Free trade agreements are agreements between two or more countries that aim to remove or reduce barriers to trade and investment. These agreements are meant to increase economic growth and open up new markets for businesses across the globe.
But where did the idea of free trade agreements originate?
The concept of free trade dates back to the 18th century when Scottish economist Adam Smith first proposed the idea in his book, “The Wealth of Nations.” In the book, Smith argued that if countries specialized in what they were good at producing and traded with other countries, everyone would benefit. He believed that by opening up trade, countries would be able to produce goods more efficiently, and consumers would have access to a wider range of goods at lower prices.
The first free trade agreement between two countries was signed in 1860 between the UK and France. The agreement aimed to reduce tariffs and increase trade between the two countries. Over the years, more countries began to sign free trade agreements, including the US and Canada in 1988, and the EU and Mexico in 2000.
Free trade agreements have played a significant role in the growth of international trade. According to the World Trade Organization (WTO), the volume of world merchandise trade increased by 33 times between 1950 and 2017, largely due to the increasing number of free trade agreements.
Today, free trade agreements continue to be a controversial topic, with supporters arguing that they benefit businesses and consumers, while opponents claim they can lead to job losses and harm domestic industries.
Despite the controversies surrounding free trade agreements, their origins can be traced back to Adam Smith`s idea of specialization and trade. As trade continues to grow and evolve, it will be interesting to see how free trade agreements continue to shape the global economy.