The World's Top 5 Free Trade Zones
Free Trade Zones can be defined as a type of special economic zone (SEZ) where there are no taxes, no duties, and no other kind of trade-related fees. The ultimate goal of trade zone is to boost economic exchange and remove trade barriers.
Free Trade Zones appeared in the mid-20th century and thy started to increase by the end of it. Nowadays, there are about 5400 free trade zones in the world. Economic experts expect the number of free trade zone in the world to continue its rise in the next few years.
North American Free Trade Agreement (NAFTA)
This free zone is the fruit of 30 years of American-Canadian negotiations over establishing a free trade zone. The agreement was first signed between the US and Canada on January 1, 1989, and later on January 1, 1994, Mexico joined the agreement.
NAFTA eliminated tariffs, duties, and taxes on all products traded in the area between these countries. The agreement also regulates rules of origin, customs procedures, agriculture and sanitary measures, government procurement, investment, trade in services, protection of intellectual property rights, and dispute settlement procedures.
European Union Single Market
The European single market contains all 28 Europeans states as well as Iceland, Liechtenstein, Norway, and Switzerland. The single market aims are bringing down barriers and simplifying existing rules opening more economic opportunities to everyone living in the European Union.
The European Union Single Market is based on four principles which are: The free movement of people, the free movement of goods, the free movement of services, and the free movement of capital.
The Single Market is regulated and supervised by the European Commission. The Commission monitors the application of EU law and can launch infringement proceedings against EU countries that do not comply.
African Continental Free Trade Area (AfCFTA)
After years of negotiations and talks, the African Union finally ratified the establishment of an African Single market that will serve as free trade zones for all African countries. The Agreement Establishing the African Continental Free Trade Area (AfCFTA) entered into force on 30 May 2019.
The agreement, signed by all but three of Africa’s fifty-five nations, establishes the largest free trade area in the world since the creation of the World Trade Organization in 1995. Economists believe that this agreement will forge a new path for Africa to foster sustainable wealth and development for the continent.
Association of Southeast Asian Nations Free Trade Area (AFTA)
The ASEAN Free Trade Area (AFTA) was established in 1992 between 10 Asian countries which are Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Laos, Myanmar, and Cambodia.
According to this agreement, members of this Free Trade Area cut tariffs on nearly 8,000 items. The main goal of the ASEAN Free-Trade Area is to reach free trade in products in the ASEAN area to establish a single market and production base for deeper economic integration of the ASEAN economies towards the ASEAN Economic Community.
China Special Economic Zones
China possesses several free trade zones where foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing. These special Chinese economic zones help China attracts foreign investors and technologies.
The creation and success of SEZs have led to prosperity in the coastal regions of China, creating additional economic disparity between regions. Thus, due to economic boost that these economic zones gave to the Chinese economy, China is now a huge player in the global economy and has made large strides in economic development in a concentrated period of time.
Special Economic Zones were instrumental in making China's economy the way it is today. Here are the most important Chinese Special Economic Zones:
- 2013, Shanghai: 121km2.
- 2015, Fujian: 118km2, Tianjin: 120km2, Guangdong: 116km2.
- 2017, Chongqing: 120km2, Henan: 120km2, Hubei: 120km2, Liaoning: 120km2, Shaanxi: 120km2, Sichuan: 120km2, Zhejiang: 120km2.
- Hainan: 35,400km2
Benefits Of Free Trade Zones
- Boost trade and Economy
- Incite Investments and business
- Push economic growth and create new opportunities.
- Reduce costs and expenses of trade especially logistics costs
- Increase profit and lower risk rates
- Make business and trade smoother, easier, and faster by eliminating formalities and bureaucratic procedures.
Free Trade Zones became a necessity for the world’s economy. In fact, economists argue that without free trade zones, economic growth is impossible.