North american free trade agreement nafta upsc

Trade agreements are like special rules that countries make to trade with each other. They can be different in how they work. Here are the main types:

Free Trade Agreement (FTA)

This is when countries decide to trade without extra taxes or limits on goods. It's like a trade friendship to help each other's economies.

Customs Union

In this agreement, countries trade freely. They also make the same trade rules for others outside the union. It's like having a shared rulebook for trading.

Common Market

Countries in a common market trade freely. They also let people, money, and services move easily between them. It's like making it simpler to live, work, and do business in different countries.

Economic Union

This is like a common market but with more cooperation. Countries agree on things like money, taxes, and economic policies to boost their economies even more.

Trade Blocs

These are groups of countries that make deals to help each other trade better. They work together and might have similar rules for trading.

Bilateral Agreements

When two countries make a deal to trade with each other, it's called a bilateral agreement. They agree on specific terms to benefit each other.

• 13 All India Mock Test Series
• 123 Chapter Test
• 31 Subject Test
• +129 more tests

• 32 State PSC Level Test
• 27 UPSC Level Tests

English,Hindi + 7 More Available in: English, Hindi, Bengali, Marathi, Telugu, Tamil, Malayalam, Gujarati, Kannada,

• 36 State PSC Level Test
• 36 UPSC Level Tests

• 29 State PSC Level Test
• 25 UPSC Level Tests

• 33 Art and History
• 9 Polity and Governance
• 24 Geography
• +26 more tests

• 24 Monthly 2024
• 92 Topic Wise 2024
• 29 Yearly Roundup 2023

List of Free Trade Agreements by India

At present, India has signed 13 FTAs the list is as follows :

• India-Sri Lanka
• South Asia Free Trade Area (India, Nepal, Sri Lanka, Afghanistan, Bhutan, Maldives, Pakistan, Bangladesh )
• India-Nepal
• India- Bhutan
• India Thailand
• India- Singapore
• India- ASEAN
• India- South Korea
• India-Japan
• India-Malaysia
• India -Mauritius
• India- UAE
• India-Australia

With India Opening up its economy in the early 1990s, Sri Lanka was the first country with whom India signed the Free Trade Agreement and subsequently with other nations and organizations. Following trends have been observed as the impact of FTA on the Indian Economy

• Increase in Exports
• Significant Gains from SAFTA
• A rise in trade deficit with ASEAN, Japan and South Korea
• Low Utilization of FTAs as per Asian Development Bank
• Limited growth in Value added sector

Rationale Behind Free Trade Agreements

Here's why countries make FTAs:

• More Trade: FTAs help countries trade stuff easily and more often.
• Fewer Taxes: They cut taxes on traded things, so they're cheaper.
• Economic Boost: More trade means more jobs and money for countries.
• Learning and Sharing: Countries learn from each other's ways to make things and grow food.
• Better Relations: Good trade relations can make countries get along better.
• Global Presence: FTAs help countries play bigger roles in the world.
• Innovation: FTAs encourage companies to make better stuff and do cool things.

India ASEAN Free Trade Agreement

India ASEAN FTA (AIFTA) is an agreement between India and 10 members of the Association of Southeast Asian Nations. Talks began in Oct 2003 in Bali, Indonesia, and the Final agreement was signed in Aug 2009. This will lead to tariff liberalisation of 90% of products between these two nations and has also led to the creation of one of the largest FTA. Some products to name are Palm Oil, Coffee, Black Tea and Pepper.

South Asian Free Trade Agreement (SAFTA)

SAFTA came to force in 2004 and came to force in 2006 with the agreement between Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. One of the major goals of SAFTA was to reduce customs duties imposed by countries.

India EU Free Trade Agreement

Recently India's EU conducted the first round of talks with regard to the FTA. The second round of talks is scheduled to be held in OCT 2022 in Brussels. The European Union is a group of 27 countries. An agreement of FTA with these nations will gain India’s economy significantly.

Significance of FTA for India

In the post, COVID world FTAs pose special significance for India because of the following reasons.

• Exports have been essential in India’s growth.
• Connecting the Indian market to global Markets
• Increasing trade risk diversification
• Enhances innovation and, In turn, competition
• Opportunities for India in the post-COVID world due to structural changes such as working from home and Thus increasing India’s tradable services, capitalizing on sectors which bigger economies have been surrendering

Benefits of Free Trade Agreement

A Free Trade Agreement (FTA) is like a special handshake between countries for trading. It brings some advantages:

• With an FTA, countries can buy and sell from each other without extra taxes. This means more stuff to choose from, like different foods and gadgets.
• When taxes are less, goods become cheaper. People can save money on things they buy every day.
• FTAs can boost a country's economy. More trade means more jobs, more money, and a happier country.
• Companies can explore new markets and sell their products to more people. This helps them grow and create more jobs.
• Countries can learn from each other's skills and ideas. They can share technology and knowledge to improve their industries.
• FTAs make sure companies are treated fairly. They protect things like patents and copyrights, so no one can copy someone else's stuff.
• When countries trade well, they usually get along better. It's like a friendly way of building good relationships.
• FTAs encourage innovation. When companies know they can trade freely, they work harder to make better products.

