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Advantages And Disadvantages Of Free Trade Agreements

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In today’s world, the international market has become more competitive and uncertainty as compared to last century. To survive in this competitive environment, strategy is a must. So, the challenge for importer and exporter is to minimize their cost in order to maximize their. We have identified five options for reducing distribution cost.
Free Trade Agreement
Obviously, free trade agreement provides the opportunity for exporter and importer for saving costs. Exporter and importer should fully utilize the terms and condition provided by agreement when conducting business. Understand the preferential trade agreement is crucial as it might reduce a double digit import duties. We take Asean Free Trade Agreement (AFTA) as an example. Malaysia, Indonesia, Singapore, the Philippines, Brunei and Thailand are the member of the agreement. As being one of the members of AFTA, some certain imported goods tariffs have fallen to zero. As a result, the exporter and importer will gain higher potential in long run.
The example provided indicates that the exporter and importer should fully understand the preferential agreement in order to fulfil …show more content…

By adjusting its design, tariff engineering can be considered as a technique to reduce the duty of an imported product. Generally, this technique can be accomplished without any significantly change of the performance of the imported item. For instance, assume that a man’s cloth made of 55 percent polyester and 45 percent of silk, it would have a duty rate that close to 27 percent. By tweaking the ratio, the cloth could be made by 45 percent of polyester and 55 percent of silk. As a result, the duty rate would drop to 7 percent. Assume that the order valued at 1 million MYR, the technique would save the importer 200,000 MYR in duty. The figure indicates that tariff engineering is an effective for importer so save

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