1. What are “free trade areas”?

Free trade area are those regions in which several countries have signed a free trade agreement

(Farole, 2011) . Such areas will have no import tariffs or quotas on goods from one nation

entering another. This is mainly done to limit trade barriers like quotas and tariffs between

each other (Chappelow,2019) . Free trade areas can increases the volume of international trade

amongst the member countries and also results in greater specialization and better

international division of labour. Examples of free trade areas include NAFTA (United States,

Mexico and Canada), EFTA (European Free Trade Association consists of Norway, Iceland,

Switzerland and Liechtenstein) and Pacific Alliance (Chile, Colombia, Mexico and Peru).

2. What are three (3) of the world’s major free trade areas? What countries are involved in

these three areas?

Some of the major free trade areas are as follows:

 NAFTA: The North American Free Trade Agreement was formed on January 1994

between Canada, Mexico and the United States to mainly lower investment and trade

barriers over a fifteen-year period (Trilling, 2017). This resulted in the three nations

becoming on of the largest free market in the world. NAFTA was mainly formed to

remove trade barriers to manufacturing, agricultural and services; to protect property

rights, and remove restriction to investments.

 AFTA: The Association of Southeast Asian Nations Free Trade Area was formed in 1992

with its original members Philippines, Thailand, Singapore, Brunei, Malaysia and

Indonesia. Vietnam, Laos, Myanmar and Cambodia later joined the agreement in the

following years. This helped in removal of all import and export duties on goods that were

traded between the member nations (Myers, 2016).

 EFTA: also known as the European Free Trade Association, EFTA is free trade area and a

regional trade agreement between four different European countries: Norway,

Switzerland, Iceland and Liechtenstein (Myers, 2016).

3. What are open borders? Do open borders refer to the flow of goods, services, people, or

all of these?

The term open borders is usually associated with the free movement of people amongst

countries or political jurisdictions. A country can have open border due to no border control

law, its government or due to the lack of resources required to come up with strict

immigration laws. Open borders only apples for the flow of people and not the flow of

services and goods. The term “open borders” usually means that people can travel from and to

a country without presenting legal documentations, visa or a passport. But this doesn’t mean

that person will automatically receive citizenship (Longely, 2019).

4. Give two (2) examples of countries/areas with open borders.

Two examples of countries/areas with open borders are:

 European union (Schengen Area): free movement of people is a guaranteed right to the

citizens in the EU region. This right allows all he citizens of EU to live, work and travel

freely in any of the EU country without the requirement of special formalities. The

Schengen cooperation further enhances this freedom by giving the citizens the right to

travel across internal borders without undergoing any border checks. This border free

Schengen Area currently allows the movement of more than 500 million EU citizens, as

well as many businessmen, non-EU citizens, businessmen and other people legally present

within the EU area (European Commission, 2020).

 Common Travel Area: CTA is an open border area that consist of Ireland , United

Kingdom, the Channel Islands and the Isle of Man. According to the agreements under the

CTA, British and Irish nationals can cross borders within the area with minimal controls
 and documents. The maintenance of the Common Travel Area still requires a considerable

amount of corporation on immigration policies between Irish and British authorities.

5. Do you think open borders are positive or negative? Give one (1) argument for open

borders and one (1) argument for closed borders?

One of the main arguments of open borders is that it stimulates economy to a great extent. It is

very clear from the history that immigration has surely helped boost the economies of

countries. Immigrants, who are subjected to lack of opportunity and poverty are usually

willing to do a lot of important work that people of their new countries are reluctant to do.

Once they find new job and are employed, they bring in significant contribution to the

domestic society and economy. Immigrants in workforce has the potential to increase

production and also helps raise the annual GDP of the country they work in. For instance, in

the USA, it is estimated that the immigrant population increases the GDP by 36 to 72 billion

dollars per year.

