Different Trade Agreements Influencing Global Marketing

Many countries and regions have established trade agreements, laws, and tariffs that affect global trade. There are trade agreements among and between countries that establish the rules of the game. Depending on where you want to trade, these agreements may have a direct impact on your international efforts. Even if you are not planning to become a global marketer, you may find that these and other agreements will affect your domestic competitive environment.

Regional Trade Agreements

(RTAs) focus on removing barriers at the border by reducing tariffs to increase market access between signatory nations. RTAs are designed to facilitate trade on a regional basis, generally including tariff cutting and often including complex regulations regarding trade between participating countries. Among the more sophisticated RTAs, there are rules on competition, labor, investment, and the environment. A total of some 575 notifications of RTAs were received (as of July 31, 2013) with Regional Free Trade Agreements (RFTAs) and partial scope agreements.

(RTAs) focus on removing barriers at the border by reducing tariffs to increase market access between signatory nations. RTAs are designed to facilitate trade on a regional basis, generally including tariff cutting and often including complex regulations regarding trade between participating countries. Among the more sophisticated RTAs, there are rules on competition, labor, investment, and the environment. A total of some 575 notifications of RTAs were received (as of July 31, 2013) with Regional Free Trade Agreements (RFTAs) and partial scope agreements.

RFTAs go a step further by simplifying commercial regulations and reducing tariffs to zero (or very low levels) to eliminate trade barriers between them, without establishing a common trade policy for nonmembers. The WTO provides cautionary comments with respect to RTAs because such agreements are inherently discriminatory, and the ultimate net impact may not be positive. Of particular concern is the membership of countries in multiple RTAs. Descriptions of some of the most noteworthy RTAs follow.

European Union (EU or EC):

The European Union (or European Community) is a political and economic confederation formed in 1993 that has addressed foreign and security policy, created a central bank, and adopted a common currency (the euro). The member nations of the EU are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

European Free Trade Association (EFTA):

The European Free Trade Association was founded in 1960 with its stated premise as “free trade as a means of achieving growth and prosperity amongst its Member States as well as promoting closer economic cooperation between the Western European Countries.” The member states are Iceland, Liechtenstein, Norway, and Switzerland.

North American Free Trade Agreement (NAFTA):

The North American Free Trade Agreement is a trilateral accord established in 1994 to support free trade between Canada, Mexico, and the United States. This agreement created the world’s largest free trade area. Much has been written and debated about the positive and negative impacts on labor costs, markets, and the like, and you may find that NAFTA directly or indirectly affects your competitive circumstances and opportunities.

Southern Common Market (Mercosur):

Mercosur, a regional association formed in 1991, has Argentina, Brazil, Paraguay (suspended in 2013), Uruguay, and Venezuela as members and permits free transit of goods and services between them, eliminating customs rights and nontariff transit restrictions and setting a common external tariff and trade policy regarding nonmember states. Mercosur moved from free trade to a common market, which permits the free movement of labor and capital across borders.

Association of Southeast Asian Nations (ASEAN): Free Trade Area (AFTA) AFTA has member countries progressing in lowering intra-regional tariffs in accordance with the Common Effective Preferential Tariff (CEPT). Most tariffs on CEPT products have been lowered to between zero and 5 percent, and the members have agreed to work on nontariff barriers. The member states are Brunei, Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

Common Market of Eastern and Southern Africa (COMESA): This agreement defines its role as “economic prosperity through regional integration.”  COMESA’s mission is to “endeavor to achieve sustainable economic and social progress in all member states through increased cooperation and integration in all fields of development particularly in trade, customs and monetary affairs, transport, communication and information technology, industry and energy, gender, agriculture, environment and natural resources.”

The formation of a free trade area through the removal of tariff and nontariff barriers, including coordination of trade statistics, customs procedures, and management systems, was COMESA’s first goal. A free trade area was established with 14 members. Formation of a Customs Union with a common external tariff was the first goal achieved. A full monetary union with a common currency and central bank is the next priority. The member states of COMESA are Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.

One topic in particular to analyze when considering global marketing is whether any U.S. trade agreement provides you with a competitive advantage or whether a country with which you want to trade is a member of an RTA. The Office of the U.S. Trade Representative, in the Executive Office of the President, has an online resource center (http://www.ustr.gov/countries-regions/) that will provide information on RTAs, including primary imports and exports and RFTA status. This analysis could dramatically alter your cost structure and present a greater opportunity for global marketing success. The London School of Business and Finance is the best source to learn more about different trade agreements that influence global markets.

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fredvalentine995

Fred is working as a freelance content specialist rendering his services to various media and publication houses. Fred has a master’s degree in English and is working as a full time blogger for over 6 years. Technology and gadgets have been his keen areas of interest and when not busy writing he loves to spend time with his family

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