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Op-Ed: New Free Trade Agreements Enable Growth Yet Require Tight Control

Globalization and protectionism are driving a new business paradigm for supply chains—a vigorous international debate on the parameters of free or preferential trade.

From a strategic and global perspective, Brexit could be the first wave of de-globalization and growing populism in other nations. But President Trump’s driven agenda continues to cause turbulence worldwide as other countries look to strike bilateral trade agreements rather than stay in the previous regional ones.

When seeking trade policy changes, even the newest administrations—like those in the U.S. and France—realize the positive implications from trade preference agreements. Free trade agreements have a history of spurring trade and economic activity.

With over 500 free trade agreements (FTAs) now in place across the globe, companies can benefit from the preferential duty rates and lowered trade barriers that come with FTAs. But managed ineffectively, they also pose huge compliance risks. FTA information needs to be constantly updated to ensure accurate preferential origin determination for making a claim.

Keeping global trade professionals compliant is not a simple task. To be sure you are covering every aspect of import and export requires a combination of technology and people power. Within the last two years, hundreds of new agreements have been put in place. Most of these are multilateral in design, meaning they allow for commerce between three or more nations. The agreements reduce tariffs and make it easier for businesses to import and export; leveling the playing field for emerging market countries and providing lower cost products to the big consumer nations. However, multilateral and bilateral agreements alike are complex and require detailed information sharing to cross borders successfully.

Brexit may usher in a whole new set of bilateral agreements, as countries around the globe have made statements welcoming an FTA with the U.K., even though the divorce proceedings are only just beginning. Brexit implications for trading relationships with the EU and U.K. will be highly complex, and only the best automated FTA management solutions will be able to keep on top of the changes.

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Although Trump removed the U.S. from the Trans-Pacific Partnership (TPP) earlier this year, the eleven remaining nations are charting a path forward on TPP, hoping the years of work put into the agreement won’t go to waste.

These pending agreements are not the only FTAs that global companies must keep an eye on. In the Americas, renegotiations on NAFTA are slated to begin later this year, with the potential to change the way business is conducted across either side of the U.S. border. While it will be some time before any changes become law, having an automated solution that keeps track of the changes will position your company to be one of the first to take advantage of any new duty reductions, while helping keep you on top of compliance requirements.

As all of these new and revised agreements enter into force, global companies need to leverage the technology found in FTA Management software solutions to support the process. The platform needs to include all of the current trade agreements to allow identification and qualification of goods by using a global trade content database which contains the rules of origin, product classifications, duties and taxes for the major preferential trade programs.

Utilizing a best-of-breed technology solution can help open up new markets for your company by simplifying the compliance and qualification processes. With new FTAs on the horizon or just passed, such as the EU-Canada FTA, sourcing decisions can be made with an eye towards potential trade benefits from the start.

By Gary M. Barraco, director of Global Product Marketing for Amber Road