Companies who learn to use free trade agreements make full use of tariff preferences

– The result of our study is unexpected. It is surprising how quickly companies learn to use free trade agreements effectively and hence can take full advantage from the tariff preferences in just a few years, says Jonas Kasteng, Senior Adviser at National Board of Trade Sweden.

In the report – which is based on unique import transaction and firm level data – the National Board of Trade has analyzed how Swedish companies have learned to use and benefit from the EU’s free trade agreement with South Korea during a 10-year period.

About 50 per cent of the companies that started trading with South Korea did it for one year only. Among these companies, the preference utilization rate was generally very low. On the other hand, the companies that remained active and continued trading with South Korea quickly learned how to benefit from the free trade agreement. The preference utilization rate among these companies reached levels above 90 per cent after only three years, and after five years the preference utilization rate stabilized at around 97 per cent.

– It is obvious that the companies that are willing and able to invest in time and effort have a lot to gain from the use of free trade agreements after a couple of years. And the result is equal regardless of whether it is a small or a large company. More important is the experience companies gain – the more import transactions the companies make, the greater the benefit, says Jonas Kasteng.

Report facts:

The EU’s first free trade agreement with an Asian country, South Korea, entered provisionally into force in July 2011. It went further than any previous free trade agreement negotiated by the EU.

This report focuses on the trade aspects of the free trade agreement and more specifically on imports and the utilization of available tariff preferences by Swedish importers between the years 2008 and 2018.