Trade Agreements and Foreign Trade Zones

Published: 2021-06-17 08:20:08
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Category: Strategy, Industry, Asia

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Deceuninck Group is currently planning to open a business to produce PVC profile in the Philippines. To achieve this, the company should be aware of trade agreements, foreign trade zones and competitiveness in Philippines. If at least two countries concede to the terms of exchange between them, it means they have trade agreement. The Philippines’ particular exchange agreements are Association of Southeast Asian Nations (ASEAN), European Free Trade Agreement (EFTA) and Japan – Philippines Partnership Agreement (JPEPA). These exchange agreements convey advantages to Philippines, for example, members of AFTA distinguished more pros than cons of this agreement. The hugest advantages to businesses are expanded number of export and less duties.
According to members of this agreement, AFTA’s particular rates empower them to get less expensive crude materials and segments from other nations, along these lines lessening their manufacturing expenses. This impacts the plastic industry which Deceuninck Group operates in. They can purchase cheaper materials for manufacturing and increase their profits. Likewise, businesses which operate in electric and transportation sectors distinguished less duties and expanded number of export as the most critical advantages of this agreement. On the other hand, trade agreements have disadvantages, too. For example, there is an expanded rivalry as their most noteworthy issue, especially with the getting the less expensive imported goods into the nation. The worries of expanded rivalry cause the organizations’ industrial defenselessness as they manage not just meeting the request because of the worldwide monetary slowdown, yet in addition inward requirements in climbing the value chain to contend with other worldwide companies. Additionally, exchange agreement lead expenses of certification and better inclinations which are accessible to businesses in others. (Wignaraja & Lazaro, De Guzman, 2009)Foreign trade zone means such zones are legitimately outside the nation’s duties area and in this way products are generally not subject to obligations. Organizations appreciate special assessment treatment if situated in export processing areas, free trade areas and specific sectoral assets by and large known as Eco zones. Philippine Economic Zone Authority (PEZA) at present works and manages 326 Eco zones, fundamentally in the production, tourism, supply chain, information technology and agro-sector industries. PEZA oversees 3 government-claimed trade preparing areas and directs motivations to ventures situated in other exclusive and worked Eco zones. Any individual, association, partnership or company association, not depending on nationality, control as well as possession, may enlist as an export, tourism, information technology or agro-modern endeavor with PEZA, gave that the business should be in its action inside any of the declared Eco zones.
The fundamental advantage of PEZA is to empower foreign direct enterprises through environment friendly financial areas situated in the diverse areas of the nation like in the case of Deceuninck Group. PEZA overseers are being known as keeping up a reasonable and unsurprising enterprise environment inside the areas of their power. Be that as it may, the foundation of the economic zones had its own arrangement of burdens. First of all, workers in Philippines were regularly abused, particularly which were operating in the manufacturing lines of the production industry. This impacts the plastic industry which Deceuninck Group operates in. They can hire employees by providing less salary. Secondly, besides the less expensive labor force which the nation provided to the foreign enterprises, some PEZA companies additionally take advantage from the nonappearance of any administration ecological assurance measure. Thirdly, the government needed to forego millions in inescapable incomes with a specific end goal to give the numerous liberal motivation that were being conceded to foreign enterprises. (Castell)
Philippines ranked as a 41st in 63 countries regarding overall competitiveness. Doing business in Philippines is attractive for foreign investors due to various reasons. For instance, environment-related technologies, legal and regulatory framework increase in recent years. Also, decreased pollution problems and protectionism are decreased. In production sector such measures could incorporate minimal effort and long run area lease, loose terms on employment and terminating, preparing projects to help support rivalry and stronger access to less expensive power for electricity. Deceuninck Group could also benefit from economies of scale through industry clustering, developed supply-chain productivity and savings in transport expenses. (Coleman & Kalish & Konigsburg & Navarro, 2014)

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