A Free Trade Agreement (FTA) is a legally binding international treaty or concept between two or more countries that establishes a free-trade area by reducing or eliminating trade barriers between the signatories. The idea of free trade gained significant traction in the 20th century, with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947 after World War II, which aimed to solve the problem of high tariffs and protectionism that had stifled global commerce. FTAs work by providing for the reduction or elimination of tariffs (taxes on imports) and addressing non-tariff barriers like import quotas and technical standards, thereby encouraging international trade and creating a more predictable environment for businesses.
Key provisions in modern FTAs extend beyond simple tariff reductions to include clauses on trade facilitation, investment, intellectual property rights, government procurement, and the mobility of professionals. FTAs are permitted under the rules of the World Trade Organization (WTO), which succeeded the GATT in 1995. Specifically, Article XXIV of the GATT 1994 allows WTO members to form FTAs as an exception to the most-favored-nation principle, provided the agreement eliminates barriers on "substantially all the trade" within the area.
India has recently intensified its focus on FTAs, signing seven new trade agreements since 2021, after a decade-long hiatus. This marks a significant change, with new-generation agreements like the India–UAE Comprehensive Economic Partnership Agreement (CEPA) implemented in May 2022 and the India–Australia Economic Cooperation and Trade Agreement (ECTA) implemented in December 2022. More recently, India signed the India–European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA) on March 10, 2024, which entered into force on October 1, 2025. These modern pacts often include provisions for greater mobility for Indian professionals, such as post-study work visas and social security relief, which was not a primary focus of earlier agreements.