Free Trade Agreements

What is a Free Trade Agreement?

A Free Trade Agreement (FTA) is an international accord between two or more countries aimed at eliminating trade barriers among the parties. These agreements typically include the reduction or complete removal of customs duties, the elimination of import and export quotas, and the minimization of technical obstacles. FTAs enable freer, faster, and lower-cost trade between countries, resulting in economic benefits for both producers and consumers.

The primary goal of FTAs is to increase mutual trade volume, contribute to economic growth, and establish long-term partnerships between the parties. These agreements may cover not only the trade of goods but also services, investments, and public procurement. They also often include provisions for the harmonization of technical regulations, competition policies, and protection of intellectual property rights. Thus, FTAs support not only commercial exchange but also institutional and structural transformation.

For developing countries like Turkey, FTAs facilitate access to foreign markets and diversify exports. They also help domestic companies adapt more easily to international competition. However, the effectiveness of FTAs depends on the economic structures, product profiles, and trade balances of the involved countries. Properly structured FTAs are considered strategic tools for achieving sustainable development goals.

Purpose and Importance of Free Trade

Free trade is an economic principle that allows the free flow of goods and services between countries without tariffs, quotas, or other trade barriers. This concept is based on a system of international trade that brings mutual benefits to participating countries. The main objective of free trade is to boost competition, provide producers and consumers with more options, contribute to economic growth, and strengthen interdependence among nations, thereby making trade relationships more sustainable.

Liberalizing trade enables companies to access broader markets, sell their products in different countries at more competitive prices, and procure raw materials at lower costs. Consumers also benefit by gaining access to quality products at lower prices. This dynamic increases efficiency in both production and consumption. Moreover, free trade encourages international division of labor and collaboration by allowing countries to focus on their areas of expertise.

Turkey's Free Trade Agreements

Turkey has signed numerous Free Trade Agreements (FTAs) with various countries to strengthen its trade policy, increase the competitiveness of its exporters in global markets, and promote economic integration. These agreements allow Turkish products to be exported to partner countries under more favorable customs conditions, directly boosting trade volumes.

Countries with which Turkey has FTAs include members of the European Free Trade Association (EFTA) — Switzerland, Norway, Iceland, and Liechtenstein — as well as South Korea, Singapore, Malaysia, Georgia, Albania, Bosnia and Herzegovina, Morocco, Egypt, Chile, Mauritius, Moldova, Serbia, and Kosovo. These agreements generally cover industrial products and some agricultural goods.

Turkey also maintains duty-free trade relations with many EU member states under the Customs Union agreement in effect since 1996. In addition, Turkey aims to enhance its presence in Asia, Africa, and Latin America through ongoing FTA negotiations led by the Ministry of Trade. Each FTA represents a long-term collaboration offering both economic and strategic advantages.

Advantages of Free Trade Agreements

Free Trade Agreements (FTAs) aim to liberalize trade between countries and enhance economic cooperation. The most fundamental advantage of FTAs is the elimination or reduction of customs duties between the parties, which allows goods to be offered at more competitive prices. This provides cost advantages for exporters and allows importers to procure goods at more favorable prices. Such dynamics directly contribute to the growth of trade volume and increased economic activity.

FTAs also create opportunities for businesses to access new markets. Reduced dependence on the domestic market enables companies to compete globally. Moreover, incentives for investments and regulatory alignment resulting from the agreements create an attractive environment for foreign investors. There are also significant benefits for consumers, including increased product diversity, lower prices, and improved service quality driven by competition.

Disadvantages of Agreements

While Free Trade Agreements (FTAs) offer significant advantages such as eliminating customs duties and liberalizing trade between countries, they can also create disadvantages for certain sectors and economies. Particularly for developing countries or industries with weaker competitiveness, the liberal environment created by these agreements may pose challenges. FTAs do not benefit all countries equally and can bring structural risks.

Domestic producers may face competition from lower-cost imported goods from FTA partner countries. This can slow down production, negatively impact employment, and even lead to closures in certain sectors over the long term. Additionally, provisions in some agreements may limit a country’s ability to regulate environmental standards, labor rights, or public policies.

Countries with Agreements with Türkiye

Türkiye has signed Free Trade Agreements (FTAs) with various countries to become more competitive in the global trade network and to expand its export markets. These agreements not only allow products to be traded exempt from customs duties or at reduced rates, but also cover investor rights, competition rules, and technical regulations. Trade with countries that have signed agreements with Türkiye is usually conducted more quickly and with less bureaucracy.

Frequently Asked Questions About Free Trade

Companies and investors often have common questions about Free Trade Agreements. Below are some of the most frequently asked questions and their brief answers: