Taking Advantage of Regional Trade Block Regulations
- by Edward Mengl -
- June 12, 2019 -
- 0 Comments
If you search hard enough online you’ll find a very comprehensive index ranking countries by how easy it is to open up a business. Naturally there’s a lot of due diligence involved which undoubtedly costs some money, but if you’re looking at it from the point of view of wanting to take advantage of regional trade blocks, you could very well be operating a multinational company with branches in each of the world’s regional trading blocks in under six months!
Regional trade blocks fundamentally offer neighbouring countries the opportunity to take full advantage of their close proximity and so they typically relax certain trade laws which they otherwise impose on any other company seeking to do business with those countries. The most famous example of this is how countries belonging to the EU waive cross-border tariffs on some goods and services, something which is consolidated on by the use of a single currency across the EU nations.
Regional trade blocks exist all across the world, with the Caribbean nations having their own, which I believe is referred to as CARICOM. The Southern African nations also have one which they’ve named SADC.
While regional trade blocks may appear to hold much of their allure from a political point of view, their true power resides in their economic implications. So if you wanted to have better access to a specific region then taking advantage of the regional trading block regulations would entail something like registering a local branch of your business in one of those countries from which you can operate in and trade more freely with its immediate neighbours.
Because of international sanctions imposed on a country like Zimbabwe for example, registering a company in South Africa could grant you the access you’d need to the Zimbabwean market. South Africa’s regional trade regulations supersede the international sanctions and so a company operating out of South Africa doesn’t take heed of the international trade sanctions.
The Zimbabwe- South Africa example was perhaps a little bit more of a political one, but otherwise as someone who is in business, taking advantage of regional trade blocks would typically have you wanting to enjoy access to regional sourcing and trading advantages.
Sticking with SADC for a bit, if for example you wanted to permeate the surrounding tourism industries of countries such as Botswana, Zimbabwe, Namibia, etc, establishing the headquarters of your tourism business in South Africa would make sense because Johannesburg is a major regional air travel hub where a lot of international flights land, from which one can then go to the neighbouring countries.
It appears to be under threat under the presidency of Donald Trump, but North America also has a regional trade block of which the regulations can be taken advantage of, including the trio of the USA itself, Canada and Mexico. Basically accessing one of those countries pretty much grants you access to the other two as well if you register a branch of your business in one of those countries.
There’s typically a lot of red-tape to have to deal with though, but it’s nothing you can’t handle if you know exactly what you want to do with the kind of power that grants you better access to regional trading blocks.