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 becomes global. The world economy and international relations are developing today in rather difficult conditions. A variety of steps are being taken to ensure the most effective collaboration. One of them is the allocation of compact zones where intensive economic interaction takes place. Let us consider in more detail what these territories are.
General information
The free economic trade zone allows these or other states and regions to adapt to modern conditions and reduce the gap between leaders. In such a territory, a special preferential regime has been formed for carrying out economic and market activities in accordance with national and natural characteristics. A free trade zone is a region where the most favorable conditions are created for attracting new technologies, foreign investment, as well as advanced managerial experience. In the past few decades, the creation of such territories has become quite popular. The first to form them were developed countries. Free trade zones began to appear in the 60-70s. Gradually, a single market space began to turn into a holistic entity. Subsequently, this presupposes not only coordination, but also the maintenance of a common, practically uniform policy, and the absolute unification of the regulatory framework.
What is a free trade area?
This is a regional grouping of developing and highly developed states. Within its limits, no duties apply on the market. A free trade zone is a form of integration. Its participants remove customs tariffs for each other. Along with this, with respect to third states, each party to the international treaty has the right to pursue its own market policy.
Positive aspects of creating duty free territories
An international treaty signed by the parties allows:
- Expand the boundaries of the domestic market.
- To develop competition. As a result of this, one region or another gets the opportunity to overcome the low level of its economic development. Due to which, its role in the total turnover is strengthened, and dependence on other regions is reduced.
- Develop infrastructure. This, in turn, increases the export and import potential of a single state.
- Overcome the difficulties in marketing finished products and services in the market.
Enhanced collaboration
Over the past few decades, there has been 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 existing documents, they account for about 84%. Negotiations are conducted at 96%. The agreement on a free trade zone provides for very transparent conditions for participants. This explains the high percentage. A free trade zone is a territory that does not require special coordination of foreign market policy. Moreover, it maintains the independence of the state in creating a customs regime with respect to third parties.
Specificity
Free zones can address issues related to state access to strategic markets. In this regard, the geographical proximity of the participants is sometimes not at all mandatory. In this, such territories differ from other, more complex integration forms, suggesting the presence of a common border between partners. The agreement within the WTO involves the formation of a multilateral system of basic requirements for the creation and subsequent functioning of zones. First of all, the formation of these territories is allowed as an exception in the most favored nation treatment (along with preferences for developing states, the introduction of cross-border markets, and so on). In such cases, the participating parties will act on preferential grounds. Secondly, agreements should be concluded only with other participating states. Engagement with third parties should be an exception. It should be noted here that compliance with this provision is rather ambiguous in practice. The transition to a free market should have a stimulating effect on trade between participants, without creating obstacles for third countries. Regional acts act as a complement to the principles of forming a multilateral market system, but not as a contrast to them. Free trade should cover a large part of the turnover of products between participants, including the main branches of economic activity, and be mutual. The formation of duty free territories is expected to be carried out within a reasonable time. The period may be more than ten years only in exceptional cases. It is generally accepted that this period is sufficient for the full adaptation of most manufacturers to new competitive conditions.
Distinctive features
Free zones vary in some essential respects. These include, in particular:
- The number of participants.
- Comparative volumes of national economies of the parties.
- Different levels of development of the economy.
- Regime coverage of industries and goods.
- The nature of the impact on the national economy.
- Duration of transition to a free market.
- The level of real mutual dependence between countries in economic terms.
- The importance of the political factor.
- Norms, values, traditions of the integration process in the region.
Common symptoms
Despite the above list of differences, there are several features that combine free zones. These general laws should be taken into account when forming new territories. First of all, it should be emphasized that the creation of the zone should have rather deep preconditions of a historical, political, economic, regional, social and other nature. It is worth highlighting the level of market interaction in general indicators for the region. So, for 2008 they amounted to:
- 66.8% - EU.
- 24.9% - ASEAN.
- 12.9% - MERCOSUR.
- 55.8% - NAFTA.
The free trade zone, as practice shows, has a positive impact on the level of development of the participating states. Along with this, 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 characteristic of individual states differ from each other. This is due to differences in production and market structures, the ability of manufacturers to adapt to new conditions, and efficient use of resources.
The leaders
Today, the main centers of "attraction" of duty-free territories have already been formed. Structurally developed, capacious market platforms of customs unions or individual states are very attractive for foreign exporters. They provide the formation of most conditions for conducting international trade. Undoubted leaders were identified in this category. The most developed are free trade zones of the USA, India, Chile, EFTA. The scope of interaction between Singapore expanded quite quickly. The largest number of agreements has the European Union. At the beginning of negotiations with him, the state will have to take into account not only the main laws by which duty-free territories should develop. A free trade zone with the EU should be formed in accordance with the terms of the foreign policy of the Union itself.
CIS countries
According to news agencies, Canada plans to open a market for Ukrainian industrial products. This will be after signing the relevant documents. Earlier it was reported that Prime Minister Yatsenyuk will go to the UK, USA 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 engineering products and industrial products to Canada. After this, Yatsenyuk plans to go to London, where he will negotiate support for Kiev.
Free trade zones in Russia
In the Russian Federation, FTAs operate as customs warehouses and territories. Warehouse mode is established for the maintenance of imported products without levying duties, as well as exported products with a return or exemption from fees. The maximum period during which goods can be stored is three years. During this period, products can be sorted, packaged, crushed, labeled, and so on. In fact, the owner of the customs warehouse provides customers with tax, including long-term, loans. More favorable conditions have free customs zones. In addition to lending, there is the opportunity to conduct any commercial, except retail, and production activities. In a free warehouse there are no time limits for the content of goods. The first FTZ in the Russian Federation was created in Nakhodka. The license was awarded to Dalintermet JSC. This company carries out cutting of decommissioned fishing and merchant ships, as well as Navy ships for scrap. AO has the right of duty-free import of foreign technological equipment and export of products.