International Trade Does Not Have to Be Scary

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Despite the fact that the United States has signed and implemented free trade agreements with 20 countries around the world, less than one percent of all 30 million U.S. businesses take advantage of these trade deals. Some business owners have expressed to me that they just were unaware of the opportunities presented by free trade agreements or exporting just seemed too complicated to understand. However, free trade agreements do not have to be so daunting.

Trade agreements create special access into the markets that are a part of those agreements that otherwise would not be available. By not exporting, your business is missing out on opportunities to grow its profits.

I will share with you the opportunities that are available so that you can export with ease to the global market and show how exporting to the global market can increase your profits.

The Opportunities to Spread Your Business

The United States currently has free trade agreements with countries all around the world. As a part of these agreements, member countries are able to export goods at a much lower or no tariffs. Additionally, goods can be exported from country to another at a higher quota, which refers to the quantitative restriction on the amount of good that can enter a country. Free trade agreements also consist of provisions to encourage all countries to uphold certain labor and environmental standards. Countries also agree to remove non-tariff barriers such as regulations and standards that may serve a more discriminatory purpose. In cases where a country violates the terms of that free trade deal, a dispute settlement process is included to ensure fairness.

I emphasize countries that we have signed free trade agreements with, because other countries are more difficult to enter due to protectionist policies. During a Los Angeles-based event, a consultant expressed the difficulties with entering Brazil’s market. He merely echoed the complaints of a number of investors that have been highlighted in numerous studies over the years. While Brazil’s economy has grown tremendously, it presents a challenge for others seeking to export to that market. For this reason, exporting begins with identifying the market where the barriers to entry are far lower, as in the case of the countries that agreed to remove tariff and non-tariff barriers.

Those 20 countries and their respective 14 free trade agreements (FTAs) with the United States are as follows:

  • Australia FTA
  • Bahrain FTA
  • DR-CAFTA (Dominican Republic, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica)
  • Chile FTA
  • Colombia FTA
  • Israel FTA
  • Jordan FTA
  • South Korea FTA
  • Morocco FTA
  • North American Free Trade Agreement (Canada, Mexico)
  • Oman FTA
  • Panama FTA
  • Peru Trade Promotion Agreement
  • Singapore FTA

As a result of these free trade agreements, as highlighted by a U.S. Chamber of Commerce study, business, labor and the US economy have benefited in the following manner:

  • U.S. GDP increase by $1 trillion
  • Supports 17.7 million jobs across a variety of industries
  • U.S.  output reaches $304.5 billion, accounting for 2.1% of U.S. GDP

Currently, the United States has signed the Trans-Pacific Partnership (TPP) Agreement with 11 other countries throughout the Asia-Pacific.  Those 11 countries have a combined value of about US$12 trillion GDP and 478 billion, population, according to a June 2013 Congressional Research Service report. The United States already has signed a free trade agreement with all of the countries except for Brunei, Japan, Malaysia, New Zealand and Vietnam. The same CRS report reveals that U.S. exports to these countries increased 75% from 2002 to 2012 and imports by 50% during the same period. The United States reported a trade surplus of US$78 billion in services in 2011.  The U.S. trade deficit in goods trade with its TPP partners has reached US$155 billion in 2012, which actually narrowed from US$247 billion in 2007. The conclusion and implementation of the TPP will increase the access that U.S. businesses will have to other markets.

Furthermore, the United States is negotiating the Trans-Atlantic Trade and Investment Partnership (T-TIP) Agreement with the 28 member states of the European Union. The EU is the largest export market for U.S. goods and services worth over US$400 billion. The EU consists of about 508 million people and a GDP of roughly US$17 trillion. Finalizing and implementing the T-TIP will also allow for greater access to other markets around the world.

Just think of the number of additional consumers with the purchasing power to buy U.S. goods and services that you will reach, especially in times of an economic recession.

Business that Export See Profits

According to a 2007 survey of business owners, those who exported earned more, had more employees and were more productive than non-exporters.

Average annual receipts (US$)

Exporters – 16.8 million

Non-exporters – 313,689

Average number of employees

Exporters – 56

Non-exporters – 10

Average productivity

Exporters – $323,897

Non-exporters – $150,946

Take the first step

My challenge to you is to identify those markets with which you can export. That begins with the list of countries above that have signed FTAs with the United States. FTAs make it easier for U.S. businesses to enter other markets and grow their profits without facing high tariffs and other domestic restraints from those markets.

If you are interested in markets throughout Latin America and the Caribbean, contact GRIIT at griit@griit.org for assistance. 

 

 

 

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