Question

Agreement between two or more nations to reduce or eliminate tariff and non-tariff barrier on trade is known as:-

• A. Free trade agreements
• B. Foreign trade agreements
• C. Free tariff treaty
• D. Custom trade agreements

Hint:

Trade Treaty Terminology:
- Free Trade Agreement (FTA): Eliminates tariffs and quotas between member nations.
- Customs Union: FTA + Common external tariff on outside nations.
- Common Market: Customs Union + Free movement of labor and capital.

Answer 1

The Correct Option is A

Concept:
International trade governance relies on bilateral and multilateral treaties to regulate the transboundary flow of goods, commodities, and services.
Trade barriers typically include import tariffs (taxes on foreign goods) and non-tariff barriers (import quotas, subsidies, and customs delays).

Step 1: Characterization of Trade Pacts:
1. Free Trade Agreement (FTA): A legally binding international treaty between two or more countries under which member nations agree to reduce or eliminate tariffs, import duties, and non-tariff restrictions on traded goods and services.
Examples include NAFTA (now USMCA) and the ASEAN Free Trade Area.
2. Customs Union: An agreement where member states eliminate internal tariffs and establish a common external tariff applied to non-member nations.
3. Foreign Trade Agreements: A broad, informal term for any external trade accord that does not necessarily eliminate protectionist tariffs.
4. Free Tariff Treaty: A non-standard economic term.

Step 2: Environmental Significance of FTAs:
In environmental studies, Free Trade Agreements are closely scrutinized because trade liberalization can encourage "pollution havens" (where polluting industries migrate to nations with weaker environmental regulations) or accelerate the overexploitation of natural resources.
Consequently, modern FTAs incorporate environmental clauses to ensure trade policies align with environmental protection standards.
Final Answer:
The agreement to reduce or eliminate trade barriers is a Free Trade Agreement, corresponding to option (A).