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What is a Free Trade Zone?

  A free trade zone is delimited usually among more than two countries or regions by signing free trade agreements which specify that the countries or regions involved shall cancel tariff and non-tariff barriers for each other, relax the restrictions on the market access of most service sectors, and open up investment to promote the free flow of production factors such as goods, services, capital, technology, and personnel, so as to achieve complementarities and promote common development. In some context, it can also refer to one or more national regions that have eliminated tariffs and trade quotas and have been imposing less administrative interventions on their economies.

  Types of free trade zones:

  The free trade zones for re-export and distribution take advantages of their superior natural and geographical environment for re-export, distribution, cargo storage, and commercial processing of goods, with the Cologne Free Trade Zone in Panama being the most prominent one.

  The free trade zones that combine trade and industry but mainly focus on trade, are primarily engaged in import and export, and also some simple processing and assembly manufacturing. This type of free trade zone is common in developing countries, for example, the Free Trade Zone of Dubai Port in the United Arab Emirates.

  Export-oriented free trade zones are mainly engaged in processing, and also take part in re-export, international trade, warehousing, and transportation services, such as the Nigerian Free Trade Zone.

  The free trade zones for bonded warehousing are mainly devoted to offer protective tariffs, streamline procedures for foreign import and export, and make sure these goods are bonded for a long time. The Amsterdam Free Trade Zone in the Netherlands is an example.

 
 
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