1. Free trade area: duty-free domestic trade, but differences in external tariff levels. As a general rule, a free trade agreement will eliminate or significantly reduce the imposition of tariffs on most products traded between the signatory states, but it may be possible to have a quota for sensitive products. The recent EU free trade agreement with Canada has been touted as a model that the UK may intend to follow. For example, tariffs on 99% of goods traded between Canada and the EU have been abolished, including up to 92% of agricultural products. There are pros and cons of trade agreements. By removing tariffs, they reduce import prices and consumers benefit from them. However, some domestic industries are suffering. They cannot compete with countries with lower standards of living. This allows them to leave the store and make their employees suffer. Trade agreements often require a trade-off between businesses and consumers.
Both the creation of trade and the diversion of trade have a decisive impact on the establishment of a free trade agreement. The creation of trade will result in a shift in consumption from a cost producer to a low-cost producer, which will lead to an expansion of trade. On the other hand, trade diversion will mean that trade will move from a low-cost producer outside the zone to a more expensive producer in the free trade agreement.  Such offshoring will not benefit consumers under the free trade agreement, which will be deprived of the opportunity to purchase cheaper imported goods. However, economists note that trade diversion does not always harm the overall national well-being: it can even improve national well-being as a whole if the volume of misappropriated trade is low.  A government is not obliged to take concrete steps to promote free trade. This upside-down attitude is called “laissez-faire trade” or trade liberalization. Once negotiated, multilateral agreements are very powerful.
They cover a wider geographic area, giving signatories a greater competitive advantage. All countries also give themselves the status of the most favoured nation – and grant the best conditions of mutual trade and the lowest tariffs. On the other hand, some local industries benefit. They are finding new markets for their duty-free products. These industries are growing and employing more labour. These compromises are the subject of endless debate among economists. They depend on the terms of the free trade agreement and what is agreed between the parties. The agreement entered into force on August 1, 2006. All bilateral trade in industrial goods and consumer goods will be exempt from tariffs as soon as the agreement enters into force. In addition, Bahrain and the United States will provide immediate duty-free access to virtually all products in their tariff plans and will eliminate tariffs on the handful of remaining products within 10 years. In the first two decades of the agreement, regional trade increased from about $290 billion in 1993 to more than $1 trillion in 2016. Critics are divided on the net impact on the U.S.
economy, but some estimates amount to 15,000 a year. 3.