FTA
Category: trade
Free Trade Agreement — bilateral or multilateral agreement reducing tariffs between countries.
A Free Trade Agreement (FTA) is a treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers on goods traded between them. FTAs typically include rules of origin requirements to ensure that only goods produced in member countries qualify for preferential tariff rates. Major FTAs include USMCA (US-Mexico-Canada), RCEP (Asia-Pacific), and the EU's network of trade agreements.
Examples
- • A seller manufacturing products in Vietnam can benefit from preferential duty rates under the RCEP agreement when exporting to Japan or South Korea.
- • To qualify for USMCA preferential rates, goods must meet specific rules of origin — e.g., a certain percentage of the product's value must originate in the US, Mexico, or Canada.
- • A Chinese manufacturer exporting to the EU cannot benefit from preferential EU tariff rates unless the goods qualify under a specific FTA between the EU and China (limited).