Free trade zone is Free economic zones

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

The level at which the world economy and international relations are now requires constant reform of market mechanisms. It is assumed, in this regard, the use of various forms of business cooperation. Interaction in some cases acquires a global character. The world economy and international relations are developing today in rather difficult conditions. Various steps are being taken to ensure the most effective cooperation. One of them is the allocation of compact zones, where intensive economic interaction is carried out. Let us consider further what these territories are.

General information

The free economic trade zone allows certain states and regions to adapt to modern conditions, to close the gap from the leaders. On such a territory, a special preferential regime for the implementation of economic and market activities has been formed in accordance with national and naturalfeatures. A free trade zone is a region where the most favorable conditions have been created for attracting new technologies, foreign investment, as well as advanced management experience. In the last few decades, the creation of such territories has become quite popular. The developed countries were the first to form them. Free trade zones began to appear in the 1960s and 1970s. Gradually, the single market space began to turn into an integral entity. Subsequently, this implies not only harmonization, but also the maintenance of a common, actually unified policy, the absolute unification of the regulatory framework.

What is a free trade area?

This is a regional grouping of developing and highly developed countries. There are no duties on the market within its limits. A free trade zone is one of the forms of integration. Its participants remove customs tariffs for each other. At the same time, with regard to third states, each party that signed an international treaty has the right to pursue its own market policy.

The benefits of creating duty-free areas

The international treaty signed by the participants allows:

• Expand the boundaries of the domestic market.
• Develop competition. As a result, this or that region gets the opportunity to overcome the low level of its economic development. Due to which its role in the overall turnover is enhanced, dependence on other regions is reduced.
• Develop infrastructure. This, in turn,increases the export and import potential of a single state.
• Overcome the challenges of marketing finished products and services to the market.

Expand engagement

The past few decades have seen a significant increase in the number of regional agreements. For example, in July 2005, 330 documents were notified to the WTO. Of these, 180 began to function over the next years. Most of them are agreements on free trade zones. Of the total number of valid documents, they account for about 84%. Negotiations are underway for 96%. The free trade zone agreement provides for very transparent conditions for the participants. This is the reason for such a high percentage. A free trade zone is a territory that does not require special coordination of foreign market policy. Moreover, it preserves the independence of the state in the creation of a customs regime with respect to third parties.

Specifics

Free zones allow solving issues related to states' access to strategic markets. In this regard, the geographical proximity of the participants is sometimes not at all necessary. In this, such territories differ from other, more complex integration forms, which assume the existence of a common border between partners. The agreement within the framework of the WTO implies the formation of a multilateral system of basic requirements for the creation and subsequent functioning of the zones. First of all, the formation of these territories is allowed as an exception in the regime of maximumfavorable conditions (together with preferences for developing countries, the introduction of border markets, and so on). In such cases, the participating parties will act on preferential terms. Secondly, agreements should only be concluded with other participating States. Engagement with third parties should be done on an exceptional basis. It should be noted here that the implementation of this provision in practice is rather ambiguous. The transition to a free market should have a stimulating effect on trade between participants, while not creating obstacles for third countries. Regional acts act as a supplement to the principles of the formation of a multilateral market system, but not as an opposition to them. Free trade should cover most of the turnover of products between the participants, including the main branches of economic activity, and be mutual. Formation of duty-free territories is expected to be carried out within a reasonable time. The period may be longer than ten years only in exceptional cases. It is generally accepted that this period is sufficient for the majority of manufacturers to fully adapt to the new competitive conditions.

Distinguishing Features

Free zones differ in some significant ways. These include, in particular:

1. Number of participants.
2. Comparative volumes of the national economies of the parties.
3. Different levels of economic development.
4. Regional coverage of industries and goods.
5. Characterimpact on the national economy.
6. Duration of transition to free market.
7. The level of real mutual dependence between countries in economic terms.
8. The value of the political factor.
9. Norms, values, traditions of the integration process in the region.

Common signs

Despite the above list of differences, there are several features that free zones have in common. These general patterns should be taken into account when forming new territories. First of all, it is necessary to highlight the fact that the creation of the zone should have rather deep prerequisites of a historical, political, economic, regional, social and other nature. Here it is worth highlighting the level of market interaction in general indicators for the region. So, for 2008 they were:

• 66.8% - EU.
• 24.9 % - ASEAN.
• 12.9 % - MERCOSUR.
• 55.8% - NAFTA.

Free trade area, as practice shows, has a positive impact on the level of development of the participating States. At the same time, the transition to such a model of cooperation will not always imply the same benefits. The ratios and volumes of dynamic and statistical results that are typical for individual states differ from each other. This is due to differences in production and market structures, the ability of producers to adapt to new conditions, the efficiency of resource use.

Leaders

Today, the main centers of "attraction" of duty-free territories have already been formed. Structurally developed, capacious market areas of customs unions or individual states are very attractive for foreign exporters. They provide the formation of most of the conditions for international trade. There are clear leaders in this category. The most developed are the free trade zones of the USA, India, Chile, EFTA. The sphere of cooperation between Singapore has expanded rather quickly. The European Union has the largest number of agreements. When starting negotiations with him, the state will have to take into account not only the main patterns according to which duty-free territories should develop. A free trade area with the EU should be formed in accordance with the terms of the foreign policy of the Union itself.

Near Abroad States

According to news agencies, Canada plans to open a market for Ukrainian industrial products. This will be after the signing of the relevant documents. Earlier it was reported that Prime Minister Yatsenyuk will travel to the UK, the US and Canada. An investment conference will be held in the United States. Upon its completion, documents will be signed, according to which a free trade zone will be formed. Ukraine plans to supply Canada with the products of machine-building plants and industrial goods. After that, Yatsenyuk plans to go to London, where he will negotiate on the support of Kyiv.

Free Trade Zones in Russia

In Russia, FTZs operate in the form of customs warehouses and territories. The warehouse regime is established for the maintenance of imported products without the collection of duties, as well as for exported products with return or exemption from duties. The maximum period during which goods can be stored is three years. During this period, products can be sorted, packaged, batch split, labeled, and so on. In fact, the owner of the bonded warehouse provides customers with tax credits, including long-term ones. Free customs zones have more favorable conditions. In addition to lending, it provides an opportunity to conduct any commercial, except for retail, and production activities. In a free warehouse there are no restrictions on the time of keeping goods. The first FTA in Russia was established in Nakhodka. The license was awarded to JSC "Dalintermet". This company cuts decommissioned fishing and merchant ships, as well as ships of the Navy for scrap. JSC has the right to duty-free import of foreign technological equipment and export of products.