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Not a wind up but - how do these trade deals actually work?


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Old 28-12-2016, 15:42
Citizen Kane
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I can understand how one country can negotiate a preferential trade deal with another - but what happens after the overarching contract is signed. Is it then just up to individual companies to advertise for orders? What if the new market has no need for what we currently supply?
For example I might be a manufacturer of light-bulbs and currently sell all my production to the EU, I could try to sell my bulbs to the new country but - where are getting their bulbs currently, and without severely cutting my costs, why should they bother with me?
If I do, do a deal, then the old supplier won't be very happy with us for stealing their business.
Seems to me that overarching trade deals only make good press - the actual business contracts will take a long time to secure.
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Old 28-12-2016, 16:05
Parker45
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A trade agreement doesn't mean that you can now start selling to a country you didnt sell to before. It simply means that you can now sell goods cheaper to that country, due to free or reduced import tariffs, which will make it easier to sell more of the product to that country.
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Old 28-12-2016, 17:41
Citizen Kane
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But if they are have a supplier they are happy with then you have no chance of gaining an order, without severely cutting your costs. What is the point of loosing a relationship with the EU to start at the back of the queue with a new country. Many small businesses don't have the resources to start a new advertising campaign with the rest of the world.
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Old 30-12-2016, 09:53
wjong
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I can understand how one country can negotiate a preferential trade deal with another - but what happens after the overarching contract is signed. Is it then just up to individual companies to advertise for orders? What if the new market has no need for what we currently supply?
For example I might be a manufacturer of light-bulbs and currently sell all my production to the EU, I could try to sell my bulbs to the new country but - where are getting their bulbs currently, and without severely cutting my costs, why should they bother with me?
If I do, do a deal, then the old supplier won't be very happy with us for stealing their business.
Seems to me that overarching trade deals only make good press - the actual business contracts will take a long time to secure.
Free Trade Agreements (FTA) are negotiated and established at government level between two or more governments. Once ratified and signed, then individual companies and businesses, can take advantage of the FTA to trade into, or from those international markets.

The following links relate to Australian FTAs and indicate how FTAs operate. There are advantages but also some disadvantages.

http://dfat.gov.au/trade/agreements/...s-of-ftas.aspx

http://ftatool.com.au/fta-basics/what-are-the-benefits/

http://www.abc.net.au/news/2015-06-1...d-cons/6553680

http://www.smh.com.au/federal-politi...11-11kkh9.html

I hope this gives you a better understanding of FTAs

Cheers from wjong..
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Old 30-12-2016, 10:18
corf
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Free trade agreements are usually in place to "prioritise" trade between countries.

The EU protects the EU food production by penalising trade between the Eu and Africa.
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Old 30-12-2016, 16:46
andykn
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But if they are have a supplier they are happy with then you have no chance of gaining an order, without severely cutting your costs. What is the point of loosing a relationship with the EU to start at the back of the queue with a new country. Many small businesses don't have the resources to start a new advertising campaign with the rest of the world.
World tariffs are generally low so it doesn't necessarily create new markets, it just makes it easier to sell more to existing ones. It's not only tariffs that get removed with free trade deals, it's quotas too.

The issue can be that there's usually a quid pro quo, so we have to lower tariffs and let foreign firms compete with our own. If done properly between equals or countries with little overlap there's benefits to both countries, both sets of populations get more choice and cheaper products and the strong industries in both countries can grow.
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Old 30-12-2016, 16:51
GibsonSG
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A trade agreement doesn't mean that you can now start selling to a country you didnt sell to before. It simply means that you can now sell goods cheaper to that country, due to free or reduced import tariffs, which will make it easier to sell more of the product to that country.
...... it's a set of protocols that allow you to trade. It has nothing to do with anything being cheaper. They might be but that is not what it is all about. Also it doesn't guarantee trade, despite what some died in the wool leavers believe. Always seemed dumb to me turning your backs on you trading partners for a whole load of nationalist crap.
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Old 30-12-2016, 17:49
Mr Oleo Strut
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...... it's a set of protocols that allow you to trade. It has nothing to do with anything being cheaper. They might be but that is not what it is all about. Also it doesn't guarantee trade, despite what some died in the wool leavers believe. Always seemed dumb to me turning your backs on you trading partners for a whole load of nationalist crap.
Quite right. You have to be of a certain age and experience to remember the complexities of international trade before the EE/EU came along. It was a minefield of form-filling facing a mountain of set-in-concrete bureacracy, all costing a fortune in time and money. A total nightmare. To think that the UK is contemplating going back to all that is madness.
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