The Free Trade Zones were created by the Galactic Senate in 124 BBY to jump-start legitimate commerce in the region in the hopes of ending the political isolation, stagnation and crime that had gripped the area since the Ruusan Reformations. The acts benefited various mega-corporations, including the InterGalactic Banking Clan and the Corporate Alliance, but none more so than the Trade Federation, a Neimoidian trade cartel. The Trade Federation rapidly expanded into the Outer Rim, stifled competition, and enforced deals with its powerful Trade Defense Force. It soon dominated hundreds of star systems and commanded tremendous influence on Coruscant.
The Free Trade Zones were reformed in 67 BBY after an intense debate on the issue. The Trade Federation and several other major commerce corporations opposed this act as it would give startup companies in the Outer and Mid Rim, as well as small planetary business, greater control over trade in the outlying systems. Predominantly in the opposition camp was the financial lobbying company Damask Holdings, while the Jedi Order campaigned strongly in favor of reform.
Secretly however, Damask Holdings Magister, Hego Damask II, knew the trade zones would be reformed regardless so he instead negotiated a compromise to strengthen the Federation. In exchange for Damask's support, the pro-creation lobby granted the Federation full representation in the Senate, while Damask advised the InterGalactic Banking Clan to invest in startup shipping operations in the Outer Rim.
By 33 BBY, it was felt that the Free Trade Zones had made the Trade Federation far too powerful. Supreme Chancellor Valorum advocated restoring taxation to the Free Trade Zones in an effort to curb the Trade Federation. Senate Resolution BR-0371 would have effective abolished the Free Trade Zones. Regarding this as an attack on their interests, and urged on by Darth Sidious, the Trade Federation blockaded the planet Naboo in protest.
- Monsters and Aliens from George Lucas (First mentioned) (Non-canonical appearance)
- Star Wars: Episode I Insider's Guide
- The Official Star Wars Fact File 13 (NAB7–8, The Naboo Blockade)
- The Essential Atlas
- The Essential Guide to Warfare