The concept of free trade is the opposite of trade protectionism or economic isolationism. A free trade agreement is a set of rules on how countries deal with each other when it comes to doing business together – importing and exporting goods, services and investment. There are significant differences between unions and free trade zones. Both types of trading blocs have internal agreements that the parties enter into to liberalize and facilitate trade between them. The key difference between unions and free trade zones is their approach to third parties [lack of ambiguity needed]. While a customs union requires all parties to apply and maintain identical external tariffs on trade with non-parties, parties to a free trade area are not subject to such a requirement. Instead, they can set and maintain any customs regime for imports from non-parties, as they see as necessary.  In a free trade area without harmonized external tariffs, the parties will adopt a system of preferential rules of origin to eliminate the risk of trade diversion [necessary ambiguities].  A free trade agreement is an agreement between two or more countries to facilitate trade and remove trade barriers.
The aim is to eliminate tariffs completely from day one or over a number of years. A free trade agreement focuses primarily on economic benefits and the promotion of trade between countries by making it more efficient and profitable. As a general rule, agreements remove tariffs on goods, simplify customs procedures, remove unjustified restrictions on what may or may not be exchanged, and make it easier for businessmen to travel or live in each other`s country. But free trade agreements can also have political, strategic or aid benefits. Governments with free trade policies or agreements do not necessarily abandon import and export controls or eliminate all protectionist policies. In modern international trade, few free trade agreements lead to completely free trade. Or there are guidelines that exempt certain products from duty-free status to protect domestic producers from foreign competition in their industries. Two countries participate in bilateral agreements.
Both countries agree to relax trade restrictions to expand business opportunities between them. They reduce tariffs and give themselves privileged trade status. In general, the point of friction is important national industries that are protected or subsidized by the state. In most countries, they are active in the automotive, oil and food industries. The Obama administration negotiated with the European Union the world`s largest bilateral agreement, the Transatlantic Trade and Investment Partnership. Unlike a customs union, parties to a free trade agreement do not maintain common external tariffs, which means that they apply different tariffs and other measures against non-members. This function allows non-parties to free themselves as part of a free trade agreement by entering the market with the lowest external tariffs. Such a risk requires the introduction of rules for determining which products originate may be preferred under a free trade agreement, which is not necessary for the establishment of a customs union.  In principle, there is a minimum processing time leading to a “substantial processing” of the products, so they can be considered original products.