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Market Access: What It Is, Importance

What is Market Access?

Market access refers to the capacity of a company or country to sell its goods and services in foreign markets. While it can also apply to domestic trade, it is most commonly discussed in the context of international trade. Market access is distinct from free trade.

The ability to sell in a market often comes with tariffs, duties, or quotas, whereas free trade implies the movement of goods and services across borders without any additional government-imposed costs. Nevertheless, market access is seen as an initial step toward deeper trade relationships. Increasingly, trade negotiations focus on market access rather than achieving true free trade.

Key points:

  • Market access is the ability of a company or country to sell goods and services internationally.
  • Tariffs, duties, and quotas may all be components of market access, which should not be confused with the term “free trade.”
  • Market access is often negotiated between countries for their mutual benefit but may not necessarily result in freer trade.

Understanding Market Access

International trade negotiations entail intricate discussions between multiple governments. Throughout these talks, participants typically strive for market access that benefits their own export industries while attempting to restrict market access for imported products that might compete with sensitive or politically significant domestic industries. Trade agreements and promotional efforts aid in facilitating market access, yet it is also influenced by geopolitical factors.

Distinguished from free trade, market access focuses on negotiating beneficial trade conditions, which may not necessarily imply completely unrestricted trade. It looks over the conditions, regulations, and obstacles that define the ease or complexity of engaging in global commerce.

For businesses seeking expansion and access to new customer bases internationally, market access is crucial. It necessitates addressing various factors, including trade barriers, compliance with regulations, and navigating customs procedures.

Importance of Market Access

The significance of market access in the international trade circuit is pivotal for several reasons.

Revenue and Expansion

Access to foreign markets serves as a gateway for businesses to broaden their customer base and revenue sources. It offers avenues for companies to expand, especially when domestic markets are either saturated or have limited potential.

Diversification

International trade gives businesses a chance to diversify their income sources. Relying solely on domestic markets can render a company susceptible to economic fluctuations or shifts in consumer preferences, given the distinct conditions and outlooks of various economies.

Economic Advancement

For many nations, market access stands as a cornerstone for economic progress. It can invigorate investments, employment opportunities, and overall economic growth by facilitating the export of goods and services. Without access to international markets, these advantages would remain confined inside one country’s market; some companies may even mark their product as “not valid for export.”

Supply Chain Agility

Businesses often depend on global supply chains to acquire components or raw materials. Market access ensures the smooth flow of these materials across borders, allowing companies the capacity to receive specific goods as needed for their manufacturing processes.

Economies of Scale

Access to larger markets can drive economies of scale, enabling businesses to manufacture goods more efficiently and cost-effectively. As companies expand, they can make more financially viable investments and better manage their expenses. Greater market access inherently offers enhanced growth potential.

Cultural Exchange

International trade fosters cultural exchange and cross-cultural understanding by facilitating the sharing of products, ideas, and practices across borders. This exchange can spur innovation and creativity, granting consumers access to goods that might not have been available otherwise.

Common Barriers in Market Access and Trade

Achieving market access in international trade encounters various impediments, primarily stemming from tariff and non-tariff barriers, each presenting distinct challenges.

Tariffs

Import tariffs, levied upon goods entering a country, amplify the cost of foreign products, elevating their prices relative to domestically produced goods. Conversely, export tariffs, imposed on goods leaving a country, can diminish the competitiveness of domestic products in global markets by inflating their prices.

Further complexities in tariff structures hinder market access. Specific tariffs, fixed amounts imposed per unit of a product irrespective of its value, disproportionately impact lower-value items. For instance, a country might enforce a $5 tariff per kilogram of a particular imported item, disproportionately influencing cheaper products.

Countries also employ tariff rate quotas, creating a dual-tier tariff system. For import quantities below a certain threshold, a reduced tariff rate is applied, which incentivises increased imports. However, exceeding the quota triggers a higher tariff rate, limiting further imports. While encouraging some imports, tariff rate quotas cap import volumes, complicating comprehensive market access, particularly for those engaging in international trade.

Non-Tariff Barriers

Non-tariff barriers are diverse measures restricting or prohibiting market access. Quotas impose quantitative limits on the volume of a specific product importable within a defined period, halting further imports once the cap is reached.

Alternatively, countries may impose hurdles that complicate trading specific goods. Some necessitate import licences or permits for specific products. Others enforce strict regulations on product safety, quality, and technical specifications, raising barriers to exporting goods.

Finances

Financial barriers hinder market access. Certain countries offer subsidies or financial aid to domestic industries, granting them a competitive edge over foreign counterparts. Others impose restrictions on foreign exchange transactions, currency controls, or limitations on profit repatriation, inhibiting market access.

