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33-584: The Asia-Pacific Trade Agreement (APTA) , previously known as the Bangkok Agreement and renamed 2 November 2005, was signed in 1975. It is the oldest preferential trade agreement between countries in the Asia-Pacific region. The APTA market covers 2.7 billion people and accounted for US$ 15 trillion in terms of gross domestic product in Fiscal Year 2015–2016. APTA’s key objective

66-448: A free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other. If natural persons are also free to move between the countries, in addition to a free trade agreement, it would also be considered an open border. It can be considered the second stage of economic integration . Customs unions are

99-572: A PTA, but these are not listed below. Several hundred bilateral PTAs have been signed since the early 20th century. The TREND project of the Canada Research Chair in International Political Economy lists around 700 trade agreements, the vast majority of which are bilateral. Free trade area A free trade area is the region encompassing a trade bloc whose member countries have signed

132-570: A free trade area are not subject to this requirement. Instead, they may establish and maintain whatever tariff regime applying to imports from non-parties as deemed necessary. In a free trade area without harmonized external tariffs, to eliminate the risk of trade deflection, parties will adopt a system of preferential rules of origin . The term free trade area was originally meant by the General Agreement on Tariffs and Trade (GATT 1994) to include only trade in goods. An agreement with

165-422: A free trade area are relatively cheaper as compared to those with non-parties, free trade areas are conventionally found to be excludable. Now that deep trade deals will enhance regulatory harmonization and increase trade flows with non-parties, thus reduce the excludability of FTA benefits, new generation free trade areas are obtaining essential characteristics of public goods. Unlike a customs union , parties to

198-434: A free trade area creates trade which may not have otherwise existed. In all cases trade creation will raise a country's national welfare. Both trade creation and trade diversion are crucial effects found upon the establishment of a free trade area. Trade creation will cause consumption to shift from a high-cost producer to a low-cost one, and trade will thus expand. In contrast, trade diversion will lead to trade shifting from

231-437: A free trade area do not maintain common external tariffs, which means they apply different customs duties, as well as other policies with respect to non-members. This feature creates the possibility of non-parties may free riding preferences under a free trade area by penetrating the market with the lowest external tariffs. Such risk necessitates the introduction of rules to determine originating goods eligible for preferences under

264-452: A free trade area, a need that does not arise upon the formation of a customs union. Basically, there is a requirement for a minimum extent of processing that results in "substantial transformation" to the goods so that they can be considered originating. By defining which goods are originating in the PTA, preferential rules of origin distinguish between originating and non-originating goods: only

297-485: A lower-cost producer outside the area to a higher-cost one inside the area. Such a shift will not benefit consumers within the free trade area as they are deprived the opportunity to purchase cheaper imported goods. However, economists find that trade diversion does not always harm aggregate national welfare: it can even improve aggregate national welfare if the volume of diverted trade is small. Free trade areas as public goods Economists have made attempts to evaluate

330-649: A number of depositories of free trade agreements available either at national, regional or international levels. Some significant ones include the database on Latin American free trade agreements constructed by the Latin American Integration Association (ALADI), the database maintained by the Asian Regional Integration Center (ARIC) providing information agreements of Asian countries, and the portal on

363-497: A party to a free trade area has the incentive to use inputs originating in another party so that their products may qualify for originating status. Since there are hundreds of free trade areas currently in force and being negotiated (about 800 according to ITC's Rules of Origin Facilitator , counting also non-reciprocal trade arrangements), it is important for businesses and policy-makers to keep track of their status. There are

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396-496: A similar purpose, i.e., to enhance liberalization of trade in services, is named under Article V of the General Agreement on Trade in Services (GATS) as an "economic integration agreement". However, in practice, the term is now widely used to refer to agreements covering not only goods but also services and even investment. The formation of free trade areas is considered an exception to the most favored nation (MFN) principle in

429-410: A special type of free trade area. All such areas have internal arrangements which parties conclude in order to liberalize and facilitate trade among themselves. The crucial difference between customs unions and free trade areas is their approach to third parties. While a customs union requires all parties to establish and maintain identical external tariffs with regard to trade with non-parties, parties to

462-487: Is not subject to litigation at the WTO's Dispute Settlement Body, "there is no guarantee that WTO panels will abide by them and decline to exercise jurisdiction in a given case". Trade diversion and trade creation In general, trade diversion means that a free trade area would divert trade away from more efficient suppliers outside the area towards less efficient ones within the areas. Whereas, trade creation implies that

495-413: Is tied to the evolving trend of them becoming "deeper". The depth of a free trade area refers to the added types of structural policies that it covers. While older trade deals are deemed "shallower" as they cover fewer areas (such as tariffs and quotas), more recently concluded agreements address a number of other fields, from services to e-commerce and data localization . Since transactions among parties to

528-472: Is to hasten economic development among the seven participating states opting trade and investment liberalization measures that will contribute to intra-regional trade and economic strengthening through the coverage of merchandise goods and services, synchronized investment regime and free flow of technology transfer making all the Participating States to be in equally winsome situation. Its aim

561-863: Is to promote economic development and cooperation through the adoption of trade liberalization measures. APTA is open to all members of the United Nations Economic and Social Commission for Asia and the Pacific , which serves as the APTA Secretariat. Members of APTA are currently participating in the Fourth Round of Tariff Concessions, which are expected to conclude in October 2009. The Third Round, entering into force on 1 September 2006, led to tariff concessions on more than 4,000 items. The Fourth Round, launched in October 2007,

