Trade is a big deal for Virginia, helping local businesses reach more people worldwide with their products. When Virginia’s manufacturers can sell more, it means better jobs and a healthier economy for everyone in the state. Selling American-made goods to countries like Canada and Mexico without worrying about extra fees or complicated rules makes a huge difference in the global market. This blog goes into some quick-fire facts and figures on the main modern trade agreements important to manufacturers.
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What this blog covers:
- Free Trade Agreements like the USMCA, KORUS, and U.S.Colombia Trade Promotion Agreement
- Virginia’s Port Volume Increase Tax Credit
- The Virginia Investment Partnership Grant (VIP)
- How they all help small Virginia manufacturers
1. Free Trade Agreements (FTAs)
Virginia exports goods to 20 existing FTA countries, totaling $6.5 billion in 2013. These agreements provide preferential treatment, reducing or eliminating tariffs on specific products. Here are some key FTAs impacting Virginia’s manufacturers:
United States-Mexico-Canada Agreement (USMCA)
Replacing the North American Free Trade Agreement (NAFTA), this 21st-century trade agreement fosters mutually beneficial trade, fairer markets, and strong economic growth. Here’s how:
- Tariff Reductions: The agreement ensures duty-free access for many goods traded between the three countries. In 2022, according to the Thomas Jefferson Institute of Policy, Virginia businesses sold over $15 billion worth of products, and a good chunk of that—about 27%—went to Canada and Mexico. That’s around $4.11 billion!
- Automotive Sector: Rules of origin encourage sourcing components within North America, benefiting Virginia’s automotive manufacturers.
- Intellectual Property Protection: Enhanced IP provisions protect innovations.
U.S. — Korea Free Trade Agreement (KORUS)
The U.S. — Korea Free Trade Agreement (KORUS) is a trade pact that powers economic relations between the United States and South Korea. It enhances Virginia’s exports to South Korea through:
- Duty-Free Access: Under KORUS, most Korean industrial and consumer goods can enter the United States free of duty and the merchandise processing fee (MPF). By 2016, this figure is expected to grow to over 95 percent.
- Export Opportunities: U.S. exports in key sectors, including electrical/electronic goods, chemicals, and scientific equipment, gain duty-free access to the South Korean market. This opens up new opportunities for Virginia manufacturers to sell their products in Korea.
- Textile and Apparel: Including the “yarn forward” rule of origin benefits both countries. Korean apparel products receive preferential access to the U.S. market, while U.S. fabric and yarn exports are supported. This helps textile and apparel makers in both nations.
- Slashed Tariffs: The agreement eliminates tariffs on over 95 percent of U.S. exports to South Korea within five years. This reduction in trade barriers benefits Virginia manufacturers by making their products more competitive in the Korean market.
U.S. — Colombia Trade Promotion Agreement
Colombia is a growing market for Virginia’s manufacturers. Key benefits of the U.S.—Colombia Trade Promotion Agreement include:
- Market Access and Tariff Reductions: Provides immediate duty-free access for over 80% of U.S. consumer and industrial products to Colombia, with big reductions in average tariffs on U.S. industrial exports—ranging from 7.4% to 14.6%—benefiting sectors such as agriculture and construction equipment, aircraft and parts, auto parts, and more.
- Agricultural Commodities: More than half of U.S. agricultural exports to Colombia now enter duty-free right away. This includes wheat, soybeans, and top-quality beef, with almost all taxes on other farm goods going away in 15 years.
- Economic Impact: The agreement will boost U.S. exports by more than $1.1 billion and grow the U.S. economy by $2.5 billion, helping save thousands of jobs. It also opens up Colombia’s $166 billion service market for more U.S. business chances.
- Complementary Economies: The agreement highlights the complementary nature of the U.S. and Colombian economies, facilitating trade in grains, tropical fruits, cotton, yarn, and fabric, which are used in Colombian apparel exports to the U.S.
2. Virginia’s Port Volume Increase Tax Credit
Benefiting manufacturing, distribution, agriculture, and mineral and gas companies, this credit encourages utilizing Virginia’s port facilities. Companies increasing usage by 5% over the previous year’s cargo volume can receive over $50 per TEU (twenty-foot equivalent unit). By leveraging this credit, manufacturers can enhance their export capabilities and reduce shipping costs.
3. Virginia Investment Partnership Grant (VIP)
Designed to encourage capital investment, VIP targets manufacturers or research and development companies. It supports added capacity, modernization, increased productivity, and advanced technology utilization. By accessing VIP grants, small manufacturers can invest in machinery, infrastructure, and workforce development, boosting competitiveness in global markets.
How GENEDGE Can Help Your Business Thrive in International Markets
Navigating the complexities of international trade and maximizing the benefits from Free Trade Agreements (FTAs) can be challenging for Virginia’s manufacturers. GENEDGE’s Alliance Emerging Business Program serves as your small business operations manufacturing guide — providing tailored advice on leveraging these agreements for your benefit and identifying opportunities to expand your markets.
Whether understanding tariff reductions or capitalizing on Virginia’s strategic incentives, GENEDGE has the resources and tools for small and mid-sized manufacturers to elevate business to the global level. Get a free assessment from GENEDGE today and start your journey toward international success.
