Many entrepreneurs who do business internationally benefit from the trade agreements that the EU has with dozens of countries. For example, due to reduced import duties. But trade agreements do not only offer advantages, says entrepreneur Monique Ansink. In this article you can read what a trade agreement is and what the advantages and disadvantages are.

Monique Ansink is the owner of Jumbo Tension Belt Manufacturer. The company has a production location in Hoorn. And since 2010 also in Vietnam, close to the equator, where rubber trees supply the raw materials that Jumbo Cargo Products processes in, for example, carrier straps.

She supplies her products in 26 countries around the world. Jumbo has stopped paying import duties for imports into the EU for more than a year. This has everything to do with the trade agreement between the EU and Vietnam, which has been in force since 2020.

Promote trade

With a trade agreement, two or more countries want to promote mutual trade. Few barriers to import and export should ensure higher production, more jobs, prosperity and social development. Agreements in a treaty make mutual trade easier. Barriers such as documents and import duties are reduced or removed.

Because trade agreements promote a freer movement of goods and services between trading partners, the treaties are also called free trade agreements or ‘free trade agreements’. The EU negotiates trade agreements with other countries on behalf of the Netherlands.

Fewer import duties

According to Ansink, the major advantage of the trade agreement with Vietnam is the decrease in import duties. “In many cases, the zero rate even applies.” Jumbo shows with a proof of origin that the export goods are produced in Vietnam. Based on agreements in the trade agreement, you can in many cases import such products into the EU without paying import duties.

Why do we still pay import duties?

“Previously you paid about five to six percent in import duties when importing, now often zero. I hope that Vietnam as a production country will come into the picture a little more, for example in relation to China. That the money is better distributed. More than 90 million people live in Vietnam and they also earn more wealth there.”

“Outdated system”

“Why do we still pay import duties?” Ansink wonders. “It was created to protect your own industry, but the world has changed so much since then. When I look at our own products; rubber trees do not grow in the Netherlands. We no longer have steel mills that make the ratchets we use. That’s all gone from Europe. We have to buy it internationally. Nobody thinks about the usefulness of import duties anymore. The system is maintained without thinking. I can still imagine that a country levies import duties on products that you would rather not have. Balloons, for example, because all those plastics are harmful to the environment. Then levy twenty percent if an entrepreneur imports them.”

Dates

Although import duties are perhaps the most important theme for entrepreneurs, treaty countries lay down more agreements in a trade agreement. For example, about product requirements, so that all parties know what the standard is for products that they supply to each other. In addition, a trade agreement contains agreements on other themes, such as:

• Cutting wood
• Prohibition of child labour
• Ban on the use of certain chemicals
• Testing and certification of medical devices
• Financing a project in a partner country
• Protecting regional products, such as Gouda cheese and champagne
  treating each other’s companies equally

The trade agreement with Vietnam contains agreements on corporate social responsibility (CSR). “We have already started doing this ourselves,” says Ansink. “Because our employees in Vietnam are just as much our colleagues. They are also entitled to a good salary and a pleasant workplace.” Ansink is therefore pleased that this is now receiving attention. “Enforcement is not quite there yet, but, for example, a minimum wage is now regulated by law.”

Monique Ansink previously worked for the company and took over from her former boss in 1999. In 2010, she opened a factory in Vietnam, together with a Vietnamese shareholder. “Due to the treaty, as a Dutch person, you can now start a business in Vietnam yourself, which was not yet possible at the time.”

“As far as I am concerned, we conclude treaties with the whole world”

Advantages

Trade agreements have a number of advantages. For the economy of countries, governments, and for entrepreneurs:

• For example, lower import duties are offset by an increase in foreign competition. A trade agreement also makes it easier for foreign entrepreneurs to sell products in the Netherlands.
• In some sectors, you see job losses as foreign competition increases.
• The standards for, for example, product requirements, food safety, and privacy may differ between treaty countries. This is the case, for example, when chemicals that are banned in the EU are used in the cultivation or production process in another country. These products may not be marketed within the EU. It also happens that the requirements for food safety in the EU are stricter than in the treaty country. EU negotiators then check whether all agreements in a trade agreement remain within the set EU standards.

Monique Ansink sees another disadvantage of trade agreements: exclusion. For ten years she worked from Vietnam without a treaty. “A trade agreement in itself is very nice. But where two or more countries start working together, other countries are excluded. That of course has an impact. As far as I am concerned, we are making treaties with the whole world.”

China excluded

Journalist and political scientist Ko Colijn wrote a column with the same purport in 2014, employed by the Clingendael Institute. The TTIP agreement that ultimately never materialized seemed then only a matter of time. Colijn pointed out that China would feel ignored by the TTIP treaty that appeared to be concluded between America and Europe according to ‘the old western rules’. The Trans-Pacific Partnership that is referred to below also ultimately fell through.

In fact, a trans-Atlantic TTIP get-together would also be at our expense, countries such as China complain. Because while the EU and the US are probably aiming for ‘mutual recognition’ (allowing each other’s products on each other’s home market despite differences in quality), products from third countries will have to meet double standards. Apart from that, the question is whether it is politically useful to exclude a superpower such as China from a deal in advance. Since the US also wants to conclude a Trans-Pacific Partnership (with Japan and South Korea, but without China), Beijing will feel surrounded and discriminated against.”

How a trade agreement works

The European Commission (EC) negotiates with other countries on behalf of the EU. The EU concludes the trade agreements. The negotiation of the final trade agreement takes place in steps, involving various stakeholders. It often takes years to complete a trade agreement.

Influence

As an entrepreneur, you individually have little influence on the content of a trade agreement. Together with industry peers you can move forward. For example, you can make your wishes known to the Ministry of Foreign Affairs in the Breed Trade Council via a trade association. The ministry is continuing to work with the negotiators in Brussels.

Negotiations

The EU recently concluded trade agreements with the UK (2021), Vietnam (2020), Japan (2019), Singapore (2019) and Canada (which came into effect in 2017). Negotiations are underway with Australia, New Zealand and Mercosur (Brazil, Argentina, Paraguay and Uruguay).

The Trade and Cooperation Agreement between the EU and the UK was one of the fastest concluded treaties. Within a year and a half it was in provisional operation. The parliaments of the member states still have to finally approve the treaty. The approaching Brexit caused time pressure.

Worldwide

In addition to trade agreements in which the EU is involved, there are all kinds of trade agreements between all countries or groups of countries worldwide. For example, after leaving the EU, the UK will negotiate with various future treaty countries.

Planning to import or export products? Cross the border and start doing business internationally.

Source and more information:

https://www.kvk.nl/advies-en-informatie/internationaal-ondernemen/handelsverdrag-soepel-zakendoen-heeft-ook-een-keerzijde/