In October, Singapore and the European Union (EU) signed a milestone Free Trade Agreement (EUSFTA), which will grant tariff-free status for an estimated 80% of Singapore exports to the EU.
According to a guide on the EUSFTA published by Singapore’s Ministry for Trade and Industry (MTI): “The EUSFTA…marks the first bilateral FTA where Asian food products made in Singapore can enter the EU tariff free under liberal Rules of Origin (ROOs), up to a combined quota of 1,250 tons annually”.
The guide further clarified that the EUSFTA will include the concept of ‘ASEAN cumulation’ for Singaporean exports to the EU. This enables manufacturers in Singapore who utilize raw materials sourced from ASEAN countries to still qualify for tariff exclusions.
In addition, the guide noted that the EUSFTA is “the first bilateral FTA concluded by Singapore to have the concept of ASEAN cumulation in its ROO regime. Singapore will stand to benefit from the progressive elimination of customs duties on all qualifying exports to the EU once the FTA is fully implemented”.
All tariffs on eligible Singapore exports will be abolished gradually across a five-year transitional period. There will be three stages of tariff elimination: the first stage is effective immediately, where the EU will remove custom duties on 84% of Singapore exports. The second stage will be realized within three years, and encompass 90% of items including authorized produce and meats such as duck and liver. The third and final stage will come into operation within five years and include exports such as qualifying seafood, pork, and fruit. By the end of the fifth year, all customs duties will be completely eliminated for eligible Singapore exports.
Reciprocally, Singapore will offer immediate tariff-free access to all EU imports, inclusive of beer and stout. In addition, both parties have agreed not to increase any current duties or introduce new ones for items imported from the other side once the EUSFTA is effective.
The EUSFTA still has to be voted on by the European Parliament in 2019 before it becomes official. EU Ambassador to Singapore Barbara Plinkert said “with this agreement, the EU has made an important stride towards setting high standards and rules for the important and fast-growing South East Asian region”. MTI also highlighted that this will be the first-ever FTA concluded between the EU and an ASEAN country.
Globally, the EU is Singapore’s third biggest trade partner while the Republic is EU’s 15 largest. MTI disclosed that bilateral trade between the two sides was SGD 97 billion in 2013, accounting for approximately 10% of Singapore’s total international trade value.
On top of that, the EU is Singapore’s largest foreign investor with about 10,000 companies and SGD 227 billion worth of investments. On the flip side, the Republic is the second largest Asian investor in the EU after Japan.
Singapore Prime Minister Lee Hsien Long described the EUSFTA as “an ambitious trade deal, it is a high quality arrangement, and it is one which will fly the flag and encourage others, I hope, to do the same”. He added that Singapore is “prepared to transfer it over (to the UK too). If the UK were in the EU, it would apply…straight away”.