ThomsonReuters

Unlocking the Chain: Gaining a Competitive Edge with FTAs

Unlocking the Chain: Gaining a Competitive Edge with FTAs

Firms of all sizes are currently experiencing unprecedented pressures as a result of COVID-19, the ongoing US-China trade war, and even climate change. Such quickly changing market signals have put enormous pressure on margins, leaving companies with sub-optimal networks and trading partners, and making firms more vulnerable to further disruptions and market fluctuations. In such an environment, building a more transparent and robust supply chain risk management program that monitors and responds proactively to potential disruptions has become a C-suite agenda item. Firms need to re-examine their existing supply chains and ensure that they are fit for purpose in a new, widely disrupted, trade environment. Companies that did not see the point in engaging in potentially complex reengineering of their footprint may be forced to look more closely. Areas of the chain that were previously unimportant may become a top-line challenge while other markets that have traditionally sustained business may no longer do so. To help lower risks, one key, typically underutilized, tool for companies is effective use of free trade agreements (FTAs). These agreements can limit the scope for sudden shifts in government regulations, policies, tariff levels and services and investment restrictions. Proper use of FTA rules can generate thousands or even millions of dollars in annual savings, providing consistently lower tariffs, plus rules between partners that bring greater certainty and lower risks for regional supply chains.