| |
01 Apr 2005
Singapore pushes for multilateral trade negotiations and bilateral free trade agreements to advance global trade.
|
| |
Beyond advancing Singapore's economic interests, FTAs help to build a web of strategic linkages for Singapore within and beyond the region.
|
| |
Trade cooperation has been an issue that has occupied the thoughts of many governments for decades. In Singapore's case, it has, since 1999, pushed for multilateral trade negotiations, as well as bilateral free trade agreements (FTAs), beginning with an agreement with New Zealand in 1999.
Singapore's approach has been to combine multilateral trade cooperation with bilateral relationships. It is felt that the latter can effectively complement the multilateral process to advance global free trade.
More importantly, beyond advancing Singapore's economic interests, intra- and inter-regional FTAs help to build a web of strategic linkages for Singapore within and beyond the region. They serve the broader interest of anchoring the presence of Singapore's major trading partners in South-east Asia by ensuring that they remain stakeholders in the country. These FTAs also help to sustain an open regional orientation and prevent the formation of inward-looking trading blocs. This web of interlocking economic and strategic interests will contribute to regional stability, prosperity and security.
The three basic components in Singapore's FTAs are the trade in goods, trade in services, and investment chapters. There may be additional chapters covering government procurement, intellectual property protection, competition policy and other cooperation measures.
Singapore strengthens US ties
- The US-Singapore FTA aims to cement the strong economic ties between both countries
- The agreement will significantly improve market access opportunities in the service sector by removing Singapore's restrictions on a wide range of services
The US and the Government of Singapore announced their intent to enter into negotiations for an FTA in November 2000, with the goal of developing a comprehensive, state-of-the-art agreement. Negotiations were launched in December 2000.
The US-Singapore FTA, which was concluded on 15 January 2003, kicked into operation with effect from 1 January 2004.
As the first FTA to be concluded between the US and an Asia-Pacific country, it was hoped that the US-Singapore FTA would cement the already strong economic ties between Singapore and the US. The agreement was more comprehensive in nature than other FTAs and has been described as the "gold standard" for its breadth and depth of coverage.
|
| |
|
|
FTAs empower Singapore as a competitive investment and export destination, which in the long run, will help create more jobs for Singaporeans
|
| |
| |
Economically, the trading relationship between the US and Singapore is of immense importance to both countries. The US is Singapore's second largest trading partner (after Malaysia) and the largest foreign direct investor, with cumulative investments in manufacturing exceeding S$26.4 billion (US$16 billion) at end-2001. In 2003, trade between the two countries amounted to S$62.6 billion (US$38 billion), accounting for nearly 14 per cent of Singapore's global trade.
As for Singapore, it is the US' 13th largest trading partner and second largest investor from Asia. The Republic is home to 1,500 US companies, over 300 of which have made Singapore their regional Asia Pacific headquarters.
Politically, Singapore views the US' presence as vital to the security and stability of Asia. This has become even more pronounced with the growing threat of terrorism.
The US-Singapore FTA sets out the duties and obligations of Singapore and the US, with respect to issues such as trade in goods and services, customs administration, temporary entry of business persons, competition and intellectual property protection. It also sets out the rules for administration and dispute settlement procedures.
The key purpose of the US-Singapore FTA is to facilitate trade, and thus, it involves the elimination of tariffs. Most tariffs on trade in goods originating from the two countries have been eliminated; the remaining tariffs will be phased out over the next three to 10 years.
Mitsui Chemicals (Japan, www.mitsui-chem.co.jp), which has a full-scale elastomer (a natural or synthetic rubber-like material) manufacturing facility in Singapore, benefited from a tariff reduction from 6.5 per cent to 4.8 per cent in 2004, and are looking forward to enjoy more cost savings with the complete elimination of tariffs by 2007.
Similarly, Barry Callebaut (Switzerland, www.barrycallebaut.com), which recently expanded its Singapore production line, will benefit from Singapore's favourable location. According to Mr Marc Donaldson, Managing Director, Barry Callebaut (Asia Pacific): "[It] is more efficient and cost-effective to freight our products to the West Coast of the United States from [Singapore], than to ship it across from the North American East Coast. From our base in Singapore, we have also been able to project a significant presence in North-east Asia. Sales in Japan have been growing steadily at eight to 10 per cent annually and sales in China are estimated to grow by 30 per cent in this fiscal year."
The US-Singapore FTA will significantly improve market access opportunities in the service sector by removing Singapore's restrictions on a wide range of services, including high technology and professional services sectors such as engineering, medical, information technology, environmental, legal, financial and distribution services. The agreement also provides explicit guarantees for electronic commerce and digital products, important protections for US investors, enhanced protection for intellectual property and firm commitments to combat illegal shipments of all traded goods.
As a testament to the effectiveness of FTAs, Singapore and the US announced recently that trade and investment between the two countries had increased by 10 per cent to S$66 billion (US$40 billion) in the first year of their FTA.
|
| |
 |
|
| |
Singapore's FTA partners collectively account for 60 per cent of the world's gross domestic product.
|
| |
Trade benefits
- More foreign service suppliers will set up operations in Singapore, creating more jobs and leading to a greater range of services
- Singaporean businesses will gain preferential access to overseas markets
As more foreign service suppliers set up operations in Singapore, consumers will enjoy greater choice in services, ranging from retail banking to education. Moreover, service standards are expected to improve with increased foreign competition.
The Singaporean consumer is also the Singaporean worker, and FTAs empower Singapore as a competitive investment and export destination, which in the long run, will help create more jobs for Singaporeans.
Additionally, as exports drive Singapore's economy - which is evident from the fact that the value of trade in Singapore is almost three times that of its gross domestic product - FTAs are negotiated with the primary aim of enhancing exports. With FTAs, Singapore-based companies will enjoy cost-savings from the elimination of customs duties and improved market access.
Cost savings are derived not only from tariff savings, but also from mutual recognition agreements, customs cooperation measures and the removal of onerous regulations. Both Singapore producers and service suppliers will enjoy "national treatment" - they will be treated like locals upon entering Singapore's FTA partners' markets. This and many other provisions in Singapore's FTAs are intended to help blaze the path of internationalisation for Singapore-based companies.
Finally, just as Singaporean businesses gain preferential access to overseas markets, Singapore's FTA partners will also enter Singapore more easily than before. Service suppliers are more likely to feel the impact of foreign competition. For example, Singapore's financial and legal sectors will undergo gradual liberalisation, and this will bring about increased competition.
This article is adapted from An Anatomy of an FTA Agreement - A Study of the United States-Singapore FTA by Ms Kala Anandarajah, Partner, Rajah & Tann and Ms Foo E Lin, Senior Associate, Rajah & Tann.
|
|
|