Building a Country’s Market Access

Enhancing market access in international trade involves various strategies beyond the avoidance of previously mentioned tariff and non-tariff barriers. Below are several approaches, although not exhaustive, that countries can adopt to promote market access:

  • Trade Agreements: Participation in trade pacts — be they bilateral, regional, or multilateral—serves as a fundamental method for trade liberalisation. These agreements often entail negotiations aimed at reducing tariffs, standardised regulations, and committing to eliminate diverse trade barriers. 
  • Tariff Reduction: Nations can opt to unilaterally decrease their import tariffs, signalling a dedication to free trade. Such actions may encourage reciprocity from other countries in reducing their own tariffs.
  • Financing Infrastructure Development: Investment in trade-related infrastructure, such as ports, roads, railways, and logistics hubs, streamlines the movement of goods, bolstering market access. In some countries with major agricultural industries, for example, there are calls for more building of “farm-to-market” roads to ensure farmers can transport their produce to the nearby market for sale.   
  • Simplified Licence/Permit Procedures: Streamlining these processes eases market access for foreign businesses. Reducing bureaucratic complexities and processing durations facilitates companies in obtaining necessary authorisations to enter foreign markets. However, some verification may apply if a foreign business aims to enter the market but there are questions about its competitiveness, which can require scrutiny by government bodies such as the Foreign Investment Review Board.
  • IP Protection: Stringent protection and effective enforcement of intellectual property rights assures foreign investors and businesses that their intellectual assets will be safeguarded. This fosters investment and innovation, assuaging concerns about international competitors misappropriating valuable information. IP protection issues have become high priority for businesses in recent years, with cyber attacks targeting secure information portals to pilfer trade secrets or disrupt critical infrastructure (warranting a new report from the ASD).    
  • Enhance Trade Finance: Ensuring access to trade finance tools like letters of credit and export credit insurance mitigates risks linked to international trade, facilitating cross-border transactions.
  • Reform Regulations: Implementation of transparent and predictable regulatory frameworks minimises uncertainty for businesses and investors. This clarity enables easier planning and investment in international trade endeavours with greater confidence.

Market Access as the New Trade Reality

The dynamics of market access negotiations dominate contemporary international trade, elucidating why broader market access, rather than absolute free trade, is the primary focus. Over decades of expanding global trade, there’s mounting evidence that many no longer universally endorse unfettered trade due to concerns about job security within their own countries.

For example, the Australian agricultural industry exports products like beef, wine, and dairy to international markets. Market access agreements play a pivotal role in ensuring that these products can be traded freely without excessive tariffs or non-tariff barriers. However, Australian meat exports still have turbulence from imported meat products; 2021 data compiled by the market platform OEC pointed to the USA and Japan as main import competitors for beef in Australia while China and Japan were strong in importing pork to Australia – and all their imports must pass Department of Agriculture, Fisheries and Forestry (DAFF) biosecurity controls.

The federal government is also actively involved in trade negotiations to secure better market access for its businesses. Agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Australia-United States Free Trade Agreement (AUSFTA) have helped enhance market access for Australian exporters.

Market Access and the WTO

Established in 1995, the World Trade Organisation (WTO) serves as an international body overseeing trade regulations among nations for the global benefit. It influences market access by providing a platform for member governments to negotiate and resolve trade disputes. The WTO has both reduced trade barriers among member-nations and maintained some barriers when deemed necessary.

In international trade, the WTO aids in market access through negotiation facilitation, trade policy monitoring, and offering technical support. It employs dispute resolution mechanisms and programs to promote action in service sectors. Ultimately, the WTO assumes a pivotal role in promoting transparency, lessening trade barriers, and nurturing collaboration among nations to enhance market access for businesses, fostering global economic growth.

Australia is an active WTO member-state and has benefitted from its work in promoting market access. The country has successfully negotiated trade agreements, reduced tariffs, and resolved trade disputes through the WTO’s mechanisms, contributing to its economic growth and international trade relations.

Conclusion

Market access is an essential aspect of international trade, driving economic growth, competitiveness, and innovation. Reducing trade barriers and fostering a more open and predictable global trade environment is a collective effort, with organisations like the WTO playing a significant role in moderating market access.

Australia, with its export-oriented economy, recognises the importance of market access and actively participates in trade negotiations to secure favourable terms for its businesses. Achieving market access is not only vital for Australia but also for countries worldwide, as it contributes to a more prosperous and interconnected global economy.

DISCLAIMER: This article is for informational purposes only and the opinion of the author. BARTERCARD is not connected with any trade body.

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