Free trade agreement and common market are two terms that are often used interchangeably, but they are actually two different concepts. While both aim to promote trade and commerce between countries, they have significant differences that can affect the way businesses operate and the economy as a whole.

Free Trade Agreement

A free trade agreement (FTA) is an agreement between two or more countries to reduce or eliminate tariffs, quotas, and other trade barriers between them. FTAs are designed to promote free trade by allowing goods and services to move more easily between countries.

Under an FTA, each country agrees to reduce its trade barriers to a certain level, allowing for a more open flow of goods and services across borders. This means that businesses can export their products to foreign markets more easily, leading to increased trade and investment.

One of the key features of an FTA is that it does not require the formation of a single market. Each country maintains its own regulations and rules related to trade and commerce, making it easier for businesses to adapt to different markets.

Common Market

A common market, on the other hand, is a more integrated form of economic cooperation between countries. In a common market, members of the agreement not only remove trade barriers, but they also adopt common rules and regulations related to trade and commerce.

This means that businesses can operate under a single set of rules across multiple markets, making it easier for them to trade and invest across borders. Members of a common market also typically allow the free movement of goods, services, and people between their countries.

The European Union (EU) is an example of a common market. EU member countries adopt common rules related to trade, agriculture, and other areas, making it easier for businesses to operate across multiple countries. However, businesses must comply with a more extensive set of regulations, which can make it more challenging to enter the market.

Which is better?

The choice between a free trade agreement and a common market depends on the specific needs and goals of the countries involved. FTAs are typically easier to negotiate and can lead to increased trade between countries, making them a good choice for countries that are just starting to build economic ties.

On the other hand, common markets offer a more integrated approach to economic cooperation, which can lead to more significant benefits in the long run. However, they require a greater degree of cooperation and harmonization between countries, which can be challenging to achieve.

Overall, both free trade agreements and common markets can promote economic growth and benefit businesses. The key is to understand the differences between the two and choose the option that best suits the needs and goals of the countries involved.