SINGAPORE - Singapore signed a free trade agreement (FTA) with the United Kingdom on Thursday (Dec 10) to ensure that companies from both countries continue to enjoy the same benefits that they are receiving under the Republic's FTA with the European Union.
The agreement will cover more than £17 billion (S$30.4 billion) of current bilateral trade in goods and services.
The two countries also agreed to assess the modules of a UK-Singapore digital economy agreement (DEA), with a view to launching negotiations on the DEA in 2021. They also committed to start talks on and conclude an investment protection agreement within two and four years respectively of the FTA's entry into force.
The FTA was signed in Singapore by Minister for Trade and Industry Chan Chun Sing and UK Secretary of State for International Trade Elizabeth Truss.
Speaking at the event, Mr Chan noted that the UK is Singapore's third and second-largest trading partner for goods and services respectively, as well as its top investment destination in Europe. In turn, Singapore is the UK's largest trade and investment partner in South-east Asia.
As the first FTA between the UK and an Asean member state, it represents the UK's deepening engagement of the region, and provides British businesses a platform to access opportunities in the region through Singapore, said Mr Chan.
"In these volatile times, the UKSFTA provides Singapore and UK businesses the certainty they need to find and access new growth opportunities," he added.
The deal's immediate and tangible benefits include tariff elimination for 84 per cent of all tariff lines for Singapore exports to the UK upon the UKSFTA's entry into force, with virtually all remaining tariffs eliminated by Nov 2024 - the same timeline under Singapore's FTA with the EU (EUSFTA), said Mr Chan.
It will also enhance market access for Asian food products made in Singapore, such as har gow (prawn dumplings) and sambal ikan bilis (spicy crispy anchovies), he added.
"We hope this will allow our UK friends to try more of our distinctive Asian food products," said Mr Chan.
Ms Truss, in an interview with The Straits Times, said the FTA will come into force on Jan 1 next year, which is when the UK leaves the transition period for its exit (Brexit) from the EU.
"We want to secure a Canada-style deal with the EU, but if we are not able to secure that we will trade with the EU on Australian style terms. Neither of those, two arrangements will affect the deal with Singapore, the deal with Singapore is done," she said in the interview.
A Canada-style pact will get rid of most but not all tariffs, while an Australian-style agreement is basically no trade deal at all and will fall back on World Trade Organisation terms.
The Ministry of Trade and Industry (MTI) in a statement issued after the signing of the FTA said the benefits of the UK-Singapore FTA include tariff elimination for goods trade, and increased access to respective services and government procurement markets.
The FTA will provide Singapore and UK companies with certainty and clarity in trading arrangements between both countries by reducing non-tariff barriers in at least four major sectors - electronics, motor vehicles and vehicle parts, pharmaceutical products and medical devices, and renewable energy generation.
The trade deal will also support the regional operations and supply chains of companies in the UK and Singapore.
In line with the current arrangement under the FTA with the EU, companies in UK and Singapore can continue to use materials and parts sourced from the EU-27 and Asean in their exports to each other's markets - dubbed as Asean cumulation.
Similar to the EUSFTA, the UK-Singapore FTA requires Asean countries to provide undertakings of cooperation and compliance in order to allow for Asean cumulation.
Once the relevant cumulation arrangements are put in place, Singapore exports using Asean materials and parts can qualify for preferential tariff treatment when entering the UK.
"This will strengthen Singapore and the UK's roles as business hubs in our respective regions," MTI said.
As the first FTA between the UK and an Asean member, the UK-Singapore FTA will also serve as a pathfinder for the UK's engagement of the Asean region, said MTI.
The proposed UK-Singapore DEA will also serve as such for modern rules on digital trade and financial services between Europe and South-east Asia.
"It (DEA) will facilitate more seamless digital trade and business between the UK and Singapore by promoting cross-border digital connectivity and interoperability of digital standards and systems," MTI said.
The UK has indicated its interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Singapore supports and welcomes.
In addition to the FTA, the UK and Singapore have also committed to commence negotiations and endeavour to conclude a high standard investment protection agreement within two and four years respectively of the UK-Singapore FTA's entry into force.
"This will ensure that bilateral investments are covered by robust and up-to-date treaty safeguards, as well as provide businesses and investors with the certainty of investment protection," MTI said in its statement.
Singapore and the UK will now work on their respective ratification processes for the entry into force of the UK-Singapore FTA, MTI said without giving a timeline for the ratification process.
Mr Ho Meng Kit, chief executive officer of the Singapore Business Federation, said the FTA will allow businesses here to enjoy greater certainty and assurance after Britain's exit from the EU.
"However, businesses should note that UK's independent trade regulations may differ from that of the EU's. They will also need to ensure that they comply with changes in UK's domestic standards and Customs procedures," he said.
"We look forward to working with both governments to support businesses coping with these changes, particularly those which may be using the UK as a hub to re-export to Europe or to offer services to EU customers."
The British Chamber of Commerce Singapore said on Thursday that having this agreement in place at this time will "provide a sense of confidence for the business community, so that they may make critical decisions, strengthen their workforces, invest for the future and continue to grow".