Free Trade Area

A group of two or more countries that have eliminated tariff and most nontariff barriers affecting trade among themselves, while each participating country applies its own independent schedule of tariffs to imports from countries that are not members. A free trade area allows member countries to maintain individually separate tariff schedules for external countries; members of a customs union employ a common external tariff. The best known example is the European Free Trade Association (EFTA) and the free trade area for manufactured goods that has been created through the trade agreements that have been concluded between the European Community and the individual EFTA countries. The World Trade Organization (WTO) spells out the meaning of a free trade area and specifies the applicability of other WTO provisions to free trade areas.

See European Community; European Free Trade Association; common market.

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