Bilateral Free Trade

Bilateral free trade agreement INDIA

BILATERAL FREE TRADE AGREEMENT

DEFINITON A Bilateral free trade agreement ( BTA ) is a trade agreement between any two countries in order to reduce tariffs and quotas on items traded between themselves . A BTA may be either preferential , wherein benefits and obligations apply only to the two signatories , or most favored , which applies terms that are already given to other nations under similar agreements .

" We always use bilateral free trade agreements to move things beyond WTO standards . By definition , a bilateral trade agreement is 'WTO plus' ." -- Pascal Lamy, then EU Commissioner for Trade The Jakarta Post, 9 September 2004

FREE TRADE AGREEMENT A formal arrangement between two or more countries to reduce or Eliminate tariffs , quota and barriers to trade in product and services .

BFTA Objectives

qBetter market access qTrade and investment facilities and promot qGreater competitiveness for exports qCapacity building through technical cooperation and collaboration

Issues qGoing beyond trade qMarket fragmentation qTrade distortions qTransaction costs qLoss of sovereignty

BFTA Include :Free trade area Custom union Common market Economic union

Long term dynamic effect :Increase competition Increase efficiency Economic of scale Advantage preferential agreement

BFTA talks :- Working Groups Industrial goods

Sanitary measures

Textiles and clothing

Agriculture

Custom procedures

Rules of origin

Technical barriers to trade

Trade remedies Services

Intellectual property rights Government procurement Telecommunications Competition policy Legal matters

Financial services Investment Environment E - commerce

Advantage of BFTA Long term market access opportunities Access to cheaper import Attractive FDI destination Promote capacity building Technology exchange/ Transfer Economic of Scale Improve the competitiveness and efficiency 

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Various BFTA of INDIA Sri Lanka (1998) Thailand (2003) ASEAN (BFTA is under process) Bangladesh (BFTA is under process) Colombia (BFTA is under process) Uruguay (BFTA is under process) Venezuela (BFTA is under process) Mauritius (BFTA is under process)

Advantage of BFTA to Business Expand and penetration of overseas market Elimination of import duties on negotiation

product Sources input at competitive price BFTA would offer trade facilitation 

Principle of BFTA qAbsolute advantage qComparative advantage qCompetitive advantage

Absolute advantage

A country benefits by producing only those product in which it has absolute Advantage. or can produce using fewer resource than another country. EXAMPLE

1 TON OF FRANCE GERMANY

CLOTH 30 100

WHEAT 40 20

Comparative advantage It can be beneficial for two countries to trade without barriers as long as one is more efficient at producing good or services needed by the other. What matter Is not the absolute cost of production but rather the relative efficiencies with which A countries can produce the product. 1 Ton of FRANCE GERMANY

Cloth 30 10

Wheat 40 20

BILATERAL TRADE GREEMENT Agreement   Country   Armenia-Kazakhstan free trade Armenia agreement

Country   Kazakhstan

Date   02001-12-25December 25, 2001

Armenia-Kyrgyzstan free trade Armenia agreement

Kyrgyzstan

01995-10-27October 27, 1995

Armenia-Moldova free trade Armenia agreement

Moldova

01995-12-21December 21, 1995

Armenia-Turkmenistan freeArmenia trade agreement

Turkmenistan

01996-07-07July 7, 1996

ASEAN-China trade agreement Association of China [7] Southeast Asian Nations Closer Economic Relations Australia

New Zealand

Australia-Chile Free Trade Australia Agreement

Chile

Australia-Singapore free Australia trade agreement

Singapore

Australia-Thailand free trade Australia agreement

Thailand

Australia-United States Free Australia Trade Agreement

United States

Canada-Chile Free Trade Agreement Canada

Chile

2004

Canada - Colombia free trade agreement Canada

Colombia

Canada - Costa Rica Free TradeCanada Agreement

Costa Rica

Canada - Israel Free Trade Agreement Canada

Israel

Canada - Peru free trade agreement Canada

Peru

Chile - El Salvador free tradeChile agreement

El Salvador

Chile - El Salvador free tradeChile agreement

Costa Rica

Chile - Costa Rica free trade Chile agreement

Costa Rica

Chile - Mexico free trade agreement Chile

Mexico

Chile - Japan free trade agreement Chile

Japan

02007 - 09 - 03September 3 , 2007

Chile - South Korea free tradeChile agreement

South Korea

02004 - 04 - 01April 1 , 2004

China - Chile free trade agreement Chile

China ( People's Republic of 02006 - 10 - 01October 1 , 2006 [8] China )

China – Peru Free Trade Agreement China ( People's Republic of Peru China )

02002 - 06 - 03June 3 , 2002

EXAMPLE

The United States-Canada Bilateral Trade Relationship

Purpose of US - Canada BFTA Elimination of barrier Fair competition Liberalization condition for investment Procedure for joint administration Foundation for future expansion 

By The Numbers : United States and Canada

have the world’s largest bilateral trade relationship, with total exports and imports exceeding $533.7 billion in 2006.

 $303.4 billion in goods and services were imports form Canada and remaining $230.3 billion exports to Canada 

By The Numbers :

Canadian Trade since 1991

 The US trade deficit with Canada is $73.1 billion in 2006   US merchandise trade deficit with Canada decreased 4.4% from its record $76.5 billion in 2005 to $73.1 billion in 2006.   Imports generally have grown faster than exports in the free trade era, increasing from 3.5% of the value of total trade in 1991

Economic Integration  The US and Canada benefit from a highly integrated economy. Why?   US and Canada free trade agreements reflect Comparative Advantage Theory, which states that all countries can benefit from free trade even if they are characterized by low levels of productivity.   The underlying concept is the opportunity cost concept – countries have a comparative advantage in which they are comparatively most successful. 

Trade Agreements In 1965, the Automotive Agreement was signed

between US and Canada eliminating tariffs on shipments of autos and auto parts between the countries.

 In 1989, the Free Trade Agreement (FTA) was

signed between the two countries removing several trade restrictions in stages over a ten year period

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EFFECTS :

Effects Purchasing Power The shift has major implications in terms of

the energy and auto industries

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Trade Disputes The United States and Canada have highly

integrated and relatively open, transparent trading regimes. However, a few highly contentious issues have arisen between the trading partners.

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