On the other hand, this stimulation of the economy only happens if the tax they pay is higher

than the cost they create. This scenario only happens if the immigrants entering the country is

highly educated and therefore gets a higher income. But historically speaking, majority of the

people who immigrate to other countries are often not educated and are from the lower-

income demographic. Hence this creates drains the economy than benefiting it (Longely,

2019).

6. What are Free Trade Agreements?

FTA’s are usually considered as an agreement between two or more countries, mainly formed

to decrease trade barriers to exports and imports. Under an FTA policy, services and goods

can be sold or bought across the borders of different nations with no or very minimal quotas,
subsidies or tariffs. Free Trade Agreements also have a significant impact on international

trade.

7. Name and explain four (4) advantages and four (4) disadvantages of Free Trade

Agreements.

The advantages of FTA are as follows:

 FTA’s between countries can lead to increased foreign direct investments by attracting

potential investors. This is very beneficial because it adds to the capital of the country and

also helps expand domestic industries and businesses. Increased foreign direct investments

can also help bring in U.S dollars to several isolated nations.

 With the help of FTA’s between countries, local businesses will get access to the latest

technologies from multinational and global partners.

 Often, without FTA’s countries often tend to protect their local businesses and domestic

industries from foreign competition. This kind of protection can stagnate them and make

them non-competitive on the global market. When FTA’s are formed, this protection is

removed, and domestic businesses tend to become global competitors.

 Free Trade Agreements have also historically increased economic growth between

member nations. For example, according to the United States International Trade

Commission, NAFTA has the potential to increase the U.S. economic growth by 0.1%-

0.5% annually (USMCA,2017).

The disadvantages to FTA’s are:

 When tariffs and quotas are reduced, companies usually look to expand into other

countries where the cost of production is often very less. This results in outsourcing of

several job and contributes to unemployment. For example, in United States, several

companies in the manufacturing sector laid of huge number of workers after the
 formation of NAFTA. A lot of critics argue that one of the main downsides of NAFTA

is that it contributed to unemployment and sent lots of jobs to Mexico (CRS, 2017).

 FTA’s can also contribute to the theft of intellectual property. This is mainly due to the

reason that several developing nations still doesn’t have the adequate rules to protect

new inventions and patents. Due to this, businesses often get their ideas stolen and

imitated by knock-offs.

 When MNC’s expand into developing countries and outsource jobs, they often oversee

the labour protection rules. Due to this, children and women are often subjected to

sub-par conditions often risking their own health.

  When global companies brings in development into isolated and preserved areas,

indigenous cultures can be negatively affected. Local communities are often disrupted,

and natural resources are also exploited.

8. List and explain one (1) Free Trade Agreement that the UAE is currently a signatory to.

The United Arab Emirates is a part of several bilateral and multilateral trade agreements with

several countries within the Gulf Cooperation Council (GCC). Due to this, the country has

strong relations and economic ties with Bahrain, Oman, Kuwait and Saudi Arabia. GAFTA is

a free trade agreement that UAE is currently signed to. Under the GAFTA (Greater Arab Free

Trade Area Agreement), the U.A.E. has free access to Bahrain, Egypt, Iraq, Jordan, Kuwait,

Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Syria, Tunisia, and Yemen

(Ubaydli, 2016).

The countries under the GAFTA can enjoy various privileges including complete exemption

from non-tariff and custom duties on import (produced by the member states only). Some of

the exempted commodities are animal and agricultural products, semi-finished goods, non-

metallic and mineral materials etc. This agreement which was formed in the year 1998 is still

considered as an important in promoting trade between the member states till date.
9. Which country currently has the most Free Trade Agreements?

As per WTO, EU’s 28 countries are the ones with the most number of trade agreements with

the rest of the world (Statistica, 2019). The EU as of today has 41 trade agreements with

individual nations or with other FTA areas, along with FTA agreement among the member

nations.

