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What lies ahead for free trade?

The Trans-Pacific Partnership trade agreement struck after more than five years of intense talks will give Singapore businesses new levels of access to consumers in 12 countries.
The Trans-Pacific Partnership trade agreement struck after more than five years of intense talks will give Singapore businesses new levels of access to consumers in 12 countries. ST PHOTO: YEO KAI WEN

Although the conclusion of five years of negotiations on the Trans-Pacific Partnership last month was a considerable milestone, the hard work is far from done.

Each of the 12 countries in the pact will have to go through domestic ratification involving different branches of government.

This process is expected to be smooth in Singapore, where the deal must be approved by the Cabinet. Parliament must then pass legislative changes that may be required.

But observers point out that elements within the United States, Japan and Malaysia will put up varying degrees of resistance.

In the US, where Congress must ratify the TPP, prominent lawmakers have already voiced their dissatisfaction with the deal. Leading candidates for the presidential election next year, such as former secretary of state Hillary Clinton, have also come out against the TPP.

Other free trade initiatives besides the TPP are also afoot. A draft report on the Free Trade Area of the Asia-Pacific will be presented at the coming Apec summit, and the full report will be ready at next year's meetings in Peru.

On Nov 5, US President Barack Obama, who has pushed strongly for the TPP, officially signalled his intent to sign it, kick-starting a 90-day process for Congress to consider if it wants to approve the agreement.

The US, as the world's No. 1 economy, also "sets the timetable effectively" on when the TPP can come into force, says Dr Alan Bollard, executive director of the Asia-Pacific Economic Cooperation (Apec) secretariat.

This is because before the TPP can come into effect, enough economies representing at least 85 per cent of the total gross domestic product of the 12 signatories must have ratified it. Without the US, the other nations fall far short of the 85 per cent target.

Similarly, Asia Trade Centre executive director Deborah Elms says "the battle in the US will be tough" .

"Members of Congress do not see many benefits from voting on trade agreements and an election year in 2016 makes taking a tough vote even harder," she adds.

How soon the TPP can be implemented will also affect how fast other countries can join it. South Korea has expressed keen interest, while Indonesia and the Philippines have signalled they are open to such a move.

One glaring omission from the world's biggest trade deal is the world's second-largest economy, China. The reasons behind its exclusion are still uncertain, though it has been suggested that China will have difficulty meeting TPP standards on areas like government procurement. It is also unclear how Beijing views its exclusion. Its Ministry of Commerce said it took an "open-minded attitude" towards the TPP but made no overtures to be a part of it.

Meanwhile, those already in the partnership will have to start taking steps towards complying with the requirements stipulated in the TPP.

Most experts believe Singapore will have only minor adjustments to make compared with a country like Vietnam, which will have to work on its labour standards and relook its state enterprises.

But other free trade initiatives besides the TPP are also afoot. A draft report on the Free Trade Area of the Asia-Pacific will be presented at the coming Apec summit, and the full report will be ready at next year's meetings in Peru.

The study aims to examine the 150 or so trade agreements in the Asia-Pacific region and determine how compatible they are.

"We're pulling all those together to check just whether they are heading in the same direction or whether they conflict. Could there be some problems between them sort of hitting against one another?" says Dr Bollard.

A version of this article appeared in the print edition of The Sunday Times on November 15, 2015, with the headline 'What lies ahead for free trade?'. Print Edition | Subscribe