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I think a side effect of them is that they Gradually raise your GDP, but theres not much information from ingame sources to tell if they're actually contributing to anything.. this game sorely lacks a lot of info.
Mr Geczy is the Lead Programmer, according to the credits.
" by George Geczy » Aug 01 2008
While having Free Trade and Free Flow of Labour do have slight economic effects for the countries that poses the agreements, the general effects on economy and GDP are purposefully minor.
These agreements have two other important purposes: 1) To improve world opinion (ie "I'm a get-along-with-people free trading globally-thinking kind of country! Love me!), and 2) To improve relations between the two regions involved."
How? What exactly should be different once you have that agreement in place?
Well there could be random flavour text events with criminal extradition, that could generate tension between nations.
like Criminal Extradition treaties might occassionally have someone flee to your country , who stole a tech from their own government who might insist you turning the criminal over, along with what they stole.
or maybe they stole a large sum from the government. and in exchange for not turning them over they might offer to give it to you. which would might harm relations with another nation.
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Free trade Agreements could work more like common market treaties. where when you sign them you are agreeing to share excess production before market trade takes place .
So for example if i have a surplus of Rubber production, but i have a deficit in oil, an the person i sign it with needs rubber than
my excess rubber production would meet some of its demand, before what you ship stuff to other nations as sold product.
which the excess trade would be taken from your potential sells an not your stock amount.
so for example if..
i have 10,000 in excess production and i have it set to sell 50% of surplus than 5,000 would go into stock. an then the remainder thats flagged for sell would go to the allies you have free trade agreements with.
so if my ally has for the sake of convience 2,500 demand then the remaining sales stock which was 5,000 should ship 2,500 to your ally and the remaining 2,500 would be sold to the market as normal.
if you have multiple allies , perhaps a slider could be added that would further allow you to influence how much of your sells stock is dedicated to 'free trade'.
so something like 50% goes to surplus stock.
25% goes freely to free trade agreement partners , and 25% goes to the world market. this would allow you to control your trade a little more. allowing you to supply only your allies . which this would give a reason for nations to want to avoid war with you.
since well if you produce the largest amount of resource they need then they would want a free trade agreement with you to conserve their finances.
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Free flow of labor could see the country with the highest unemployment providing immigrants directly to the person they have the agreement with, perhaps resulting in a reduction in production cost, and an increase in production output. witheach treaty gradually giving the slightly larger boost. this would give incentive as to not to want to break treaties. and would add perhaps actual dilemias to the aforemention criminal extradition events.
perhaps like Euro, the events generated for these treaties could also have effects on relations and internal things.
like for example a celebrity from one country comes to yours and is the victim of a crime. or perpetrator of a crime. if you do(n't) punish them its fall out could effect diplomatic relations and public opinion.
something like that i think would go a long way to making peace a bit more lively, and allow for the developement of "legitamate" war scenarios.
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though i'd still like to see seperate treaties for 'transit' and 'basing' Transit just means they could pass through your territory but they couldn't land at your bases. this is due to the fact that the AI has this habit of sticking units in your territory and using your air bases when it runs out of room in its own.
like in my current game the USSR keeps positioning an engineer in parts of the USSRi conqueored when we were at war in WW2 but since i didn't wanna wipe out the USSR i made friends with it signed treaties with it, so as to avoid another war. but it keeps positioning a Motorized engineer in one of its former towns inside my border.
so transit i think should be seperated from allowing units to 'remain' in someones territory.
This would require some updates to our Random Events model. If done as scripted events, they would be region specific and very time consuming to set up with condition tests.
You hit on the issue - what if you have multiple free trade agreements? Adding slider is now also building more of the user interface, increasing complexity and we'd need to find a place to put it. It is an interesting idea, could be worth starting a thread about just this on BGForums to see if you get any community support for it.
You other suggestions are also interesting, but seem like an increase in game complexity.