Free Trade Agreements – What Do SME’s Need to Know?

With the prospect of leaving the EU, the importance of Free Trade Agreements – or FTAs – for UK business looking to export or import goods and services is going to grow significantly. As things stand, the UK’s trading arrangements with countries around the world are shaped by the agreements put in place by the EU. The trading bloc has arranged the UK’s agreements with partners around the world and of course the UK’s trading arrangements with much of Europe have been governed by the rules of being part of the EU.

When the UK has negotiated its exit from the EU, it will be in a position where it needs to start negotiating deals with partners around the world. This potentially includes the EU, depending on whether the two parties successfully agree a trade agreement as part of the negotiations for leaving.

The FTAs that the UK goes onto negotiate with new partners could become a major factor for UK businesses when deciding where they could export their goods and services to.

Free Trade Agreements and Exporting Goods

One of the major impacts that an FTA can have on companies selling goods to overseas countries is tariff reductions. When countries negotiate FTAs with other countries, they do so with the view to reducing tariffs on goods that the countries want to facilitate easy trade on. Therefore, many of the tariff reductions that the UK has as part of its being in the EU will no longer be applicable upon its leaving – again, depending on the outcome of the negotiations.

If you are selling into a country with which the UK does not have an agreement in place, the likelihood will be that the UK will need to sell according to WTO rules. Under WTO rules and since the Uruguay Round concluded in 1994, no one country can place less favourable tariffs for a particular good being sold into it that which it has set for the “most favourable nation”.

This will mean that the UK will not be able to have a better tariff situation than any other country does where selling into countries it has no FTA with. The UK will be on the same footing importing and exporting goods in and from the USA, for example, then one of the US; less preferred trading nations who are part of the WTO like Bolivia, say until an FTA is agreed between the UK and the USA, WTO rules would incur higher tariff costs for UK businesses looking to import or export goods from the USA.

In effect, if we don’t get an FTA or transition deal with the EU as part of the negotiations for leaving it, tariff costs will make exporting into the EU more expensive and the same applies for importing too.

Determining What Tariffs, You’ll Need to Pay

For UK businesses looking to determine the impact of the WTO tariffs on selling into different markets, and there the potential impact of FTAs as and when they are agreed, it will be important to know who to determine what tariffs you’ll need to pay for the goods you are selling.

Finding Out What Tariff You Will Need to Pay

A useful tool for checking your harmonized code (HS) and then your tariffs is MADB – read their guide for tips - http://madb.europa.eu/madb/indexPubli.htm

Learn More About Free Trade Agreements

When the UK has left the EU, it will be important for UK businesses to be vigilant and stay up to date with the UK’s New Trade Agreements with partners including and beyond the EU. The reality is that the FTAs that come to fruition will have a significant impact on the costs – and therefore the money to be made – in selling into overseas markets.

All FSPA members will be kept up to date with regards to UK’s New Trade Agreements via FSPA newsletters and seminars.