What is the Difference Between FTA and PTA?
🆚 Go to Comparative Table 🆚The main difference between a Free Trade Agreement (FTA) and a Preferential Trade Agreement (PTA) lies in the extent of tariff reduction and the coverage of products. Here are the key differences:
- Tariff Reduction: In a PTA, participating countries agree to reduce tariffs on a specified list of products, known as the positive list. On the other hand, an FTA aims to eliminate tariffs altogether on a wider range of products, with some exceptions listed in the negative list.
- Scope: FTAs generally aim for broader and deeper trade liberalization, covering a wider range of products and services. PTAs, on the other hand, focus on providing preferential treatment for specific products or sectors.
- Trade Blocks: FTAs are considered to be an advanced stage in trade between participating countries of a trade block, where countries agree to eliminate artificial barriers and tariffs in trade. PTAs, however, are more limited in scope and focus on reducing tariffs on specific products or sectors.
In summary, while both FTAs and PTAs aim to improve trade relations and reduce tariffs, FTAs involve more comprehensive trade liberalization and tariff elimination, whereas PTAs focus on specific products and provide preferential treatment for those products.
Comparative Table: FTA vs PTA
The main difference between Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) lies in the extent of removal of trade barriers. Here is a table summarizing the differences between the two:
| Feature | Free Trade Agreement (FTA) | Preferential Trade Agreement (PTA) |
|---|---|---|
| Definition | An FTA is an economic pact between participating countries to eliminate artificial barriers and tariffs in trade. | A PTA is an economic pact between participating countries to help improve the quantity of trade by reducing tariffs on an agreed number of tariff lines. |
| Scope | FTAs generally aim for broader and deeper trade liberalization, covering a wide array of goods and services. | PTAs focus on providing preferential treatment for specific products or sectors, with a narrower focus compared to FTAs. |
| Tariff Reduction | FTAs eliminate or decrease duties, tariffs, and quotas between member countries on a wide array of goods and services. | PTAs give preferential access to certain products from the member countries into each other's markets through lowered duties and tariffs. |
| Examples | Examples of FTAs include the North American Free Trade Agreement (NAFTA) and the European Union. | Examples of PTAs include the Asia Pacific Trade Agreement (APTA) and the India-Sri Lanka PTA. |
While both FTAs and PTAs aim to improve trade ties and reduce trade barriers, FTAs are generally more ambitious in their coverage of tariff lines and products, eliminating trade barriers for almost all goods and services. In contrast, PTAs have a narrower focus, aimed mostly at specific sectors or industries within the participating nations.