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Free trade agreements to support your export strategy
E-commerce advice · 4 Mins Read
Free trade agreements to support your export strategy
Foreign trade agreements are critical to the success of businesses expanding abroad. They reduce tariffs and increase trade and jobs. The DHL Export Barometer 2022 reveals that Australian exporters have made use of their agreements with New Zealand and China, but gaps in awareness still exist.
As businesses expand abroad and increase their market share, one key element that can significantly influence their success is free trade agreements (FTAs). From reducing or eliminating tariffs to facilitating the flow of goods, these international trade agreements offer a range of benefits to businesses in Australia. The DHL Export Barometer 2022 – an annual survey that is conducted to understand the international trade landscape of Australian businesses – has found that companies here are capitalising on these opportunities. In this article, we highlight the report’s findings and find out just how businesses have leveraged FTAs to trade in 2022.
What is the main purpose of free trade agreements?
Trade is integral to economic progress. Governments set up free trade agreements with other countries to make the trading environment more conducive to local businesses, so they flourish. When it comes to shipping goods across borders, free trade agreements are critical in supporting businesses and allowing them to enjoy reduced duties and taxes, increased trade and jobs and common intellectual property rules.
The DHL Export Barometer 2022 reveals that a significant majority of Australian businesses are keenly aware of the importance of FTAs in export decisions. 79% believe FTAs are important to their business, with 44% suggesting they are critical to their operations. One of the key ways that free trade agreements aid businesses is through the elimination or reduction of taxes levied by foreign countries on goods that enter their borders. Businesses report that tariffs are amongst the challenges they had to prepare for when exporting internationally, and trade agreements allow businesses to access overseas markets more easily.
Trade deals also allow companies to save not just costs but time. Customs procedures are streamlined, and goods that reach international borders are cleared quickly, sometimes within the same day they arrive. Specific sectors and products also enjoy greater preferential tariff concessions.
FTAs most popular amongst Australian businesses
Australian exporters report making use of about 12 international agreements. Three trade agreements stand out as being the most commonly used: ASEAN-Australia-New Zealand (AANZFTA), China-Australia (ChAFTA), and Australia-United States (AUSFTA) at 60%.
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These are the FTAs also being used amongst exporters who are aware of the importance of trade agreements:
Thailand-Australia (TAFTA)
Malaysia-Australia (MAFTA)
Korea-Australia (KAFTA)
Japan-Australia (JAEPA)
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Australia-Hong Kong (A-HKFTA) and associated Investment Agreement (IA)
Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA)
Pacific Agreement on Closer Economic Relations (PACER) Plus
Regional Comprehensive Economic Partnership Agreement (RCEP)
Singapore-Australia FTA
The report also found that a majority across all sectors consider FTAs important, but Agriculture, Consumer Goods and Manufacturing are the most likely to think so.
Bridging the awareness gap of FTAs
A surprising revelation of this year’s Barometer results is that a significant portion of exporters were not aware of some of the international trade agreements in place. Many do not utilise FTAs even in their largest export markets: 25% of businesses that trade in North America, 24% that export to New Zealand and 21% that operate in China.
What these gaps of awareness translate to is losing out on advantages that make your business more competitive and profitable. For example, without international trade agreements, you will not be able to benefit from preferential tax rates. To remain profitable, you might have to raise the prices of your goods. These higher costs are then transferred to the final consumer, who might switch to competitor brands that offer better value.
Additionally, by not making use of FTAs, you will have to navigate complex trade procedures, such as needing to submit more paperwork for your exports to be processed at customs. You might also be subject to restrictions that favour domestic enterprises and only allow you limited access to local markets.
Explore cross-border shipping with DHL Express
Free trade agreements offer businesses in Australia a myriad of benefits. By not making the most of the advantages these deals present, your company might struggle to remain competitive, and other foreign imports might be favoured over your products. When shipping internationally from Australia, partnering with a credible logistics company can also simplify the export process for you and allow you to ensure your deliveries to customers are timely.
DHL Express ships to over 220 countries across the globe. With us, you can enjoy preferential rates, same-day delivery and other flexible delivery options. Gain access to our shipping management platform, MyDHL+, which allows you to import, export, track shipments and schedule pickups. With our one-stop platform, you can also estimate all duties, taxes and costs before you start shipping.
Efficiently manage how you ship with a DHL Express business account now.