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Define Free Trade Agreement for Dummies

As a professional, I am here to help you understand what a free trade agreement is in the simplest terms possible.

A free trade agreement (FTA) is a pact between two or more countries to eliminate tariffs, quotas, and other trade barriers between them. This agreement enables countries to increase their trade with one another by removing restrictions that would otherwise hinder their ability to do so.

In simple words, free trade agreements are made between countries to allow for easy movement of goods and services between them, without any hurdles or restrictions.

The primary purpose of FTAs is to boost economic growth by increasing trade between countries, which in turn leads to job creation, higher wages, and an overall improvement in living standards. FTAs also help to reduce the cost of goods and services, as they remove tariffs and other barriers that can increase their price.

For example, if the United States and Japan signed a free trade agreement, Japanese-made cars could be imported into the US without any tariffs or restrictions. In return, the US might export agricultural products to Japan without any restrictions.

However, FTAs are not without their drawbacks. Some argue that they can lead to job losses, particularly in industries that cannot compete with cheaper imports from other countries.

Moreover, FTAs can have negative consequences for the environment and labor conditions. Countries may be encouraged to lower their environmental and labor standards to compete with other countries on price.

In conclusion, FTAs are agreements made between nations to promote free trade between them. They can be beneficial for the economies of both countries involved, but can also have their drawbacks. It is essential to understand both the benefits and the risks of FTAs before signing them.