Why free trade agreements matter for your business
By Sherine Chen Photo： CANVA
In today’s interconnected world, international trade is no longer just for large corporations, small and medium-sized businesses are also expanding globally. One of the biggest advantages companies can leverage when trading across borders is the Free Trade Agreement (FTA).
What is a Free Trade Agreement?
A Free Trade Agreement (FTA) is a pact between two or more countries to reduce or eliminate trade barriers such as tariffs, quotas, or import restrictions. By using FTAs, businesses can save costs, improve competitiveness, and expand into new markets more easily.
Benefits of FTAs for Businesses
- Reduced Tariffs
Products that qualify under an FTA enjoy lower or even zero tariffs, making them more affordable in the importing country.
Example: A textile company in Vietnam exporting to Japan under the ASEAN–Japan Comprehensive Economic Partnership (AJCEP) can save on import duties, making its products more price-competitive compared to non-FTA countries.
- Market Access Opportunities
FTAs open doors to new markets with fewer restrictions.
Example: Under the Regional Comprehensive Economic Partnership (RCEP), an Indonesian food manufacturer can access not only ASEAN countries but also China, Korea, and Australia with simplified procedures.
- Stronger Global Supply Chains
Businesses can source raw materials at lower costs from FTA partner countries.
Example: A Taiwanese electronics company might import components from South Korea under an FTA at reduced tariffs, lowering production costs.
- Competitive Advantage
By leveraging FTAs, companies can gain an edge over competitors from countries without such agreements.
Free Trade Agreements are not just government policies—they are practical tools that businesses of all sizes can use to reduce costs, access new markets, and strengthen their global competitiveness. By understanding the opportunities and preparing the correct documentation, your business can fully benefit from today’s global trade networks.
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