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How International Trade Agreements Affect The Shipping Industry

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Have you ever wondered how bananas grown in Ecuador land in your local grocer’s produce section? The answer is simple: international trade agreements give business a global reach.

The shipping industry plays a large role in successful international trade.

Without solid international trade agreements and international shippers, you wouldn't be able to buy things so easily that many of us take for granted.

In this article, we'll explore the major international trade agreements and discuss their impact on international shippers.

 

The Major U.S. International Trade Agreements

Over the years, several key trade agreements have been formed between the U.S. and foreign countries.

Some have had positive impacts on trade, while others have been more controversial.

Let's take a look at these agreements.

North American Free Trade Agreement (NAFTA)

In terms of area, this is currently the world's largest free trade agreement.

Formed in 1994 under President Bill Clinton, it's an agreement between the U.S., Canada, and Mexico. Its purpose is to eliminate all tariffs between countries and has tripled trade since 1994 to over $1.2 trillion.

In most ways, it has been a successful agreement with positive effects on the shipping industry. However, in January of 2017, President Trump signed an executive order with the purpose of renegotiating NAFTA.

We may even leave the agreement altogether.

 

Trans-Pacific Partnership (TPP)

The U.S. entered into the TPP in February of 2016. It was a free-trade agreement between the U.S. and 11 countries that border the Pacific.

These countries are:

  • Australia
  • Brunei
  • Chile
  • Canada
  • Malaysia
  • Japan
  • New Zealand
  • Mexico
  • Vietnam
  • Singapore
  • Peru

Its goal was to enhance trading and investments between the partner countries. A big part of the TPP was to help small businesses leverage more global reach.

However, in January of 2017, President Trump signed an executive order that withdrew the U.S. from TPP.

While this will have some benefits, there are also negatives in the withdraw from the TPP.

The agreement added $223 billion per year to the incomes of workers in all included countries. A full $77 billion of that went straight to workers in the U.S., including workers in the shipping industry.

However, most of the income gains go to workers earning over $88,000 per year. The TPP contributes to added income inequality in higher-wage countries and promotes cheaper goods from lower-wage countries.

The Transatlantic Trade and Investment Partnership

This agreement stands to link the U.S. with the European Union. These are two of the world's largest economies, behind China.

If put into law, this agreement would control more than a third of worldwide economic output. It would quickly become the world's largest free trade area.

However, the biggest obstacle is agribusiness.

Both the U.S and the E.U. have mega subsidies for their food industries. In addition, the E.U. prohibits all genetically modified organisms (GMOs) as food. The U.S. does not. The E.U. also restricts hormones and antibiotics in animals that are raised for food. Again, the U.S. does not.

Overall, this agreement could lead to a boom for international shippers, but it's not yet clear what President Trump's stance is on it.

International Trade Agreements Help the Shipping Industry Boom

The best way to boost exports is to make trade easier for businesses of all sizes. Governments set out to do this by creating agreements that reduce tariffs and other factors that block imports.

Smart business owners know how to take advantage of these agreements to grow and increase profits.

When you're ready to expand your business and start thinking on a global scale, it's time to talk to us.

We're the expert international shippers you want on your side!



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