Preferred or Free Trade Agreements (FTA) offer lower duty rates to participating countries or customs regimes and are a way of opening up foreign markets and reducing barriers while protecting mutual interests. The growth of free trade agreements worldwide is anticipated to grow significantly.
Changes to Trade Agreements in the APAC Region
The Asia-Pacific region is one of great global economic growth and opportunity, however, not without regulatory barrier complexities. Companies operating in the APAC region need to be cognizant of Free Trade Agreements (FTA) in order to both maintain compliance and avoid regulatory trade pitfalls.
Recently, in the APAC region, China and Korea signed their bilateral Free Trade Agreement (FTA). With the signing of the FTA, both countries will reap benefits including trade in goods and services, healthcare and trade rules, as well as e-commerce and government procurement. As stipulated by the agreement, China will remove tariffs on 91% of all products from South Korea within the next 20 years; South Korea will eliminate tariffs on 92% of all goods in the other direction.
Another country in the APAC region, Australia, also recently concluded FTAs with other Asian nations like Japan, Korea and China. By the end of 2015, Australia and India are expected to finalize their FTA.
India is the 10th largest trading partner of Australia with a two-way trade of $15 billion, which is about one-fifth of the India-China trade. “The free trade deal expected to be signed between India and Australia this year would be mutually beneficial and open up various sectors to further boost the current bilateral trade of $15 billion,” Australian Trade Minister Andrew Robb said. The FTA would give Australians access to India’s 1.3 billion strong consumer market – with an estimated half-billion members of its growing middle class.
While FTAs are extremely beneficial, for most companies, identifying goods as eligible for preferential treatment is usually a manually intensive, error-prone process. Companies operating in a manual or hybrid system environment simply cannot accommodate regulatory requirements for this area of compliance; and as a result, they miss out on the real cash savings offered by free trade agreements. SAP Global Trade Services (SAP GTS) provides comprehensive trade preference management functionality that supports free trade agreements, preferential treatments, vendor declarations, and regional value content calculations. The application streamlines and automates the process of preference determination.
