Britain has signed a new free trade deal with Mexico which came into force on 1 June 2022. The old deal was 20 years old and migrated over from the old EU agreement.

It is currently the UK’s 44^th largest trading partner and while UK exports are £44 billion imports are only £4 billion. Mexico is the world’s 16^th largest economy with a population of 150 million by 2035. Demand for imports is expected to grow by 35%.

UK has also recently started negotiating with Canada. Interestingly both Canada and Mexico are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Britain wants to join.

The World Trade Organization (WTO) met at the WTO Ministerial Conference (MC12) in Geneva from 12 June to discuss global trade. Kazakhstan is co-hosting, this conference was postponed from 2020 due to the pandemic.

The British Chambers of Commerce (BCC) has urged leaders to consider small businesses and ease of exports in their discussions.

Australia, Japan and Singapore Ministers are co-convening the e-commerce talks which focused on global rules. They launched the E-commerce Capacity Building Framework to level the playing field for developing nations to participate in e-commerce. The framework will offer training, technical assistance and ‘capacity-building’ to support inclusion in global e-commerce.

Trade Horizons

Trade Horizons is an award-winning market entry company, assisting ambitious companies to identify, develop and grow sustainable revenues in new geographic markets. We offer support to clients in international strategy development for their global business growth, and throughout the key phases of market entry execution – Preparation, Launch and Growth. Click here to find out more.

The UNCTAD World Investment Report says the new global minimum tax law of 15% will have detrimental effects on developing countries. The International tax reforms and sustainable investment says that smaller developing countries which usually have lower levels of tax will be penalised due to the new law as countries will have to charge a ‘top-up tax’ if companies don’t pay 15% which could impact foreign investment into those countries.

The new tax law is being put into place as a global standard minimum rate of 15% and is designed to stop multinational corporations from avoiding tax but could lead to an anti-competitive landscape as jurisdictions look to other ways to attract FDI.

The report estimates the negative effect on FDI to be around 2%. Access the full report here https://unctad.org/system/files/official-document/wir2022_en.pdf

France has been the clear winner of recent European FDI rankings as a result of recent aggressive reforms aimed at making France more business-friendly such as lowering the corporate tax rate from 33.3% to 25%, various tax incentives for foreign investors and changes to France’s notorious employee law that makes termination easier which was a large deterrent for foreign employers when considering jurisdiction.

Apparently, China is the leading Asian investor in France but is still not in the top 9 countries led by the US, Switzerland, Germany and the United Kingdom itself in sectors such as manufacturing, finance and real estate.

In 2021 France attracted 1,607 investments which was a 32% increase on 2020 and back to pre-pandemic levels.

Market entry can often be a closely-held aspiration for growing companies as a way to gain market share, broaden product or services portfolios and increase revenue. Many would-be international expansion candidates do not undertake research before deciding on a territory or properly investigate needs in the target country.

Distribution models are often overlooked in favour of the traditional one, and company leaders may wrongly believe because it works in the home country, it is what the market needs and wants in the new territory. However, many of the projects with this sort of strategy fail. They realise there is a similar product in the target market, that they are not differentiated enough, the price is too high, or they cannot penetrate.

Thorough market research is a must. But even if some market research is done, there may still be unknowns. Local expertise may be difficult to find or trust and ways of doing business vastly different to the status quo. A clear roadmap with tax, compliance and employment law planning is a must. There may be tax breaks or incentives for certain structures in some regions, or a focus on your industry.

With market experts in 20 regions and growing, Trade Horizons can help budding global companies evaluate their next move so you can reduce the unknowns and take an evidence-based approach to international expansion.