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How Free Trade Agreements Work for Semi-autonomous Countries
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How Free Trade Agreements Work for Semi-autonomous Countries

When we discuss free trade agreements, or FTAs, we often discuss them in terms of an agreement between one sovereign nation, or a group of sovereign nations such as the European Union, with another sovereign nation. But these aren’t the only FTAs that exist. Semi-autonomous nations can also be crucial trading partners.

What Are Semi-autonomous Countries?

A country that has full autonomy is one with its own government that decides both domestic and foreign policy. These countries include the US, China, Canada, and Cameroon. 

A semi-autonomous country, on the other hand, has a government that makes some of its own policies but is governed to some extent by another country. Semi-autonomous countries frequently determine their own domestic policy while another governing body determines their foreign policy.

For example, the UK is a sovereign nation made up of four constituent “countries”: England, Wales, Scotland, and Northern Ireland. The national government is the Palace of Westminster in London, but Scotland, Northern Ireland, and Wales each have their own devolved governments with varying degrees of self-rule. When the UK signs an FTA, it covers all four constituent parts. This has caused major problems recently given Brexit and the Northern Ireland protocol

To add to the confusion, the Isle of Mann, the Bailiwick of Jersey, and the Bailiwick of Guernsey are technically not part of the UK but are Crown Dependencies. Their official head of state is Queen Elizabeth II and the UK is responsible for its defense and some of its foreign policy. But they can also sign their own trade agreements. For example, Jersey recently signed a bilateral investment treaty, or BIT, with the UAE, which protects investors’ money in both jurisdictions.

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Why Do Semi-autonomous Regions Need Their Own Agreements?

Every case is different, but there are often several advantages for semi-autonomous places to have their own trade agreements. The needs of these places often differ from larger countries. For the example above, Jersey is a small island and doesn’t have many natural resources to export. But they do have a strong financial and business sector. 

The UAE, while fully sovereign, is also a small country with a strong financial and business services economy. It made sense for these two parties to have a special agreement separate from any agreement the UAE has with the UK. Places like Jersey, the Isle of Man, and the Cayman Islands have been and are used as tax havens, which is a problem. However, there are efforts being made to reduce the practice.

Intranational Agreements

Sometimes second-tier governmental regions have their own agreements. For example, the Canadian Free Trade Agreement, or CFTA, governs trade between Canadian provinces. While agreements like the USMCA or NAFTA apply to imports and exports for the whole nation, the CFTA applies to interprovincial trade.

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