Free trade agreement (FTA) is a crucial part of international trade as it allows two or more nations to trade with each other without any barriers or restrictions. FTAs provide numerous benefits such as increased market access, lowered tariffs, greater competition, and increased foreign direct investment.
Recent studies have shown that free trade agreements have significant effects on the economy of the participating countries. These studies have been conducted to assess the impact of existing free trade agreements on trade flows, economic growth, income, and employment.
One study that gained a lot of attention was done by the Peterson Institute for International Economics. The study found that the United States` free trade agreements had a net positive economic impact on the US GDP. The study also indicated that these agreements created a better market for US products and services, as well as reduced the cost of imports for US consumers.
Another study, done in 2019 by the Institute for International Economics, found that free trade agreements increased the volume of bilateral trade between member countries by an average of 28%. The study also showed that free trade agreements boost efficiency by allowing countries to specialize in producing goods and services that they are most efficient in.
However, it is not just the US that benefits from free trade agreements. In a study done by the Asian Development Bank, they found that the ASEAN Free Trade Area (AFTA) had a significant impact on the ASEAN region. The study showed that AFTA led to an increase in intra-ASEAN trade, which was critical for the region`s economic growth.
While free trade agreements have several benefits, there are also some challenges that come with them. One of the significant challenges is that free trade agreements can lead to job losses in some sectors, especially in industries that are not competitive. Therefore, governments need to be proactive in providing support and retraining programs for workers affected by free trade agreements.
In conclusion, the study of free trade agreements` impact on the economy is crucial in determining whether they are beneficial or not. The studies discussed in this article show that free trade agreements have a net positive effect on GDP, trade flows, and economic growth. However, policymakers must be aware of the challenges that come with free trade agreements and provide the necessary support to ensure that their citizens benefit from these agreements.