Written by: Angela Parkin, GTM Governance
The recent signing of the Trans-Pacific Partnership (TPP) agreement by twelve member countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam) highlighted the fact trade agreements are evolving – and fast!
The World Trade Organization (WTO) reported that, as of April 2015, there were some 612 notifications of Regional Trade Agreements (RTAs) with over 400 of these being in force today. It’s not surprising that, despite the existence of the WTO and its work to liberalize global trade, there has been an increase in the number of bilateral and multilateral trade agreements. The WTO agreements have become very lengthy and difficult to conclude, as an example the Uruguay round lasted eight years. With globalization, countries and regions have moved to negotiate free trade agreements, which in comparison to the WTO negotiations conclude a lot faster.
As countries look to expand their markets, they understand they must initiate, or at least participate in, agreements to support their economy. While new trade agreements are good for the new economy, they cause a wave of undertakings for governments, businesses and service providers to consider. Governments are required to look at their regulations, implement new legislation to accommodate a new agreement. Frequently, an agreement will include terms for when a country has to comply with legislative and regulatory rules and also when these changes must be transparent to other member countries.
Businesses must plan their supply chains to ensure they capture the benefits of a new trade agreement. Trade agreements also mean new markets, this means small and medium-sized businesses have the opportunity to grow into international suppliers and suddenly find themselves having to understand the obligations of being exporters.
Service providers, such as Livingston, look for opportunities to better serve clients. Employees are trained, and opportunities to automate some of the new regulations are reviewed. As clients look for opportunities to expand their markets, service providers must adapt by keeping up with new and changing regulations, and sometimes this means supporting clients as they move into the complexities of international exporting.
New trade agreements also offer a complexity of overlapping agreements. While agriculture was covered in the recent Canada-EU agreement (CETA) and the Trans-Pacific Partnership (TPP), it was not covered in the North American Free Trade Agreement (NAFTA) as Canada, Mexico and the U.S. could not agree on the terms for the agriculture trilateral text. As an alternative three separate bilateral agreements were signed – one between the U.S. and Canada, one between the U.S. and Mexico, and one between Canada and Mexico. This, of course, adds a layer of complexity to the arrangements between the three countries.
With multinational agreements getting bigger the complexities are also growing, as shown in the recently agreed upon TPP, which has many side letters (one-on-one agreement). While some are concerned that certain developing countries are signing up for agreements and terms they cannot fulfill in the long-term, it’s clear trade agreements will continue to evolve.