What are the Benefits of Free Trade Agreements?

In this age of international trading, it is common to see nations negotiating and entering into free trade agreements with other countries. These agreements, called FTAs, are intended to facilitate higher quality of inter-country trading between the participants across various sectors and industries in their jurisdictions.

Being a prime economic power in Asia, it is only natural, and imperative even, for the Kingdom of Thailand to enter into these FTAs. Right now, Thailand is a signatory in FTAs with the nations of Japan, Australia and the United States, among others.

Let us discuss what the benefits are for the countries that decide to enter into an FTA with other states around the world.

Lower Tariffs for Exports

One of the immediate results of the signing of an FTA is the lowering of trade tariffs imposed on exports from one country to another. For example, the Thailand-Australia FTA resulted to only 6% of Australia’s exports into Thailand being charged with import duties. That does not step there, because the FTA called for the removal of the tariffs on this 6% by 2020 or 2025.

More Markets for Businessmen

The reduced tariffs that the FTAs can result to will open more international markets for the businessmen in both partner countries. This can have the effect of removing monopolies, if there are any, in markets dominated previously by enterprises that have the financial muscle capable of shouldering the expenses incurred from operating in a landscape that charges expensive tariffs on imported products.

This also translates to more options for consumers. With more companies choosing to invest in their country’s markets, they have more products to choose from, for instance, in the supermarkets. Businessmen will run into more competition, but it also gives them a larger consumer base to target and work on.

A More Robust Economy

The general beneficiaries are the respective economies of both nations. When a nation exports and trades with another country, it results to more revenues for the government in the forms of taxes that the businesses pay back. FTAs will also attract foreign investors who are interested in doing business with their nation’s partner countries. This, in turn, will improve investor confidence in the signatories’ economic performance and drive more foreign investment as a result.

More Job Opportunities in Both Nations

As mentioned earlier, once the local market is opened more for international trade, several businesses from one signatory country will want to establish a presence in the other nation’s market. These companies, of course, will require employees to manage their day-to-day operations. This simply means more job opportunities for the locals – a fact that will also benefit the economy in general because of improved spending by the locals, and the influx of income taxes that the governments can use for more development.

There are other areas that an FTA can cover as well, including intellectual property rights for the companies that decide to invest in the new market, as well as a defining competition policy to establish the rights of local and foreign-owned businesses under the new free trade agreement.

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