free trade agreement

  

Definition

Treaty (such as FTAA or NAFTA) between two or more countries to establish a free trade area where commerce in goods and services can be conducted across their common borders, without tariffs or hindrances but (in contrast to a common market) capital or labor may not move freely. Member countries usually impose a uniform tariff (called common external tariff) on trade with non-member countries.

Use this term in a sentence

  • It can be tough for two companies to be happy with the outcome of a deal but when they are working in a free trade agreement it is easier.

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  • When there is a free trade agreement it makes it a lot easier for countries to deal with each other and work out good deals.

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  • I was glad the two countries had entered a free trade agreement because I would be visiting both countries and wanted each country to be on good terms.

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