Singapore signs FTA with Pacific Alliance bloc

A free trade agreement struck on Wednesday between Singapore and a bloc of countries comprising Chile, Colombia, Mexico and Peru is set to give the Republic greater access to what is collectively the world's eighth-largest economy, scrapping most tariffs on goods and allowing local companies to bid for government projects in the Americas.

The Pacific Alliance-Singapore Free Trade Agreement, or PASFTA, is Singapore's first direct FTA with the Pacific Alliance, a bloc with a combined gross domestic product of more than $2.6 trillion.

It caps negotiations that lasted more than four years, and is the first to be completed while the Pacific Alliance continues similar discussions with Australia, Canada, Japan and New Zealand.

More than 100 Singapore companies operate in the four countries, including e-commerce platform Shopee and high-tech software company Taiger.

"This is a landmark moment in Singapore's partnership with the Pacific Alliance. Our two regions are in fact more connected than people imagine," said Prime Minister Lee Hsien Loong in pre-recorded remarks for the 16th Pacific Alliance Summit on Wednesday. "We look forward to working with the Pacific Alliance to enhance our roles as nodes in our respective regions, to encourage greater interactions and collaborations."

In 2019, Singapore's total trade in goods with the alliance was $6.1 billion, a minuscule amount compared with the Republic's global trade of over $1 trillion that year.

But imports from the bloc include much-loved fruits such as avocados from Mexico and blueberries from Peru, as well as coffee from Colombia. In return, Singapore has exported machinery and minerals to Peru, turbo jets and gas turbines to Chile, and vehicle parts to Colombia.

The 25-chapter FTA seeks to create more opportunities for greater exchange, identifying agricultural trade, technology and infrastructure as possible areas of growth.

Under its current form, goods will be more smoothly processed at Customs, and Singapore service providers and investors treated as favourably as those from the bloc in Pacific Alliance countries.

Both Singapore and Pacific Alliance member states will also have to publish their government projects in a timely and non-discriminatory way, so that suppliers can submit a bid with enough time for preparation.

If ratified by all parties, the agreement is expected to have its most dramatic impact on exchanges between Singapore and Colombia, with which the Republic currently has no FTA. Some 85.7 per cent of tariff lines the nation of 50.8 million people now has on Singapore goods will be reduced or eliminated, the Ministry of Trade and Industry has estimated.

Colombia's Commerce, Industry and Tourism Minister Maria Ximena Lombana said the FTA is a milestone for the Pacific Alliance "as the biggest step in our integration with the Asia-Pacific region".

"We expect to attract Singaporean investors to the Pacific Alliance's extended market as a productive and export platform to the region. Reaching Singapore's market allows using regional inputs from different countries and enhancing productive regional chains," she said.

Colombian petrol company Ecopetrol, Mexican building materials supplier Cemex and Chilean mining firm Codelco are already in Singapore, and it is hoped their presence will encourage more Pacific Alliance companies to follow.

CIMB Private Banking economist Song Seng Wun said the deal's significance should be seen in the context of other FTAs that Singapore has signed over the years.

"It is part of the expanding and enhancing of our growing list of FTAs... We are a trading nation, so if we can make it as seamless as possible for trade and services to be channelled here... it's a win-win."