Dive into the world of global trade agreements and their influence on emerging markets. Uncover opportunities and challenges in this comprehensive exploration.
- Introduction to Global Trade Agreements
Rules and regulations are very important for us so that things run smoothly. Likewise Global Trade Agreements are set of rules and regulations so that trade runs smoothly within two countries. Trade helps in exchange of goods and services and through agreements prices for goods and services are set so that both the countries can trade right and trade good. These agreements cover things like cost/ price of products, quantity of products to sell and how to treat each other’s businesses. Global Trade Agreements can be made by any two countries, more than two countries or group of countries for faster, smoother and profit generating trade to have a win- win situation for both the parties.
- Emerging Markets in Focus
In this globalisation world there are many countries which are emerging as a great market for global trade. Countries like India, China are not only flooding with population but also becoming major centre point for various products which has huge demand in global trade.
To understand the importance of emerging markets in your life pay close attention to every product you use in your daily life. Check the origin of that product and then see how many products you use of that country or place you will get a better and clear idea of emerging markets and your strong connection to it.
Emerging markets accounts for almost 85% of global population (It’s a huge number- trust me), and they have a great impact not only on global level but on your personal level too. The emerging economies contribute to more than 60% of global GDP which in turn made them important players in significant reduction in global poverty.
So, these emerging markets are like a great global fair which offers n numbers of products and services for unlimited trade within the globe.
- The Role of Trade Agreements
As we already discussed that Trade Agreements are important for seamless and fast trade between two or more countries. These are set of rules and regulations which both the parties has to agree upon for good trade relations. But, there are some more points to cover-
- Reduces Trade Barriers- For smooth trades, Trade agreements are very very important. Some trade barriers are tariffs or taxes, quantity limit, and other non- tariff barriers like regulations and standards. Lesser the barriers smoother and profitable the trade.
- Promotes Economic Growth- By trade one exchanges good and services and that gives them access to larger markets. It increases money flow and promotes economic activity within the countries. When two countries after signing the trade agreement open the market to one another the customer has more option, the businessman has more customers to serve which in turn boosts the economy.
- Predictable Trade- By agreements trade becomes predictable and there is no element of surprise which can harm the countries and provides more stability. If one knows what is going to happen next the business can easily make a good plan for making high profit from trade.
- Easy Resolving of Disputes- Trade agreements are rules and regulations so, It has rules and ways for dispute like situations too. So, these agreements can avert trade wars too.
- Support to Developing nations- Sometimes some lawmaker or country make the agreements in such a way that it provides special provisions for developing nations so that they can also have access to global markets and it helps them in their economic growth.
- Opportunities for Emerging Markets
Every country today wants to be on the top and for that they are working hard day and night. Global Trade Agreements make things easier for them. So, these are some of the Opportunities for Emerging Markets today:
- Growth for Economy- The economic growth of Emerging economies/ markets is higher as compared to Developed countries. This acts as an opportunity for various businesses to sail on the same boat of developing markets and make sure they earn a good profit too, which in turn makes developing countries to grow more economically.
- Untouched Consumer Base- Emerging markets have a good bunch of middle class population whose earnings are growing but they are spending less because of lack of options. So, good businesses (Smart businesses) utilises this opportunity and give options to them in form of their products and services for more profit.
- Production cost is less for businesses- Emerging markets offers cheap labours and resources which makes production costs less. So, businesses invest more in these markets to earn more profit which also increases jobs in these emerging markets.
- More job opportunities- When emerging markets shows the character for growing, different companies and businesses see this as an opportunity for their growth too. More investment less spending means “More Profit”. And more profit for businesses means “More job opportunities for Emerging markets.
- Challenges on the Path to Growth
Everybody has to go through various challenges for growing. Likewise Emerging economies/ markets also faces several challenges in their path to growth.
- Economic instability- Many times emerging markets faces economic instability in their run for growth like currency fluctuations, inflation which makes it difficult for some countries to continue on the path to growth.
- Lack of Infrastructure- In the initial stages Emerging markets might not have the required infrastructure of global trade level, which can act as a barrier for transportation, energy, communication system which in turn hinders their growth.
- Political issues- Political issues can also create trouble for these economies. If the government is not friendly with the partner country then their trade will be hindered.
- Trade barrier- Some countries have strict trade rules and regulations like higher tariff and import quota which can be challenging for the businesses to invest in these markets.
