Compare and Contrast of Preferential Agreement and Free Trade Agreement

Preferential trade agreements (PTAs) and free trade agreements (FTAs) are both intended to promote economic co-operation between participating countries. However, these two types of agreements differ in their objectives, scope, and impact.

Preferential trade agreements are designed to provide preferential treatment to member countries by reducing tariffs, quotas, or other trade barriers for selected products or services. PTAs are often established among developing countries to promote regional economic integration and to provide a basis for future negotiations with larger economies. PTAs are less comprehensive than FTAs, and they often focus on specific industries or sectors rather than on broader trade liberalization.

In contrast, free trade agreements go beyond preferential treatment and aim to eliminate all trade barriers between member countries. FTAs are more comprehensive than PTAs, covering a wider range of issues such as investment, intellectual property rights, and regulatory cooperation. FTAs are usually established between countries with similar levels of economic development and are often seen as a pathway to create a common market or economic union.

The impact of PTAs and FTAs on member countries can vary depending on the scope and objective of the agreement. PTAs are beneficial to member countries by providing them a platform for regional economic integration, enhancing trade relations with other countries, and increasing their bargaining power in international trade negotiations. FTAs are often seen as a tool to promote economic growth, increase efficiency, and create jobs by reducing trade barriers and increasing market access.

However, PTAs and FTAs have also been subject to criticism. Some argue that PTAs create trade diversion, where trade is diverted to member countries at the expense of non-member countries, thereby limiting the benefits of global trade. In the case of FTAs, some argue that they could lead to a race to the bottom in terms of labor and environmental standards, as countries may seek to attract foreign investment by lowering their regulatory standards.

In conclusion, PTAs and FTAs are both instruments for promoting regional economic integration and international trade. While PTAs provide preferential treatment, FTAs aim to eliminate all trade barriers between member countries. The choice between the two types of agreements depends on the economic and political context and the objectives of the participating countries. However, it is crucial to ensure that the agreements are transparent, equitable, and sustainable for all the member countries involved.