This is a situation where there is unrestricted exchange of goods and services between the countries. It has benefits/advantages similar to those of economic integration.
Disadvantages of free trade area
Some of the problems it is likely to bring include;
- It may lead to importation of inferior goods and services to the country, as the member country may not be able to produce high quality as compare to other non-member countries
- It may discourage the growth of the infant industries due to competition from well developed industries in other countries
- It may lead to reduced government revenue because no tariff may be charged on the goods and services
- A country may be tempted to adopt technology not suitable for its level of development.
- If not controlled, it may lead to unfavourable balance of payment, where a country imports more than it export
- It may lead to importation of harmful goods and services, that may affect the members health such as illegal drugs
- It may lead to lack of employment opportunities especially where more qualified people have moved from their country to secure job opportunities in the country
- It may expose the country to negative cultural practices in other countries, interfering with their morals. For example the exposure to the pornographic materials.
- Compromising political ideologies especially where member countries with different ideologies wants to fit in to the bloc
- It may lead to over exploitation of non-renewable economic resources such as minerals