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.


Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern