Free Trade Agreements (FTAs) improve market access, for example by reducing tariffs and allowing 'door-to-door' trade. Even Singapore has FTAs with other nations, despite imposing zero tariffs on most imported goods.
The key problem with FTAs is that they have to have 'rules of origin'/ FTAs are between two nations or economic blocs. Each will have different agreements with other countries. So a country which was allowed to export large quantities of some product to one but not the other could 'cheat'. They simply export to the cheaper one, and then re-export from there to the second country.
'Rules of origin' are intended to stop this and mean that exporters need to prove where the goods originally come from.
Why is this increased red tape a problem? The issue is the cost of the paperwork. For small firms the cost is often greater than the tariffs charged under WTO rules, so in some countries only 20% of small export businesses take advantage of existing FTAs. Most prefer to pay the tariffs.
FTAs also increase the burden on customs, as customs officers have to check the paperwork and the incoming goods to prevent cheating.
FTAs can be good to have but are only a pale imitation of a customs union, where trading between partners is treated the same as trading within a country. As, for example, our trade within the EU is treated at the moment, trade which makes up 50% of our exports.
Shame on the Brexiteers for forcing more red tape and extra cost on British exporters.
No comments:
Post a Comment