New study examines FTA impact

New study examines FTA impact

DHL and the Economic Intelligence Unit on Wednesday released a report on the business implications of pending free trade agreements across North and South America.

The report, "Free Trade Prospects in the Americas: Strategies for a Transformed Market," was the result of a four-month investigative project sponsored by DHL.

The global report, which included information from interviews with the region's business leaders, as well as the expertise of the EIU and input from companies like DHL, defined and discussed the various issues businesses are likely to face as a result of the changing trade and investment environment in the Americas. Among the findings:

-- If implemented, the Free Trade Area of the Americas (FTAA) and the Central America Free Trade Agreement (Cafta) would increase Latin American exports to the U.S. and to the world but not by as much as the estimated 25 percent increase in Mexican exports resulting from Nafta.

-- U.S. investments in the service sector and in local production capacity would drive increased foreign direct investment (FDI) inflows but not by as much as the 40 percent increase seen in Mexico as a result of Nafta.

-- The European Union would have similar effects on trade and FDI flows between Mercosur and Europe and would help the EU to regain its position as the leading supplier to Mercosur.

-- About 71 percent of executives surveyed by the EIU said that an EU-Mercosur deal represents a major opportunity, while the corresponding proportions were 52 percent for an FTAA and 11 percent for Cafta.

Respondents also cited the following as the five areas that would be most impacted by free trade initiatives:

-- Increased FDI

-- Greater competition

-- Increased intra-regional trade

-- Rapid market liberalization

-- Greater macro economic stability

In terms of distribution and logistics, a major area followed by trade analysts, increased sales volume, more products and a stronger focus on segmentation will require broader, deeper and more complex distribution strategies along with a more sophisticated inventory and logistics management system. Further, the addition of better delivery systems and more operations in more countries is predicted to make it faster and less expensive to trade.