Many businesses are unaware of the opportunities that they are missing out on by not exporting to the global market. Business owners who have listened to my talks on this very subject and have become aware now ask about how to get started. This blog post provides an answer to that very question.
The first step toward exporting to the global market is to identify your market. There are two important components to fulfilling this step.
Seek Out Those Markets That Offer Special Access
The United States has signed and implemented free trade agreements with 20 countries all around the world. The Office of U.S. Trade Representatives provides an updated list of those countries with which we have a free trade agreement.
Additionally, the United States is currently negotiating two large free trade agreements that will offer special access to a number of markets once signed and implemented. The United States is negotiating the Trans-Pacific Partnership agreement with 12 other countries throughout the Asia-Pacific and the Trans-Atlantic Trade and Investment Partnership with the 28 member countries of the European Union.
Other countries also sign a number of trade deals. Each country has its own set of free trade agreements that offers its producers of goods and services access to other markets. Information on free trade deals that exist between countries all around the globe is publicly available.
When countries enter into free trade agreements, they determine the special access that only those countries that have signed the agreement enjoy.
Understand the Benefits of
Free Trade Agreements
Special access refers to the ability for producers to export to specific markets without facing a number of trade barriers. A UPS Perceptions of Global Trade Survey reveals that most U.S. businesses have an easier time exporting to Canada, Mexico, and Australia because of existing free trade agreements. At the same time, they face more challenges exporting to countries that do not have trade deals with the United States such as Brazil, Russia, India and China.
Many countries erect trade barriers such as tariffs, which are taxes placed on goods that a foreign country exports to that specific country. The main goal of such tariffs is to protect local producers from foreign competition. Under a free trade deal, countries negotiate a schedule to eventually eliminate those tariffs to allow for the free flow of goods across borders. As a result, a business would not have to pay tariffs to export to specific countries.
Quotas are also used as a barrier to trade in an effort to protect domestic producers from foreign competition. These are restrictions on the quantity of a good that can enter into a foreign country. As with tariffs, negotiators establish a time frame for the elimination of quotas to allow for a truly open market between countries that are a part of a particular free trade deal.
When it comes to other matters such as labor, environment, services and intellectual property, a number of provisions exist within an agreement to ensure that all parties to that agreement actually comply. The benefit of exporting to markets with which we have an agreement is that a dispute settlement process exists to address any violation of that agreement.
Businesses have to become aware of the opportunities that free trade agreements offer to grow and expand in the global market. Once businesses are familiar with these opportunities, it is important to start by identifying the markets that are accessible vis-à-vis a free trade agreement.
**Image courtesy of renjith krishnan / FreeDigitalPhotos.net