New Zealand

Exploring the benefits of FTAs when exporting overseas

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Do you run a business in New Zealand with aspirations to export overseas? Have you ever wondered what international free trade agreements (FTAs) might mean for your organisation? As businesses continue to look abroad for new opportunities, understanding the impact of free trade agreements is essential. In this blog, we’ll explore how these deals can prove beneficial when shipping across borders and how they represent potential sources of new revenue growth.

What is a free trade agreement (FTA)?

Free trade agreements (FTAs) refer to a set of rules and regulations that aim to eliminate or reduce trade barriers between two or more countries. These agreements are often negotiated and signed by governments with the goal of promoting economic growth and increasing international trade. This means that the parties involved in the FTAs agree to lower tariffs on goods and services, remove trade barriers and regulations, and facilitate the movement of goods and people across borders. By entering into these agreements, countries hope to increase trade volume and improve their economic prosperity. As a result, free trade agreements have become an increasingly popular tool for promoting global trade and economic progress and are now in place between many countries around the world.

FTAs with Key Export Partners of New Zealand

1.  Free trade agreement between New Zealand and China 

The free trade agreement between New Zealand and China, signed in 2008, paved the way for stronger economic ties between the two nations. As two major players in the Asia-Pacific region, the agreement has created opportunities for businesses to expand their markets and increase profitability. In the year ending June 2022, China continued to maintain its position as the primary trading partner of New Zealand, with a two-way goods and services trade valued at NZ$38.5 billion. During this time, China was the largest export market (NZ$20.9 billion) and import market (NZ$17.6 billion) for New Zealand, as indicated by the New Zealand Ministry of Foreign Affairs and Trade. With over a decade of successful implementation, the free trade agreement between NZ and China has served as a model for others seeking to establish mutually beneficial trade partnerships.

2.  New Zealand’s free trade agreement with Australia

New Zealand and Australia's economic partnership has a longstanding history. The Australia-New Zealand Closer Economic Relations (CER) Trade Agreement was signed in 1983, marking the beginning of a close economic alliance between the two countries. In 2009, the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) was established, further strengthening trade relations between the nations. With the New Zealand free trade agreement with Australia in place, both countries have seen significant benefits in terms of economic growth and increased job opportunities. According to Stats NZ, the total annual goods exports from New Zealand to Australia increased by 17% to NZ$797 million by December 2022. This partnership has proven to be a valuable asset to both nations as they continue to work together towards achieving sustainable economic success.

3.  Possible free trade agreement between New Zealand and the United States

The free trade agreement (FTA) between New Zealand (NZ) and the United States (US) has been a long time coming, but the two countries have yet to sign an agreement. The US is one of NZ's largest trading partners, and an FTA would provide significant benefits to businesses in both countries. In fact, the United States imports from New Zealand reached US$5.63 billion during 2022, as reported by the United Nations COMTRADE database on international trade. With negotiations for an FTA in the works, there is hope that an agreement will be reached in the near future.

Benefits of free trade agreements

1.  Tariff concessions and business opportunities

Free trade agreements (FTAs) offer numerous benefits to international trade. One of the most important advantages is the tariff concessions that come with FTAs. Tariffs are taxes that are levied on imported goods, which can create a financial burden on businesses exporting their products. Through FTAs, tariffs are either reduced or eliminated, making it more feasible for organisations to export their goods and services. This benefit tremendously increases business opportunities for New Zealand exporters and ultimately contributes to their growth in the global market. Overall, the benefits of FTAs make it clear that they are an essential component of modern trade and indispensable for the progress of businesses.

2.  Lower import costs for increased price competitiveness or added profit

Free trade agreements (FTAs) provide several benefits to businesses, including lower import costs. This can be critical in helping businesses achieve greater price competitiveness or added profit. When businesses are able to lower their production costs by reducing or eliminating tariffs, their products become more affordable and competitive in foreign markets. By gaining a foothold in new markets and competing with local companies on a level playing field, businesses can expand their customer base and increase their profitability. Overall, the lower import costs resulting from FTAs provide businesses with a strategic advantage in the global marketplace.

3.  Increased stability and better conditions to make strategic moves or investments

Free trade agreements (FTAs) are an essential tool for businesses looking to expand their operations into foreign markets. By removing trade barriers and promoting economic cooperation, FTAs can provide businesses with increased stability and better conditions for making strategic moves or investments. With an FTA in place, businesses can benefit from a predictable and transparent trading environment, allowing them to plan and make long-term investments. What's more, FTAs include provisions for protecting intellectual property, ensuring fair competition, and resolving disputes. These protections can help businesses operate more efficiently and effectively in foreign markets, making FTAs a valuable tool for companies looking to expand their global reach.

4.  Access to a larger market and diversification of sales

Free trade agreements (FTAs) have become increasingly popular among countries around the world, and for good reason. One key benefit of these agreements is the access they provide to a larger market. By reducing trade barriers, FTAs open up new markets for businesses, allowing them to diversify their sales and reduce their reliance on domestic markets. For small countries like New Zealand, this can be particularly advantageous, as they may have limited domestic markets. By expanding into new markets, businesses can increase their revenue streams and reduce their dependence on a single market. FTAs have therefore become a critical instrument for small and large businesses alike, enabling them to access new markets across the globe and unlock new opportunities for growth and innovation.

Partner with a reliable logistics provider like DHL Express

At DHL Express, we understand the importance of FTAs for businesses engaged in overseas shipping. As a reputable logistics provider, we have a wealth of experience helping businesses in New Zealand navigate the complexities of global trade and can provide tailored solutions to meet your international shipping needs. Open a DHL Express business account today to learn more about how we can help you grow your business globally.