FAQs ON FTAs

What difference will TPP make for Singapore?

Dairy farmers walking their cows past milk thrown on the street during a protest against the Trans-Pacific Partnership (TPP) trade agreement in front of Parliament Hill in Ottawa, Canada, in late September. Liberalising farming sectors is a hot issue
Dairy farmers walking their cows past milk thrown on the street during a protest against the Trans-Pacific Partnership (TPP) trade agreement in front of Parliament Hill in Ottawa, Canada, in late September. Liberalising farming sectors is a hot issue and Canada agreed to open up only a small percentage of its dairy market. PHOTO: REUTERS

The vast majority of people think of free trade agreements from the point of view of consumers. In other words: "Will anything become cheaper?" But those holding out for prices to fall will probably be disappointed.

Economists and experts Insight spoke to, like NUS economics associate professor Davin Chor, agree it is unlikely "that we will see goods becoming significantly cheaper or the new entry of brands into Singapore as a result of the TPP".

This is because the country already has a very open economy, and so additional pacts do not open the floodgates for new goods and services to enter in dramatic fashion.

NEW COMPETITION

In the past, Singaporean firms might have had an advantage with their FTA benefits.  However, now competition in some TPP countries could come from new firms.

DR DEBORAH ELMS, executive director of the Asian Trade Centre

The TPP, struck after more than five years of intense talks, will give Singapore businesses new levels of access to 800 million consumers in 12 countries that represent one-third of global trade.

Apec secretariat executive director Alan Bollard adds that because Singapore businesses have "always been quite good at going into difficult markets and finding ways to operate there", he does not see sudden and big movements of capital or reinvestments.

Still, Association of Small and Medium Enterprises president Kurt Wee sees opportunities ahead.

He says that "increasingly, there is a slant to open procurement more to SMEs" by regional governments. This trend dovetails with the TPP's aim of liberalising the tender process of state contracts.

For local businesses already leveraging Singapore's existing FTAs to enter overseas markets, a giant free trade zone created by the TPP could potentially lead to greater competition as other firms rush in to what are new markets for them.

Says Dr Deborah Elms, executive director of the Asian Trade Centre, which does research on trade activities in Asia: "In the past, Singaporean firms might have had an advantage with their FTA benefits.  However, now competition in some TPP countries could come from new firms."

SIM University senior lecturer Walter Theseira also points out that fears about the TPP will most likely revolve around overseas talent coming here and vying for the same jobs as Singaporeans.

"The area Singaporeans tend to be more concerned about is competition from foreign labour, not competition from foreign imports."

But such worries are unfounded as "the TPP should not significantly curtail our ability to formulate and implement foreign labour policy as we see fit".

This is because other TPP countries have "labour market policies that are significantly more restrictive than Singapore's" and so will not agree to "effective significant liberalisation in labour".

Another advantage of the TPP is that it is "anchoring the US economically to the region", says Ms Sanchita Basu Das of the Asean Studies Centre at the Iseas-Yusof Ishak Institute.

"This is of high strategic value to Singapore because of fast-rising China," she says.

And although Singapore already has free trade agreements with all of the TPP countries except Canada and Mexico, and other regional deals through Asean, they "do not have the same depth and breadth of commitments" as the TPP, says Dr Elms. This is because the TPP opens up more sectors than any of Singapore's previous FTAs, she explains.

Also, products assembled by Singapore companies from components sourced from Asean cannot be shipped into the US, Canada or Mexico under the current rules. But when the TPP goes into force, "parts and components can be added from across all 12 countries for shipment into the 12 markets", Dr Elms says.

Canada and Mexico will also eliminate tariffs on 99 per cent and 96 per cent of Singapore exports respectively, according to the Ministry of Trade and Industry. This includes pharmaceutical exports to Mexico, which currently incur a tariff of 10 per cent to 15 per cent.

As for the fine details, Dr Bollard says the full text - comprising a weighty 30 chapters - has just been released and analysing it will take some time.

But the TPP has been touted as a model to emulate for "next-generation" agreements.

Unlike conventional trade pacts that focused more on the movement of goods across borders, the TPP covers more complex areas such as intellectual property, state enterprises and dispute resolution.

"So in that sense it should be the gold standard but we've got to test that, we're not sure yet if that's true."

A version of this article appeared in the print edition of The Sunday Times on November 15, 2015, with the headline 'What difference will TPP make for Singapore?'. Print Edition | Subscribe