Free trade

Free trade is a policy followed by some international markets in which countries' governments do not restrict imports from, or exports to, other countries. Free trade is exemplified by the European Economic Area and the North American Free Trade Agreement, which have established open markets. Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements. However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to limit exports of natural resources. Other barriers that may hinder trade include import quotas, taxes, and non-tariff barriers, such as regulatory legislation.

Features of free trade

Free trade policies generally promote the following features:

Free trade area

A free-trade area is the region encompassing a trade bloc whose member countries have signed 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 people are also free to move between the countries, in addition to FTA, it would also be considered an open border. It can be considered the second stage of economic integration.

Description

Unlike a customs union (the third stage of economic integration), members of a free-trade area do not have a common external tariff, which means they have different quotas and customs, as well as other policies with respect to non-members. To avoid tariff evasion (through re-exportation) the countries use the system of certification of origin most commonly called rules of origin, where there is a requirement for the minimum extent of local material inputs and local transformations adding value to the goods. Only goods that meet these minimum requirements are entitled to the special treatment envisioned by the free trade area provisions.

Africa

Africa is the world's second-largest and second-most-populous continent. At about 30.2 million km² (11.7 million sq mi) including adjacent islands, it covers six percent of Earth's total surface area and 20.4 percent of its total land area. With 1.1 billion people as of 2013, it accounts for about 15% of the world's human population. The continent is surrounded by the Mediterranean Sea to the north, both the Suez Canal and the Red Sea along the Sinai Peninsula to the northeast, the Indian Ocean to the southeast, and the Atlantic Ocean to the west. The continent includes Madagascar and various archipelagos. It contains 54 fully recognized sovereign states (countries), nine territories and two de facto independent states with limited or no recognition.

Africa's population is the youngest amongst all the continents; the median age in 2012 was 19.7, when the worldwide median age was 30.4.Algeria is Africa's largest country by area, and Nigeria by population. Africa, particularly central Eastern Africa, is widely accepted as the place of origin of humans and the Hominidae clade (great apes), as evidenced by the discovery of the earliest hominids and their ancestors, as well as later ones that have been dated to around seven million years ago, including Sahelanthropus tchadensis, Australopithecus africanus, A. afarensis, Homo erectus, H. habilis and H. ergaster – with the earliest Homo sapiens (modern human) found in Ethiopia being dated to circa 200,000 years ago. Africa straddles the equator and encompasses numerous climate areas; it is the only continent to stretch from the northern temperate to southern temperate zones.

Tripartite Free Trade Area

The Tripartite Free Trade Area (TFTA) is a proposed African free trade agreement between the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and East African Community (EAC).

On June 10, 2015 the deal was signed in Egypt by the countries shown below (pending ratification by national parliaments).

On 15 June 2015 at the 25th African Union Summit in Johannesburg, South Africa, negotiations were launched to create an African Continental Free Trade Area (CFTA) by 2017 with, it was hoped, all 54 African Union states as members of the free trade area.

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Trade

Trade involves the transfer of the ownership of goods or services from one person or entity to another in exchange for other goods or services or for money. Possible synonyms of "trade" include "commerce" and "financial transaction". A network that allows trade is called a market.

The original form of trade, barter, saw the direct exchange of goods and services for other goods and services. Barter is trading things without the use of money. Later one side of the barter started to involve precious metals, which gained symbolic as well as practical importance. Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.

Trade exists due to the specialization and division of labor, in which most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions may have a comparative advantage (perceived or real) in the production of some trade-able commodity, or because different regions' size may encourage mass production. As such, trade at market prices between locations can benefit both locations.