Free Trade Agreements Drive Export Opportunities

A mid-2018 public opinion survey conducted by Pew Research found almost 60 percent of Americans believe free trade agreements (FTAs) between the United States and other countries are generally a “good thing.”

This raises the question: Why then do the overwhelming majority of businesses not take advantage of the agreements, which, after all, are intended to facilitate export activity?

A survey of trade specialists by Thomson Reuters/KPMG found 70 percent of companies do not fully utilize FTAs, “which means they are likely paying more than necessary in tariffs and duties,” the accompanying analysis noted.

Subsequent Thomson Reuters/KPMG research drilled down to determine why the rate of usage is so low and found top concerns that include:

• Almost 80 percent cited the complexity of rules of origin, which are the terms outlined in the FTA to determine whether or not a specific product is eligible for benefits. Respondents also cited difficulty in gathering required documentation.
• Respondents listed proper tariff classification, documentation, and licensing as the trade-related activities that carried the greatest risk of penalties or increased operational costs.
• Businesses cited the significant “drain on their time and resources” associated with FTA compliance.
• Also cited was the difficulty understanding rules from one country to the next, changing compliance requirements, and dealing with antiquated processes.

While these may certainly be legitimate concerns, each can be fairly easily addressed, thus clearing the way for a business to benefit from any of the 14 free trade agreements the United States currently has in place that involve 20 different countries.