What is a Free Trade Agreement?

What is a Free Trade Agreement, also known as an FTA?

A Free Trade Agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

While FTA is a common name for many of these agreements, some of the newer ones are referred to as Trade Promotion Agreements or “TPAs”.

This video gives a great overview of the basics of an FTA if you are not familiar.

The Office of the United States Trade Representative is responsible for creating and negotiating all U.S. FTA’s and they are always working on new FTA’s to better position U.S. companies in the global marketplace. 

As of July 2021, the United States has “Entered Into Force” (EIF) FTA’s with 21 different countries.

Some countries have a bilateral FTA with just the U.S., while others are included in a multilateral FTA, such as Mexico and Canada with the recent United States Mexico Canada FTA (USMCA).

Here is a list of the countries we currently have an FTA with:

• Australia
• Bahrain
• CAFTA-DR
  • Costa Rica
  • El Salvador
  • Guatemala
  • Honduras
  • Nicaragua
  • Dominican Republic
• Chile
• Colombia
• Israel
• Japan
• Jordan
• KORUS (South Korea)
• Morocco
• Oman
• Panama
• Peru
• Singapore
• USMCA
  • Mexico
  • Canada

It is important to be aware of what FTA’s the U.S. has in place with other countries and what terms in those agreements may be beneficial to you and your products.  Often the longer an FTA is in effect the more benefits U.S. suppliers can take advantage of. FTA’s are sometimes designed in a way to lower the tariffs on products by a certain amount every year, but in many cases duties become free immediately upon the agreement Entering Into Force, it just depends on the agreement.

Not all food and ag products qualify for reduced tariffs under FTA’s just because they are made in the U.S. There are specific rules of origin (ROO) that need to be met based on the Harmonized System or “HS”. 

There has been talk about the potential of an FTA between the U.S. and other countries in the near future including Ghana and the United Kingdom.  We will be sure to keep you updated as those continue to develop!

Want to learn more about Free Trade Agreements? 

Here are few of our online resources available to you anytime, anywhere.

Export Essentials – Module 4 ‘Take Advantage of Free Trade Agreements’

Webinar – Dynamics of USMCA Origin Certification

Webinar – USMCA Rules of Origin