Trade Agreements

Trade agreements are often in the news. Both in a positive and negative way. They make trade easier and lower import duties and trade barriers. They also protect innovations and brands. If you are an entrepreneur, you may have to deal with trade agreements. For example, because you are going to do business in Japan (JEFTA) or Canada (CETA). But what exactly is a trade agreement? Who concludes them? And what benefit does it offer you?

In a trade agreement, 2 or more countries conclude an agreement. The main goal is to make mutual trade cheaper and easier. Making agreements takes a lot of time. Due to the growing world trade, the number of trade agreements is still increasing. In such a document, agreements are made about, for example:

  • import and export of products and services
  • competitive position
  • tenders
  • intellectual property
  • investments
  • market access

Who concludes trade agreements?

The European Union concludes trade agreements (in Dutch), for the Netherlands and other EU member states. In doing so, the EU opens up world trade. The EU's internal market must be accessible to as many parties as possible. It uses multilateral agreements for this. These agreements ensure that all member states form a proportionate part of the trade agreement. So, the member states do not have to conclude trade agreements themselves. The EU recognizes the World Trade Organization (WTO) as the most important international institution. The WTO stimulates trade between countries.

Negotiating a trade agreement is a time-consuming task. Sometimes things get out of hand and a trade war ensues.

Tensions can be caused by the difference in customs tariffs (in Dutch), and especially by the trade balance. For example, the US pays more in imports than it earns in exports. They would like to balance that, because a negative trade balance increases the national debt.

Disadvantages

Of course, there are disadvantages. But these do not outweigh the benefits of a trade agreement. In some sectors, it can lead to job losses. The domestic market is sometimes less protected and competition from abroad increases. Sometimes it can also lead to a reduction in European standards. Think of product requirements, food safety, and privacy. The EU negotiators are careful to ensure that all agreements remain within acceptable boundaries.

Benefits

Trade agreements generally remove obstacles. This makes trading easier. A trade agreement often cancels or reduces import duties and quotas (quantity limits). As a result, prices drop and the product range increases. And filing a declaration at customs becomes easier, making importing and exporting faster and simpler.

In an agreement, countries recognise each other's standards and safety tests. Think of electronics, food, medicines, and machine and transport vehicle parts. This means you do not have to have your product tested again upon import.

Through a trade agreement, individuals from both (groups of) countries also receive permission to work in the participating countries.

Boring topic? It is really worth looking into. Take a look at interesting countries and trade agreements (in Dutch) for your products. And read how you can make use of the benefits (in Dutch) of such a trade agreement.

Information sources on trade agreements:

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