Specific to the Trade-in-Goods chapter of an FTA, goods means any merchandise, product, article, or material that may enter an importing country under non-discriminatory conditions. It is generally bounded by measures such as tariffs, tariff rate quotas (TRQs), and quantitative restrictions (QRs).
FTAs cover preferential tariffs (Customs duty) not inclusive of other internal taxes for goods. Types of preferential tariff elimination or reduction are either immediate or phased. Qualification for preferential tariffs largely depend on meeting the required Rules of Origin criteria stipulated by the FTA’s Legal Text.
Tariff commitments for goods are set out in each member’s schedules of concessions on goods. The schedules represent commitments not to apply tariffs above the listed rates.
In a typical pricing model like this, FTAs can potentially reduce one of the cost components - import duties.
This would make your exports more competitive, as compared to exporters from non-FTA partner countries.
FTAs allow for freer flow of goods by giving economies involved in the agreement preferred access to each other's markets. Beyond import duties, FTAs can also allow for increased export quotas. This exclusive treatment would thus give a greater advantage to exporters from member countries, as compared to competitors from non-member countries.
Import duties are largely dependent on individual countries’ trade policies. Countries have the right to increase/reduce import duties when necessary. Such decisions can severely affect long-term exports into these markets. However, FTA preferential rates are legally binding and signatory countries have to abide by the concessions offered. This ensures stability for exporters in the long run.
Example of volatile import duties
Exports of Gold Dore Bars into India