The country with the highest number of trade agreements with other nations after the EU is

Switzerland. Switzerland currently has 31 agreements. This is followed by Iceland and

Norway, each having 31 and 30 agreements.

10. Name Canada’s current Free Trade Agreements and a short summary of the goal of each

agreement.

Canada has multilateral and bilateral FTA’s with several countries across the world. The list

and the goal of each agreement are as follows:

 Canada – Chile Free Trade Agreement (CCFTA): this agreement was formed on 5th

January 1997, making it one of the oldest trade deals of Canada. CCFTA was also one of

the first FTA signed with a South American country. The primary goal of this trade

agreement was to open foreign markets for Canadian suppliers. Since its enforcement, it

has tripled the two-way merchandise trade between the two countries.

 Canada – Colombia Free Trade Agreement (CCOFTA): this agreement was formed on

2008. The primary goal of this agreement was the increase Canadian investments ,

particularly in mining, printing, sector, oil exploration, in Colombia. As of 2010, the

merchandise trade between the two countries accounted to 1.4 billion dollars.

 Canada – Costa Rica Free Trade Agreement (CCRFTA): was formed in 2002 and is a

first-generation agreement. It’s primary goal of this agreement is to remove trade barriers

on goods and does not focus cross border services like investments, financial services etc.
 Canada – European Free Trade Association (EFTA): this agreement came to force in

2011. The main purpose of this agreement is to eliminate tariff between European

countries like Switzerland, Norway, Iceland and Liechtenstein.

 Canadian Honduras Free Trade Agreement: The primary goal of this agreement was to

create more opportunities of economic development between the two nations, eliminate

trade barriers and promote conditions of fair competition between the two parties.

 Canada – Israel Free Trade Agreement (CIFTA): was formed in 1997. The primary goal

of this agreement was to eliminate 80% of the tariffs non-agricultural and manufactured

goods between the two nations.

 Canada – Jordan Free Trade Agreement (CJFTA): was formed in 2012. As per this

agreement, Canada will remove 97% of its tariff implemented for goods coming into the

country from South Korea and South Korea will remove 98.2% of its tariff lines on goods

from Canada.

 Canada – Panama Free Trade Agreement (CPAFTA): was formed on April 2013. Its main

goal is to focus more on labour corporation between the two nations and also on cross-

border trade.

 Canada – Peru Free Trade Agreement (CPFTA): was formed in 2009. Looks into cross

border trade, along with environmental and labour corporation.

 North American Free Trade Agreement (NAFTA): was formed in 1994. The main goal of

this FTA was to remove all non-tariff and tariff barriers that affects trade and investment

between Mexico, Canada and the USA. It is one of the biggest free trade regions in the

entire world.

 Comprehensive Economic and Trade Agreement (CETA): was signed in 2016. It is an

FTA between the EU and Canada. Its was enacted to remove 98% of tariffs between the

two parties.
REFERENCES:

Bulchholz, K. (2019). Which Countries Have the Most Trade Agreements?: Statisca.
Retrieved from https://www.statista.com/chart/18991/countries-with-most-trade-agreements/

Congressional Research Service. (2017). The North American Free Trade Agreement.
Retrieved from https://crsreports.congress.gov/product/pdf/R/R42965/15

Chappelow, J. (2019). Free Trade Area. Retrieved from

https://www.investopedia.com/terms/f/free_trade_area.asp

European Commission. (2020). Schengen borders and visas: Migration and Home Affairs.
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visas/schengen_en

Farole, T., & Akinci, G. (2011). Special Economic Zones - Progress, Emerging Challenges
and Future

Longely, R. (2019). Open Borders: Definition, Pros and Cons. Retrieved from
https://www.thoughtco.com/open-borders-4684612

Myers, J. (2016). The world’s free trade areas – and all you need to know about them. World
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https://journalistsresource.org/studies/international/globalization/nafta-jobs-wages-reviewing-
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https://www.mercatus.org/expert_commentary/gcc-free-visa-problem