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Free Trade and E-Commerce: Outlasting tariffs and Protectionism

Posted on Thu, Nov 29, 2018

The is a rallying cry amongst today’s American political leaders of “fair trade” not “free trade.” Proponents of nationalists/ protectionist policies point to egregious discrepancies in trade policies and how other countries do not play by the same rules.

 

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Fair Trade not Free Trade?

Fair trade is the new catch phrase for those with more protectionist views.

 

As Mom used to say, life is not fair.  She might have added:  Especially for international trade!

 

Negotiations involving trade are solely to further a country's self interest through an agreement that does so mutually. If one country has a better hand, they will play it for all they can get.

 

 

 

Jet Worldwide consults with Asian, European and South American manufacturers and retailers to secure high volume section 321 duty free e-commerce import processes to The US and Canada.

 

 

 

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Contact Jet's Team for information on shipping to the USA

 

 

Might makes Right:

Usually both negotiating countries have legitimate claims of an egregious discrepancies. The weakening of the American position relative to China is causing nationalists sentiment to rise but, ultimately,  the self interest of both sides will force a new equilibrium.

 

 

High minded ideals of sovereignty, human rights, democratic, socialist or communist principles always take a back seat to economic interests. Shared self interests can be served through increased trade made possible through trade agreements.   

The North American Free Trade Agreement is a case and point where, despite political rhetoric to the contrary, free trade agreements can generate significant economic benefits.  

 

 

 

NAFTA (New or Old) = Free Trade?

The North American Free Trade Agreement / NAFTA is a decades old landmark agreement that is universally credited with providing a significant economic benefit to Canada, Mexico and The United States.

 

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As anyone working on North American cross border issues will tell you, the processes and fees feel anything but free. NAFTA country of origin rules are complex and the burden of regulatory oversight - including meeting Customs and Other Government Agency requirements - are costly.

 

 

 

NAFTA Regulatory compliance requires regulatory expertise that would make a tax attorney blush! However, NAFTA has been a success.

 

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New NAFTA:  USMCA Proof of the Value of Free Trae

Proof of success of NAFTA is that, after all the rhetoric to the contrary, the “new NAFTA” / USMCA, is really just an updated version of a decades old agreement. An agreement that even its supporters agreed needed to be updated.

 

 

 

 

Slowing Trade ≠ Stopping Globalization

Tariffs and trade restrictions will certainly slow international trade. But lower cost and the most advanced producers will ultimately win the day. History has shown that economic trading trends are larger than any one country. Tariffs and quotas ultimately do more to isolate a country from global opportunity than benefit local producers.

 

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In most cases: Industries protected from foreign competition inversely are served by their captive customers rather than having to compete with more efficient and innovative competition.

 

 

 

Case and point (1): Japanese Cars Invading the US Market

In the 1960’s and 1970’s, Japan started to import cars to the USA. It was truly a David vs Goliath task. In the 1960's and 1970's, the US auto industry was the most advanced in the world with General Motors alone having more than 55% market share.

 

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Yet American car makers were producing lower quality and building legacy costs that resembled more a government agency than a company responsive to their customers.So the Japanese invasion continued, despite:

  • Nationalistic anti Japanese sentiments (much of it from World War 2 Veterans)
  • Quotas (voluntary restraint agreements)
  • A significant appreciation of their currency (over 40%)
  • Having to transition their products to American tastes and regulations

 

Ultimately, the competition from Japan (and Germany) benefited American consumers with better cars. American car makers undertook painful restructuring (including a government bail out) and today are amongst the world leaders in car manufacturing.

 

 

 

 

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Case and point (2): Textiles Duties plus Quotas

 

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To help protect American industry around the 1930’s, the Smoot-Hawley Tariff Act was implemented. Most economists consider this act as a key contributor to the Great Depression. And despite repressive tariffs that remained on textiles and shoes, virtually all shoes and textiles purchased in the US today are imported from foreign sources.

 

The maize of costly duty and quotas on textiles and shoes - perhaps slowed- but not stop the trend towards more efficient international suppliers.

 

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For example: A jacket can be assessed a duty rate of 27%. But if that same jacket is made “water-resistant” then will be assessed only a duty rate of 7.1%?   And the duty rate for most leather jackets is even less?

 

 

The legacy of Smoot-Hawley for textiles and shoe imports is that it provides greater benefit to lawyers, brokers and bureaucrats than protection for local industry. The demise of US  textiles and shoe manufacturers was determined by American consumers who chose foreign producers that provided better value despite import obstacles.  

 

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Free Trade For E-commerce Parcels to the USA

 

Despite all the trade talk, sending e-commerce shipments to the USA has never been easier. Custom manufactures of Italian Shoes, for example, can import their parcels duty free using Express Consignment Clearance Process. The entry type is referred to as a “Section 321 informal entry” and can used for most goods valued under $800 USD.

 

Most traditional customs brokers are not capable of arranging for low cost section 321 entries. Jet Worldwide helps importers utilize Section 321 consolidated entries without the expense of using a US customs broker.

 

Jet Worldwide provides unbiased consulting advice for custom manufacturers who wish to offer their shoes, textiles and other products via a direct order from their US Customer.

 

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Direct order, cross border e-commerce reconfirms the fact that global purchases are based primarily on the pragmatic issues of cost and quality. History shows that consumer behaviour ultimately wins the day and transcends duty, quotas and other protectionist policies.

 

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The growth of Section 321 parcel import has expanded access for foreign suppliers to sell direct to the American market.    Contact our team for setting up your own proprietary high volume parcel import processes to The US via CFR Part 128 Express Consignment processes.

 

 

 

 

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