IT may have taken over five years of negotiations and has been as hailed as a historic accord, but in welcoming the Trans-Pacific Partnership (TPP) agreement, Singapore economists and business leaders were also quick to point out the challenges and issues that remain.
For one, the deal still has to be ratified in all 12 countries (comprising Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam). And even when that happens, Singapore companies - particularly smaller-sized firms - will have to get up to speed on the TPP's terms, in order for meaningful gains to be made.
Its impact on Singapore is also expected to be relatively muted in the short run, especially since the Republic already has existing free trade agreements (FTAs) with all but two of the 11 other countries (Mexico and Canada). In addition, China's absence from the TPP will limit the deal's influence, say observers.
Even so, the landmark deal has been hailed as the biggest trade agreement in history. According to the International Monetary Fund (IMF), the 12 TPP countries represent a massive market for Singapore businesses. Together, they boast a population of 800 million and a combined GDP of around US$30 trillion - amounting to 40 per cent of global GDP.
Referring to the conclusion of negotiations as "a historic moment", Prime Minister Lee Hsien Loong said in a Facebook post on Tuesday: "The TPP is an ambitious free trade agreement ... Our exporters will have better market access to these countries, and investors can expect a more open and level playing field. The agreement will open up more opportunities for SMEs (small and medium-sized enterprises) in TPP countries, and make it easier for them to do business. In the long run, our people will enjoy greater prosperity and more jobs."
Indeed, in eliminating or at least reducing tariffs and other barriers to trade, the new pact will boost trade and investment flows for Singapore. In 2013, the TPP countries accounted for 30 per cent of Singapore's total goods trade, worth S$300 billion, and 30 per cent of foreign direct investment in Singapore, amounting to S$240 billion.
Business groups were cheered by news of the deal, highlighting the TPP's future role in opening up new opportunities, and improving business conditions in the region. Said the Singapore Business Federation (SBF): "More importantly, it could effectively help to address the 'behind the border' issues which many businesses face in today's complex environment."
Economists were also optimistic about the positive spillover effects that the TPP might bring, albeit more reservedly.
Noting that current economic sentiment is still sluggish, OCBC's Selena Ling believes that the agreement's effect will be muted and will not spur a big pickup in trade. "But in the long run it can only be good for Singapore. Singapore has a fairly open trade regime - the more access there is, the better it is."
CIMB's Song Seng Wun thinks that although Singapore will not benefit greatly from it, it can stand to gain by providing intermediary services that facilitate trade between partners. "Trade needs to be facilitated by banking or legal services, which Singapore is good at."
Said Credit Suisse economist Michael Wan: "I would say that the TPP is more than just symbolism - there's a net gain to trade, a net gain to GDP."
But the deal "is not just about economics", stressed Victor Mills, chief executive of the Singapore International Chamber of Commerce (SICC).
He told The Business Times: "It might seem to some people that Singapore has very little to gain (given its many existing FTAs). But I think that would probably be to ignore the bigger picture ... Assuming the TPP is ratified, it will anchor the US to the Asia- Pacific. This strategic imperative has always been part of Singapore's foreign policy from independence onwards.
"If the US is going to evidence its pivot to Asia, it needs to ratify the TPP - because then it has even greater skin in the game in ensuring free navigation of the seas, and balancing the rise of China as a superpower. That is to ensure peace and stability in the region - these are not motherhood statements; these are imperatives."
Still, Mr Mills emphasised his view that ratification is going to be significantly tougher than the already tense negotiations. "Especially in the US, the ratification process is likely to be hijacked by the upcoming presidential election. There will be all sorts of bumps along the road to ratification."
Economists such as Mr Wan and Barclays's Leong Wai Ho also picked at the TPP's limited impact, given its exclusion of China and India. The two giants are expected to become the world's largest and third largest economies respectively by 2030.
Still, Eugene Lim, head of Asia Pacific Trade & Commerce Practice at Baker & McKenzie, noted: "It would have been better if China was in the TPP, but without the TPP, Singapore already has preferential market access into China under the Asean-China FTA and the Singapore-China FTA ... That said, the TPP does provide for the ability of new countries to join the pact."
As a strong proponent of free trade, Singapore currently has 21 FTAs and Economic Partnership Agreements (EPAs) in force with 32 economic partners. These collectively account for 80 per cent of exports.
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