FTAs are signed with lots of funfair and termed as a victory in respective countries. FTAs are generally described as beneficial to a country as they generally lower prices; however, it is important to analyze whether it helps companies/industries and countries in terms of increased trade, production, GDP and are consistent in the reduction of cost, and improved efficiencies. Let us examine the issue from the perspective of Industry.
Key Benefits of FTA
This is the most important benefit of using FTAs. Zero or reduced Customs duty tariffs can save a lot of costs but also help in the efficient use of working capital.
Stable and Optimised Supply Chain
FTAs help in allowing without restrictions flow of goods between countries, this helps companies to have certainty and optimise the supply chain in sourcing imports.
Expanding Export Market
FTA eliminates tariff and non-tariff barriers and gives industries greater, easier, and more competitive access to overseas markets. Important point to note that it is not only FTA country but using FTA country you can increase Export in the Region. In the case of India -UAE CEPA will help India to increase Exports in the Gulf and Africa.
Predictable and Stable business environment at reduced risk
FTA offers stability and predictability with clear, transparent, and standard rules and requirements finalised between two countries for trade in goods and services.
Increased Competitiveness and Efficiency
Reduced tariffs on Imports, better sourcing and an optimised supply chain increase competitiveness in domestic and Export markets. Increased competition from FTA countries ensures domestic industry looks into every aspect of the business to remain relevant through increased productivity and efficiency. This is achieved by the addition, of new technology, improved and efficient processes.
Access to Govt. Contracts
Companies can bid in the FTA partner country in certain government procurements
Encourage Global Value Chain
FTAs can help create more efficient Global supply chain, benefiting countries that depend on complex production networks spanning across multiple countries
Intellectual property protection
There is robust protection and enforcement of patents, trademarks, copyrights and investments in FTA partner countries.
FTAs are increasingly used as tools for geopolitical influence and alignment. Industry finds strategic advantages in operating within trading blocs that have political significance beyond trade
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This is an abridged version of the EXIM Vidya segment that was published in the October issue of Logistics Insider magazine. To read the complete version, please click here.