594-541: The World Trade Organization (WTO) because the preferences that parties to a free trade area exclusively grant each other go beyond their accession commitments. Although Article XXIV of the GATT allows WTO members to establish free trade areas or to adopt interim agreements necessary for the establishment thereof, there are several conditions with respect to free trade areas, or interim agreements leading to

627-628: The European Union's free trade negotiations and agreements. At the international level, there are two important free access databases developed by international organizations for policy-makers and businesses: WTO's Regional Trade Agreements Information System As WTO members are obliged to notify to the Secretariat their free trade agreements, this database is constructed based on the most official source of information on free trade agreements (referred to as regional trade agreements in

660-490: The WTO language). The database allows users to seek information on trade agreements notified to the WTO by country or by topic (goods, services or goods and services). This database provides users with an updated list of all agreements in force, however, those not notified to the WTO may be missing. It also displays reports, tables and graphs containing statistics on these agreements, and particularly preferential tariff analysis. ITC's Market Access Map The Market Access Map

693-435: The extent to which free trade areas can be considered public goods. They firstly address one key element of free trade areas, which is the system of embedded tribunals which act as arbitrators in international trade disputes. This system as a force of clarification for existing statutes and international economic policies is affirmed within the trade treaties. The second way in which free trade areas are considered public goods

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726-799: The formation of PTAs. Countries are more likely to participate in PTAs if they have low transportation costs and larger economies. Third, countries with similar economic sizes are likely to benefit the most by forming PTAs. Economic determinants like GDP , similarity of economic size, and distance between countries correctly predict over 80% of PTAs in effect as of 2020. The remaining PTAs can be attributed to political predictors. Countries under democratic rule are more likely to participate in PTAs than those under autocratic rule. Autocratic rulers are not elected, and thus do not have their power threatened by dissatisfied citizens. Democratic leaders are incentivized to keep their constituents satisfied, and PTAs can help lower

759-399: The formation of free trade areas. Firstly, duties and other regulations maintained in each of the signatory parties to a free trade area, which are applicable at the time such free trade area is formed, to the trade with non-parties to such free trade area shall not be higher or more restrictive than the corresponding duties and other regulations existing in the same signatory parties prior to

792-431: The formation of the free trade area. In other words, the establishment of a free trade area to grant preferential treatment among its member is legitimate under WTO law, but the parties to a free trade area are not permitted to treat non-parties less favorably than before the area was established. A second requirement stipulated by Article XXIV is that tariffs and other barriers to trade must be eliminated to substantially all

825-404: The former will be entitled to preferential tariffs scheduled by the free trade area, the latter must pay MFN import duties. It is noted that in qualifying for origin criteria, there is a differential treatment between inputs originating within and outside a free trade area. Normally inputs originating in one FTA party will be considered as originating in the other party if they are incorporated in

858-454: The international trade system generated by the multiplication of PTAs should be taken into account in the study of the choice of fora used by countries or regions to promote their trade relations and environmental agenda. PTAs have seen rapid growth; in the 1990s, there were slightly more than 100 PTAs. By 2014, there were more than 700. In 2004, Scott Baier and Jeffrey Bergstrand published that there were three economic determinants critical to

891-403: The manufacturing process in that other party. Sometimes, production costs arising in one party is also considered as that arising in another party. In preferential rules of origin , such differential treatment is normally provided for in the cumulation or accumulation provision. Such clause further explains the trade creation and trade diversion effects of a free trade area mentioned above, because

924-541: The price of consumer goods. Advocating for PTAs also lets democratic leaders signal to voters that they are committed to policies that improve their welfare. Countries are also more likely to join PTAs if competitor countries have already done so. A free trade area is basically a preferential trade area with increased depth and scope of tariffs reduction. All free trade areas , customs unions , common markets , economic unions , customs and monetary unions and economic and monetary unions are considered advanced forms of

957-540: The same tariff to imports from other WTO members. With the recent multiplication of bilateral PTAs and the emergence of Mega-PTAs (wide regional trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) or Trans Pacific Partnership (TPP)), a global trade system exclusively managed within the framework of the WTO now seems unrealistic and the interactions between trade systems have to be taken into account. The increased complexity of

990-485: The trade within the free trade area. Free trade agreements forming free trade areas generally lie outside the realm of the multilateral trading system. However, WTO members must notify to the Secretariat when they conclude new free trade agreements and in principle the texts of free trade agreements are subject to review under the Committee on Regional Trade Agreements. Although a dispute arising within free trade areas

1023-502: The traditional tariff concessions in order to deepen trade cooperation and integration. APTA members are currently negotiating three framework agreements on trade facilitation, trade in services, and investments. In addition, APTA members are exchanging information on non-tariff measures. Preferential trade agreement These tariff preferences have created numerous departures from the normal trade relations principle, namely that World Trade Organization (WTO) members should apply

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1056-837: Was developed by the International Trade Centre (ITC) with the objectives to facilitate businesses, governments and researchers in market access issues. The database, visible via the online tool Market Access Map, includes information on tariff and non-tariff barriers in all active trade agreements, not limited to those officially notified to the WTO. It also documents data on non-preferential trade agreements (for instance, Generalized System of Preferences schemes). Up until 2019, Market Access Map has provided downloadable links to texts agreements and their rules of origin. The new version of Market Access Map forthcoming this year will provide direct web links to relevant agreement pages and connect itself to other ITC's tools, particularly

1089-489: Was scheduled to be concluded by the Third Ministerial Council in October 2009. This Round aims to widen the coverage of preferences to at least 50 per cent of the number of tariff lines of each member, and at least 20-25 per cent the value of bilateral trade. It also aims to provide a tariff concession of at least 50 per cent (on average). The Fourth Round of negotiations is extending into areas beyond

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