Trade Barriers Essay Example | Topics and Well Written Essays - 2000 words

Trade Barriers - Essay Example With the fall of imperialism the captains of the industry, working alongside their national governments, evolved a system of reducing tariffs or bringing uniformity in them to trade with their neighbors that offered them better terms with respect to the exchange of goods and services. The aim was economic prosperity through the reduction in costs and higher profits through competitive advantage. This brought about bi-lateral agreements between two nations.  With the expansion of trade between several countries, these agreements involved more countries and this was the birth of Free Trade Areas (FTA). FTA’s are drivers of growth and development.   They make use of country comparative advantages, encourage specialization and division of labor, expand the size of export markets, and promote efficiency and competitive environment within the region.  The oldest FTA was the former European Economic Community (EEC) that was formed by six nations, Belgium, France, Germany, Italy , Luxembourg, and the Netherlands. The intention was to form a designated group of countries that agreed to eliminate tariffs and restrictions on most goods traded between themselves to promote greater economic benefit. When others realized the benefits of this association, they too joined and the EEC expanded and became an economic bloc that negotiated uniformly as one unit with other nations to set quotas and preferences for the benefit of EEC members. It has now expanded to become the European Union (EU) with more things in common besides free trade between its members.  The basic FTA is an agreement between member countries to reduce or eliminate trade barriers and tariffs among them. However, in such cases, the member nation is not bound to have a common external trade policy for non-member countries.  A prime example of this is the North American Free Trade Agreement (NAFTA) comprising of the United States, Canada, and Mexico.