A free trade agreement free trade agreement (FTA) is a regional or bilateral trade agreement to expand the market for goods and services between the participating countries. Basically, is the elimination or substantial reduction of tariffs on goods between the parties, and agreements on services. This agreement is governed by the rules of the World Trade Organization (WTO) or by mutual agreement between participating countries. An FTA is not necessarily an economic integration, social and regional policy, such as the European Union, the Andean Community, Mercosur and the South American Community of Nations. While these were established to promote trade, also included provisions for tax and budgetary policy and the movement of people and common political bodies, missing elements in an FTA.Historically, the first FTA was the Franco-British Treaty of free trade) (or Cobden-Chevalier Treaty) signed in 1860 and it also introduces the most favored nation clause.