Trade Agreements

Trade Agreements are a critical aspect of organising, managing and regulating commerce between two or more countries. Their importance stretches across all industry sectors and  international relationship structures. Today's European Union, for example, started its life as such an arrangement between France, West Germany, Belgium, Italy, Luxembourg and the Netherlands, focused on the coal and steel industry 

Such pacts typically have three characteristics in common, regardless of which countries enter into them and what products are involved. They provide access to the respective markets of the signature countries; they have consequences for commerce; and, they are politically motivated.

Access To Markets

The sovereign rights of nations allow each country to determine what product it wants to see coming across its borders and what it prefers to keep out. This simple thought process applies to sophisticated consumer goods as well as commodities. Japan, for example, is not very keen on importing rice from other countries, although this market has opened a little in recent years. 

Consequences

If a country gains access to the markets in another country and successfully establishes a trading relationship with business partners in that country, the obvious positive consequence for the exporting country is that it gains new customers, additional revenue and increased market share. If the goods in question were previously not available in the importing country, consumers will also be happy due to increased choice. On the other hand, the imported product may well compete with local product - to the detriment of the local industry.  This happened in New Zealand in the early 1990s when a new trade agreement with China just about drove the local garlic industry to the wall.

Political Motivation

Decisions around Trade Agreements are always politically motivated. When East Germany decided to import a few hundred cars from West Germany in the 1980s, it was motivated by the need to keep the lid on an increasingly volatile population demanding better quality goods and access to Western products. The NAFTA agreement between Canada, the US and Mexico is partially aimed at lifting the standard of living in Mexico in order to reduce illegal migration. The Mexican fresh produce industry is a major NAFTA beneficiary. And Trump's America is now giving the proposed Trans Pacific Partnership the cold shoulder.  

Ultimately, Trade Agreements always involve a degree of compromise. The trouble starts when such compromise involves one partner ending up with an uncompetitive domestic industry sector as a result of opening the country up for imports from elsewhere. And that is a scenario, the fresh produce industry of many countries is only too familiar with.

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