Free trade agreements mean lower prices and shorter delivery times, but there is still no agreement with South America

Free trade agreements mean lower prices and shorter delivery times, but there is still no agreement with South America

Trade deals ensure your package arrives quickly and affordably. You would think of a win-win situation, but many parties are still against such a free trade agreement with Latin America.

Many parliamentary parties do not want a trade deal with Latin America. Objections: Harmful to environment and farmers. What is the importance of such an agreement for the Dutch economy and will it be a problem if it is not signed?

50 cents in every euro

The new trade agreement is called Mercosur and should allow trade between the EU and Argentina, Paraguay, Uruguay and Brazil. Despite 20 years of discussion, no agreement has yet been reached.

According to Steven Bragman, professor of international economics at the University of Groningen, trade is important to the Dutch economy: “We export about 600 billion and earn about 50 cents for every euro exported. And the 300 billion we earn is a third of our national income.”

Cheap and fast

Trade agreements stimulate that trade: “And then what you do is you try to remove barriers that make trade difficult.” Think about import duties. “You reduce or eliminate those trade restrictions. In turn, other countries do the same.” According to Brockman, everyone benefits.

But how important is a trade deal to consumers? According to Brockman, goods are becoming cheaper and if you order something from abroad, it will arrive at your doorstep faster. “All those bureaucratic hurdles are being removed or made more efficient.” And it’s good for the Dutch economy: “If things are cheap and easy to get, you buy more.”

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Diversity

However, it is difficult to say how big the contribution of trade agreements is to our economy. According to Brockman, this is due to the great diversity of agreements: “We have very deep agreements that encourage trade the most, and we also have agreements that encourage trade the least. So it’s very difficult to quantify what a contribution to an amount . . . trade makes.”

Nienke Oomes, head of economics at SEO (Economic Research), notes that it’s important to distinguish between the effect of trade on wealth and the effect of trade agreements: “I wouldn’t be surprised if the impact of trade on the economy as a whole is huge. It could be at least a third of wealth.”

Two percent

But the effect of additional trade agreements, agreements added on top of existing agreements, has a relatively small effect on welfare. Oomes refers to the international study of trade agreements.

“In that study they looked at the effect of long-term trade agreements on prosperity. Those agreements led to an average two percent increase in prosperity.”

Limited contributions

Brockmann sees the contribution of the trade agreement with South America in particular as low: “The most important area where we trade as the Netherlands is Europe. About 70 percent of all trade is within Europe. We trade with China, the United States and Latin America. But that trade is small compared to total trade.”

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Whether or not the Mecosure deal goes into effect, the effects on consumers will be minimal, according to Braggman: “The extra trade you get from that trade deal will only provide a little extra prosperity in the Netherlands. .”

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