13 September 2021
Whilst it has to be said that some pain, confusion and uncertainty remains with the UK’s decision to leave the EU and the subsequent UK-EU Trade Agreement signed as a result; the UK Government is forging ahead with new global deals as an independent trading nation. Always destined to be on the ‘back foot’ as a result of independent negotiations being forbidden until after the Withdrawal Agreement was signed and ratified, we have seen over the recent 19 months, numerous bilateral trade deals signed, some with regions and blocks we have historically traded very little with (not to say there isn’t potential) but also several high-profile ones that are imperative to our global supply chains and exports.
Well. Quite simply they are arrangements struck between two parties to make trade between each party ‘cheaper’. Often you will hear reference to tariffs and quotas, typically free trade deals look to eliminate import tariffs on both sides and reduce the number of goods that apply quotas. What’s a quota you may ask? Well, think of your self-assessment and your ‘personal allowance’ i.e. you can earn so much before tax. A quota allows importers to import a certain amount of goods at a reduced or zero rate of duty until that quota threshold is reached and import duty defaults, typically, to a much higher level; we see this a lot in agricultural goods.
However, trade deals go further than just tariffs and quotas, they will also look to establish a level of regulatory alignment or at least a mutual recognition of each other’s regulations and standards, so that trade in services and indeed the placing on the market of each other’s goods can be with less friction, easily monitored, and importantly, safer. Following the announcement of the UK-EU Trade and Cooperation Agreement, many though that the reference to ‘zero tariffs, zero quotas’ meant that little would change, and life would continue much as it had when trading in freely circulated goods as part of the same trading block. However, for goods to qualify for zero tariffs and quotas in bilateral trade agreements, they must comply with what are referred to as Rules of Origin (ROO); many traders on both sides of the Channel were unaware of this. Typically, UK exporters will have to determine and prove that their goods are of UK origin in order for their customers in the destination country to import them at a zero rate of duty; similarly, UK importers will need to obtain proof of origin from their suppliers that the goods they are buying are of the origin of the other country party to that bilateral agreement. Each free trade agreement stipulates its own rules of origin and these can be tricky to navigate and costly to misinterpret so time should be allocated to understanding them and making sure you are compliant.
The answer is no. Although there are some markets subject to sanctions and embargoes meaning that we cannot import from or export to them, by enlarge, we can trade across the globe; it just may be more difficult and more costly where a trade agreement is not in place. This is why the pace at which the UK Government is striking global agreements is encouraging; although it has to be said, it will take some time to replicate the preferential trading landscape we had established as part pf the EU trade block.
The truth is that the world is our oyster and there is significant demand for our products and services overseas. Brand ‘Great Britain’ is still regarded as being synonymous with quality and can, in some regions, even demand a premium. So, whilst UK businesses may be worrying about whether or not there is a trade deal in place, or perhaps lamenting that the cultural or language barriers may be too great and the market a little too risky; other SMEs in other markets are busy carving niches for themselves globally and establishing themselves as preferred international suppliers.
Trading internationally can be a hugely rewarding business decision, but it is true that the planning, research and risk mitigation for trading overseas is greater than if you are simply trading within your domestic market. Companies, particularly SMEs, need hands on support, guidance and funding to recognise their global trade potential. Whilst there is support nationwide via the Department of International Trade and the Chamber of Commerce for example, the East Midlands Growth Hub Cluster that supports SMEs in Lincolnshire, Leicestershire, Nottinghamshire and Derbyshire, is also primed to support businesses with international trade ambitions. The Cluster has enlisted the services of The Export Department to deliver its ‘Empowering SMEs in International Trade’ programme. Hugely important is the programme’s focus on importers as well as exporters, also its limited eligibility criteria. Whether you are an importer, exporter or both; novice or experienced; from the service or goods sector; it really doesn’t matter, the programme caters for all.
There really is no challenge or opportunity too great to explore in this programme, the only limitation is your international trade ambition and as that famous phrase says, fortune favours the brave!!! Why not take a look at what is coming up over the next few weeks (see below):
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