All About Trading Blocs and Free Trade Zones

Exporting and Importing can often be an extremely complicated and mundane process as there are so many rules, regulations as well as countless  number of procedures to adhere to. This, many a times, may require to prepare and submit documents for import and export. Usually, freight forwarders would prepare it  for us, but it is also good to know for ourselves as to how to complete the relevant documents by understanding what the terms mean. As such, in our new article series titled “Export Terms”, we would  introduce you to all the various terms used in the international trade, be it through air, land or sea freight. We would roll out one related article on a regular basis, which would help you to get a comprehensive understanding as to the document preparation for the purpose of doing trade internationally. In this article, we would be covering all about Trading Blocs as well as Free Trade Zones.

What are Trading  Blocs

Trading Blocs essentially refer to agreements made by governments of different countries. These agreements are to reduce trade barriers or restrictions so as to ease the overall trade process. As such, when businesses from these countries trade with each other, it becomes easier as there as the government regulations are less stringent and are more flexible. Usually, trading blocs consist of a group of nations in a particular geographical region. Take for instance, in the region of Southeast Asia, there is an Association for Southeast Asian Nations (ASEAN). This organisation consists of countries such as Indonesia, Malaysia, Singapore and Thailand. The ASEAN has a Free Trade Agreement known as the ASEAN Free Trade Agreement (AFTA) to support local manufacturing in the member nations. By eliminating tariff and non tariff barriers, the AFTA, it would attract more direct foreign investment into the region as well as make the region more competitively advantaged for production and manufacturing as compared to the world.

A Meeting Between ASEAN Members

What About Free Trade Zones

A Free Trade Zone defines a particular geographic area that allows businesses to import, store, organise or reexport to another country without  having to pay import duty taxes. These Free Trade Zones can be usually found along major international airports, sea ports or any area that has significant trade connectivity and other geographic advantages. Free Trade Zones are also commonly known as FTZs

Export Processing Zones

An Export Processing Zone is a type of FTZ. This type of zones are usually set up in developing countries so as to promote industrial as well as commercial exports. As such, they are usually known as industrial estates. Countries such as Indonesia, China, India are some of the countries that have FTZs.

In Indonesia, Batam-Bintan-Karimun  are part of the country’s FTZ. The primary advantage of the FTZ is the geographic location, where the location borders Malaysian as well as Singaporean shores. Furthermore, with the foreseeable economic benefits as well as the stability of the  cities’ infrastructure as  well as the general ease of doing business in the region

The Geographic location of Batam and Bintan makes it a clear choice of setting up a Free Trade Zone there

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