How International Agreements Might Have An Impact On Businesses

Established in 1947 in Geneva, Switzerland, the General Agreement on Tariffs and Trade (GATT) was responsible for settling about 90% of world trade. It has sought to liberalize trade and thus improve the global trading system through a code of rules and a forum for negotiations and other trade negotiations. It is important that it has played an important role in the settlement of trade disputes between Member States. The founders of GATT believed that increased international trade would foster economic interdependence between countries and make wars between trading partners unthinkable. The suspension of trade with the United Kingdom may have an impact on all businesses, as it could make it difficult to obtain certain raw materials or wholesale products. Diplomatic events can also affect stock markets, meaning your investments or stock prices could be affected. NAFTA is an example of an agreement that has increased exports from a cheaper production site (in this case Mexico) to a higher-cost partner country (the United States). If you`re a small business in the U.S. and your supply chain includes parts you buy directly from Mexico — or you`re made in Mexico and you buy from a third party in the U.S. — your supply chain will be influenced by a trade deal. Without NAFTA, Mexico would have the right to raise most of its tariffs to 50%. Under NAFTA, Mexico is prevented from raising its tariffs above current rates.

If the U.S. and Mexico reach an agreement, tariffs on U.S. exports to Mexico could be eliminated at an accelerated pace. This has been successfully achieved several times between the United States and Canada under the U.S.-Canada Free Trade Agreement and NAFTA. The country you are in will always act to protect its own interests. Of course, you hope that this is also in the best interest of your business. The focus is often on reducing the cost of import and export duties – a costly aspect of trade abroad – and actively investing in international trade. In the event of a dispute between countries, this can lead to the suspension of agreements or the embargo, which means that you absolutely cannot trade with that country.

Trade is often an instrument for negotiating many other types of international agreements, such as the fight against climate change, human rights and armed conflict. (While your supply chain partners – such as suppliers and logistics service providers – may be more vulnerable to the effects of trade agreements and their vulnerability can indirectly impact your supply chain.) Of course, these risks don`t need to prevent your small business from trading internationally.