- Case Studies of Success
India’s IT and Software industry services
Today India is one of the fastest growing economy in the world. India does not only have big population but also has skilled labour. India’s IT industry has seen rapid growth in the global level, by providing cheap solutions and more importantly more reliable solutions in the IT industry. India’s large pool of skilled engineers and competitive labour costs has attracted global players to invest in India.
Economic rise of China
China is major country in Asia, in terms of country’s area and population both. China soon realized the importance of global trade and their policy of global trade resulted in rapid industrialization and significant export growth. China has emerged as “world factory”, exporting wide range of their products to all over the world. We all must have seen or used Chinese product atleast once in our life. So, this is the reach of this emerging market.
Electronic Industry of South Korea
Choosing the other path than the neighbour country North Korea, South Korea walked on the path of development after being a war- torn country in mid 1950’s. Today quality electronic products are made in South Korea and has become a reliable market for electronic goods. You must have heard about SAMSUNG, LG right? That’s their reach at the global level. This country always focused on research and development and their government was always welcoming for investments in ideas and businesses which made them a strong player in global trade.
Agriculture exports of Brazil
When it comes to agricultural export Brazil is a major player at global level. Exporting different agricultural products like Soybeans, Beef, Poultry, Coffee etc. This happened because of their large arable lands, favourable climate conditions, and investments in agricultural technology.
- The Impact of Regulatory Changes
Whenever there is change in any law there are discomforts, same goes with global trade. When a government or party changes any regulations or rules it causes disturbances in the global trade but not every time some changes can bring more profit one just has to pay attention to the right opportunity at right time. Let’s see some of the impacts of regulatory changes in emerging markets-
- Making trade difficult
Sometimes regulatory changes by the government can make the trade difficult by increasing trade barriers by imposing high tariffs that can limit the reach of emerging markets in global trade.
2. Tax and investment incentive
Some regulatory changes can bring in tax incentives and investment incentives to attract more foreign investment so that emerging markets can become more attractive.
3. Sanitation and Hygiene
Changes in SPS (Sanitation and Phytosanitary) regulation can cause disturbance (good way or bad way) in trade of agricultural and food products which may affect the relation of both parties.
4. Labour and employment regulations
If regulations related to labour and employment changes it can change the cost of production in emerging markets which can impact global supply chains and trade competitiveness.
- Strategies for Navigating Trade Agreements
For emerging markets Navigating Trade Agreements can be complex sometimes.
- Stay updated
One has to timely monitor changes or updates in regulations in trade agreements. Sometimes government also provides updates through publications, notifications etc.
2. Proper Understanding of Agreement
If you want to navigate the trade agreements you will have to be thorough with each and every important information given in trade agreement. Like- Tariff rules, import- export quantity etc.
3. Take help of Experts
Expert advice always plays an important part in life. Likewise emerging markets can take help from Trade Experts or consultants or legal experts to ensure that the trade agreements is balanced and will generate profit for both parties.
4. Market Research
Proper research is very important for trade agreements. Emerging markets must do proper research if they want trade agreements to give more profit to them.
Balancing Growth and Risk
Growth and Risk goes hand in hand in life too. If you want growth you will have to take risk. Greater the risk greater can be growth. But everything has to be in balance if you want to be on the profit side.
Assess the risk
Risk assessment can give you a clear idea about how much risk you have to take so that the trade can give profit.
2. Tolerating Risk
Emerging markets has to be ready for any kind of failures. The tolerance of risk is an important part of taking risk. Not everyone things will go in your favour but you will have to make sure it goes on your favour maximum time.
By not putting all eggs in one basket, emerging markets can distribute the stress or risk. Not betting on single product for profit but giving more options to the world and offering different products.
To make the balance emerging markets has to be flexible in terms of products and regulations too. Be prepared and adapt to changing trends at global level and plan accordingly.
The Future of Emerging Markets in Global Trade
At present we have seen a lot of emerging markets which are performing really well at the global level, whether be it India offering quality services, be it China offering relaxed regulations or South Korea offering world class electronic products.
In the coming future emerging markets will be able to cover the whole globe and if there regulations are right they will also join the developed country group soon. One has to be updated, informed and ready to take challenges and risks.
Emerging markets are more solution driven and there solutions are more cheaper and also they provide options so, customer base will expand more giving everyone profit and creating a win-win situation for all.