Complexity of Agreement Terms Deter Asian Exporters From Using Free Trade Agreements

Nearly half (45%) of Asian exporters cite complexity of agreement terms as the major hurdle to using free trade agreements signed between governments in the region, according to a survey by HSBC and Economist Intelligence Unit.

In fact, only 26% of respondents said they make use of FTAs when exporting. A third of respondents say that the markets covered by the FTAs their governments sign are not attractive to their business.

About 44% have limited or no understanding of FTAs, with many of them noting that these agreements have not been promoted well enough.

However, despite the complexities, 86% of exporters using FTAs have already seen a benefit to their business as a result of the FTAs signed, according to Noel Quinn, group general manager and head of commercial banking, Asia-Pacific at HSBC.

According to Quinn, there are three principal benefits of an FTA. The first is that an FTA  can reduce the cost of exporting to a country by reducing tariffs.

Secondly, FTAs can simplify processes by cutting some of the bureaucracy and import processes. Thirdly, they can open up a market to an exporter that was previously closed.

FTAs typically require businesses to make an application with their local trade and industry authorities for the issuance of a certificate of origin to prove that their export goods have indeed originated from a signatory of the FTA.

Interpreting these rules of origin can present a challenge to smaller enterprises, especially when exported goods contain materials that were produced in countries outside of the FTA jurisdiction.

Despite the currently limited use of FTAs, a majority (78%) of companies hope their government will sign more agreements, including with larger economies. About 73% want more support in terms of education and advice on FTAs.

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