Association Agreement vs Free Trade Agreement: What`s the Difference?
When it comes to international trade, there are various types of agreements that countries can enter into. Two of the most commonly used agreements are association agreements and free trade agreements. While both agreements work towards promoting trade and economic cooperation, they differ in terms of their scope and purpose. In this article, we`ll take a closer look at the differences between association agreements and free trade agreements.
What is an Association Agreement?
An association agreement is a comprehensive agreement between the European Union (EU) and a non-EU country that covers a wide range of areas, including political, economic, and social cooperation. The purpose of an association agreement is to promote closer political and economic relations between the EU and the partner country. Association agreements typically include provisions on trade and investment, regulatory cooperation, and alignment with EU standards and policies.
When it comes to trade, association agreements typically provide for the liberalization of trade in goods, services, and investment between the EU and the partner country. However, the scope of liberalization is limited, as association agreements do not establish a free trade area between the parties. Instead, they lay the groundwork for a deeper economic integration that could lead to a free trade area in the future.
What is a Free Trade Agreement?
A free trade agreement (FTA) is a bilateral or multilateral agreement between countries that eliminates tariffs and other barriers to trade in goods and services between the parties. The main purpose of an FTA is to facilitate trade, boost economic growth, and create new business opportunities for companies in the participating countries. FTAs typically cover a wide range of issues related to trade and investment, including rules of origin, customs procedures, intellectual property rights, and dispute settlement mechanisms.
Unlike association agreements, FTAs establish a free trade area between the participating countries, which means that all barriers to trade in goods and services among the parties are eliminated. This allows businesses to trade and invest with greater ease and efficiency, leading to increased economic benefits for all parties involved.
Association Agreement vs Free Trade Agreement: Which is Better?
When it comes to choosing between an association agreement and a free trade agreement, there is no one-size-fits-all answer. Both agreements have their advantages and disadvantages, and the choice depends on the specific needs and priorities of the participating countries.
Association agreements offer a more comprehensive framework for cooperation between the EU and non-EU countries, covering a wide range of areas beyond trade. They provide for gradual, step-by-step integration, which can be beneficial for countries that are not yet ready for a full-fledged free trade area. However, association agreements can also be complex and time-consuming to negotiate, and they may not offer immediate benefits for businesses looking to expand their trade.
FTAs, on the other hand, offer a simpler and more straightforward framework for trade and investment between participating countries. They eliminate barriers to trade, which can lead to increased economic growth and job creation. However, FTAs may not cover all areas of cooperation between the parties, and they may require countries to make significant adjustments to their domestic policies and regulations to align with the agreement.
In conclusion, association agreements and free trade agreements are both valuable tools for promoting trade and economic cooperation between countries. The choice between the two depends on the specific needs and priorities of the participating countries, and careful consideration should be given to the advantages and disadvantages of each type of agreement.