PTA's are preferential trading agreements. These are set up, usually in a region, as areas of market integration without tariff barriers for goods shipped within the area. They are free trade in the sense that as yet, because the WTO does not itself include all countries in the world, there is no free trade in the world in the ideal sense of non-discrimination. And, with the WTO, as we know there are still many negotiations to take place because there are still barriers. There is only 'freer' trade that is moving in the direction of free trade. As such, where there are no barriers in an area, we can say that there is free trade within that area. That trade is actually freer than the wider WTO, and freer still than the countries who have not yet joined the WTO. Most countries in the world even those outside the WTO, have free trade agreements or some barrier reduction in the course of globalization. The problem with defining free trade and the problems of the PTAs actually lead to the same answer. Where the PTA is erected, these countries take down their barriers to trade within the PTA, and since it is not possible to extend this to all WTO members and beyond at this time, because of the negotiations needed, if it is a customs union they must decide on external tariffs together and if it is an RTA, individual countries still have barriers to negotiate with everyone else they trade with.
Ironically, the trade then, in the PTA, is freer than what is accomplished at the WTO, and the trade at the WTO is freer than the relations between WTO members and non-members, unless they have bilateral agreeements. BUT, every agreement that is less than the whole creates a state of discrimination. Now, the WTO agreements form the near-global baseline of reduction of barriers agreed upon by all and granting all MFN status, but clearly the PTA's go beyond this creating the discrimination. The problem with the discrimination is not necessarily fairness, since agreements at WTO and PTA's are voluntary and then the trading blocs establish their external tariffs in principle without violating MFN since they treat all WTO members the same, and the individual countries treat the WTO members the same too. What is puzzling, I must admit, is that countries can enter FTA, RTA and PTA's treating those countries without barriers, whilst treating the rest of WTO members the same, yet they are not treating all the WTO members the same because the countries they reach these agreements with are WTO members.
The problems of productive efficiency as the benefits of trade under the principle of comparative advantage lie with these same problems of discrimination. Free trade areas lower the transaction costs across the borders within the areas, creating trade within the areas. The comparative advantages are distorted because when trading with partners who are not in the zone, the lowest cost in trade does not necessarily reflect the lowest cost of production - their is a benefit arising from trade within the zone. Now, one can argue also that so long as barriers exist, this is the same benefit that domestic production gets within a country, and it is just as if economically the countries have joined, or with the EU this is no metaphor but a real situation. Yet it will require more rounds of WTO and more membership in the WTO for countries to give up all barriers to all countries. So long as those barriers exist, domestic and foreign producers are treated differently and where there is 'freer' trade than what is offered by MFN, countries are treated differently.
In conclusion, PTA's are freer trade. The concept of freer trade implies that free trade does not yet exist, by the definitions of non-discrimination. So long as barriers exist, they will never be even since it is impossible to align them globally, so free trade not only means non-discrimination, it means no barriers. Whether this will ever exist is another conundrum, because of the contentious issues of sovereignty and the rest, and the utilitiy for national self-interest and bargaining that barriers contain.
