A global array of trade agreements can seem overwhelming. It is not just a matter of understanding how each agreement differs from one another; the intricacy of adhering to several nations’ regulations raises operating costs and delays operations. It is vital that a company understands how to make the most of its trade agreements and has an expert in the field to assist.
The benefits of trade agreements are many and diverse, but most importantly they allow for the free flow of goods and services across borders. This increases the market size for companies to sell their goods and services, which leads to a larger customer base, increased profits, and job creation. Additionally, the ability to import and export products without a lot of red tape reduces overhead costs.
In addition to removing tariff barriers, trade agreements can also remove non-tariff barriers such as special “health” requirements, restrictive regulations, selective excise taxes, quotas, and “voluntary restraints on importing.” These restrictions may seem minor, but they create barriers to free and fair trade. The best trade agreements will contain detailed and precise rules that prevent these kinds of violations, but even the most detailed rules leave some room for creative arguments by governments that want to avoid violating them.
The countries making the most deliberate use of trade agreements tend to be smaller, reliant economies that seek to gain access to international markets. They are usually in a position to benefit from the reciprocity and breadth of other provisions, and their agreements often feature regional coverage and liberalization (with regional trading partners) as well as a commitment to greater global liberalization.