A free trade agreement provides for free trade (cero-customs) between countries and countries. In practice, this also includes broader provisions, such as capital, goods and people agreements (such as NAFTA). A free trade agreement will also cover, in most cases, all or part of the merchandise. Free trade is the unrestricted purchase and sale of goods and services between countries without conditions such as tariffs, tariffs and quotas. Free trade is a win-win proposition because it allows nations to focus on their key competitive advantages, maximizing economic performance and promoting income growth for their citizens. Former island economies such as China and India have expanded with much faster growth rates since the introduction of free trade principles in the 1980s and 1990s. These tariff preferences have led to many departures from the principle of normal trade relations, namely that members of the World Trade Organization (WTO) should apply the same tariff to imports from other WTO members.  For most countries, international trade is governed by unilateral trade barriers of various kinds, including tariffs, non-tariff barriers and absolute prohibitions. Trade agreements are a way to reduce these barriers and thus open up the benefits of enhanced trade to all parties. Free trade allows nations to focus their efforts on producing products or providing services, where they have an obvious comparative advantage, according to the theory first advocated by economist David Ricardo two centuries ago.
A free trade policy should allow a nation to generate enough foreign exchange to buy products or services that it does not produce in a particular way. The best way to do this is to have few or no barriers to the entry of these imports into the market. The imposition of artificial constraints, such as import tariffs or export subsidies, will distort and hinder free trade. A free trade agreement is obviously not a physical place (see statement above). On the other hand, a preferential trade agreement is much less broad, the more favoured (i.e.