In other words, the creation of a free trade area to give preferential treatment to their members is legitimate under WTO law, but parties to a free trade area are not allowed to treat non-parties less favourably than before the creation of the territory. A second requirement under Article XXIV is that tariffs and other trade barriers must be eliminated primarily for all trade within the free trade area. [10] In 2009, China also concluded a free trade agreement with New Zealand, which will be phased in over a 10-year period. The free trade agreement will eliminate all tariffs on Chinese exports to New Zealand by 2016 and eliminate 96% of Tariffs on New Zealand exports to China by 2019. The agreement will also facilitate reciprocal investment and trade in services. The deal has been very beneficial for kiwis like Fonterra. New Zealand`s fishing industry has also benefited. The creation of free trade zones is seen as an exception to the most privileged principle of the World Trade Organization (WTO), since the preferences of the parties to the exclusive granting of a free trade area go beyond their accession obligations.

[9] Although GATT Article XXIV authorizes WTO members to establish free trade zones or to conclude interim agreements necessary for their establishment, there are several conditions relating to free trade zones or interim agreements leading to the creation of free trade zones. In the modern world, free trade policy is often implemented by a formal and reciprocal agreement between the nations concerned. However, a free trade policy may simply be the absence of trade restrictions.