Check out this link to read about the World Bank here!

Cons of FTA

• Development always comes with a cause, and in this case, it is the degradation of the environment and natural resources. As there is more land required for setting up factories because of increased business opportunities
• The will be more job outsourcing.
• There can be poor working conditions.

Issues and Challenges of Free Trade Agreement

Some of the factors that have been hampering India’s growth in FTA as expected are:

• Small businesses don't know much about FTAs, so they don't use them much.
• India's trade balance is off with ASEAN, Japan, and Korea. The trading quality isn't good.
• India's exports struggle because of high costs and slow systems.
• Some Indian policies like Atmanirbhar Bharat make it look like India is self-centered.
• Too many agreements can mess up trade. Like, India has its own deal with Bhutan and SAFTA.

Issues with Developed Countries

• Rich countries have tough quality rules. Indian stuff can't match, like seafood blocked by Western rules.
• Developed countries use FTAs to sell more, hurting others.
• Australia and New Zealand selling milk in India hurt local milk.

Measures Taken by India to Improve the Ties

For any economy to grow and stand at par with global standards, its Free Trade Agreement needs to be sustainable in a certain manner. Some of the steps that can be taken in this regard are:

• Strengthening Rules of Origin Mechanism- CAROTAR 2020, I.e. the Customs (Administration of Rules of Origin under Trade Agreements) have laid out necessary checklists for the Importer to see if rules of origin criteria are met or not.
• Continuously Reviewing older FTAs, making them more User Friendly and compatible with new-age technologies and rules.

Way Forward to a Much Stronger Free Trade Agreement

Making FTAs better needs some actions:

• Educate Small Businesses and companies about FTAs so they can use them well.
• Fix bad trading terms with partners like ASEAN, Japan, and Korea.
• Help Indian products compete by lowering costs and improving systems.
• Balance policies like Atmanirbhar Bharat to show cooperation, not just self-focus.
• Simplify trade deals to avoid messy connections like the Bhutan-SAFTA case.

Dealing with Developed Countries

• Match rich countries' quality rules to export better.
• Ensure fair competition in FTAs to help all nations.
• Protect local markets from foreign products that harm domestic goods.

Download the PDF on Free Trade Agreement Notes for UPSC Exam!

We hope all your doubts regarding the “Free Trade Agreement” are addressed after going through this article. Testbook provides comprehensive notes and online classes for UPSC, including different competitive examinations. It has always assured the quality of its product, like content pages, live tests, GK and current affairs, mocks, and so on. Ace your preparation with the Testbook App!

• Difference between Epidemic, Pandemic and Endemic UPSC Notes
• Caatsa Outline
• United Nations Office On Drugs And Crime
• Copernicus Programme
• Interpol
• Queqiao Satellite
• Terminal High Altitude Area Defense
• Dark Net
• Anita Kaul
• Black Box Trading

What is Free Trade Agreement?

ree Trade Agreement can be defined as an agreement between two or more nations under which free trade without any barriers or conditions is allowed between the parties agreed to.

What are the benefits of the Free Trade Agreement?

A country's prosperity depends upon trade and agreements with other countries as it contributes to greater economic activities and job creation and provides an opportunity for big and small businesses to benefit from greater trade and investment.

With which country India is in an FTA agreement?

Is Free trade good for Developing Countries?

Yes, it can help a developing country to specialize more in the quality of goods it is producing and thus can help in overall export. Countries that are open to internal trade can innovate and have better productivity which will in turn provide higher income and better opportunities for their people.

Are there any Environmental effects due to Free Trade?

Yes, as there will be an increase in demand for goods and services which will lead to greater economic activity. This will place a major impact on natural resources energy and Fossil fuels and cause environmental degradation too due to pollution.

What are some problems associated with FTAs?

Quality issues and Standards set up by Some western countries pose a major problem in India's export meeting the desired criteria and thus become a problem for the producer.

How do free trade agreements work?

FTAs are treaties between two or more countries designed to reduce or eliminate certain barriers to trade and investment, and to facilitate stronger trade and commercial ties between participating countries.

What is the North American free trade agreement?

The North American Free Trade Agreement was an agreement signed by Canada, Mexico, and the United States that created a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.