EU-Singapore FTA a cushion against Covid-19

AT a time when trade is expected to dwindle in the face of a global health crisis, Singapore appears to be beating the odds when it comes to trading with the European Union (EU).

In April, the World Trade Organization estimated that world trade could plummet by 13 to 32 per cent due to disruptions brought by the ongoing Covid-19 pandemic.

But Singapore's Ambassador to the EU, Jaya Ratnam, says that merchandise trade between the EU and Singapore decreased by a far lower proportion of 4.4 per cent "at the height of the pandemic" between January and May 2020.

"This was significantly smaller than the EU's drop in trade with the rest of the world, which fell by almost 13 per cent in the same period," says Mr Ratnam in an interview from Brussels, where he is based.

At the same time, Singapore's exports to the EU grew by 12 per cent in the six months since the EU-Singapore Free Trade Agreement (EUSFTA) came into force on Nov 21 last year, a timing that Mr Ratnam has called "providential".

"A few months after its implementation in November 2019, the effects of Covid-19 started to take its toll, and now we are in the midst of a substantial crisis in terms of trade and investment flows," Mr Ratnam says.

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"In that regard, the FTA has proven to be actually extremely timely and effective in cushioning the impact of Covid-19 and providing some ballast on the trade between EU and Singapore."

Singapore's growing exports to the EU are driven by a number of factors, Mr Ratnam says, with one key area being biomedical and pharmaceutical exports to the bloc.

"This also reflects not just the FTA but our broader policy, in terms of ensuring that Singapore always provides a safe regulatory framework for our investors to operate. Unlike many other countries, we did not impose import and export restrictions," he says.

The EUSFTA has been a long time coming. While negotiations were launched in 2009, Mr Ratnam says preparations behind the scenes have gone on for more than two decades.

He recalls the day he met his predecessor four-times removed when he first took over the role in Brussels, the de facto capital of the EU, in 2016.

"He was here in the late 1990s, he's retired and he's doing a road trip in Europe. We had a beer, and he asked what keeps me busy. I said, 'The FTA', and he said, 'Oh, me too, in the 1990s'," Mr Ratnam says with a laugh.

"It has been so much a part of the picture in our relationship," he says.

The EU had plenty of suitors looking to seal an FTA with the bloc - many were larger countries with outstanding trade issues, Mr Ratnam says, which means getting Singapore to the head of the queue was a challenge.

But Singapore positioned the EUSFTA in two ways, he says, first emphasising the compelling value in terms of the agreement itself, and secondly for its strategic relevance in terms of the EU's strategy towards Asia and Asean.

"In the early 2000s, it would have been a less obvious argument, but as the world's geopolitical and geo-economic centre shifts towards the Asia Pacific, that argument clearly gained salience," he says.

"And we were there. Because we made our case early and made our case so repeatedly," he adds.

Mr Ratnam also pays tribute to a group of European parliamentarians dubbed "Friends of Singapore" for helping to realise the EUSFTA.

This is a group of about 20 to 30 Members of the European Parliament (MEPs), who have an interest in Singapore and the region and are keen to develop their relations here, he says.

"So we use them as a platform to engage the much wider European parliamentary system. In effect, they become our ambassadors because they understand our issues and they also convey issues which they feel are important to them and seek to understand how we can address them," he says.

It helps Singapore to navigate the complex European Parliament, which currently has 705 members and is made up of multiple interest groups, he says.

In the time since the EUSFTA was signed in October 2018, the EU also signed an FTA with Vietnam in June the following year.

It is an indication that the EUSFTA is living up to its promise of being a "pathfinder", Mr Ratnam says, noting that the EU is now "actively pursuing several other FTAs with other Asean member states.

It is also hoped that the EUSFTA can also serve as a pathfinder for a possible Asean-EU FTA, which Singapore has been pushing for, he says.

"When you're looking at relationships, it's not about the rhetoric. It's about interests at the end of the day that will drive it," says the ambassador.

For him, one key takeaway from this exercise is that the EU recognises Singapore's value proposition as a partner, and that is not something that the Republic, as a small country, can take for granted.

"What we have established is a strong foundation, not just of the legal foundation as evidenced by the FTA, but a strong foundation of trust and understanding. That actually provides us with the basis to move forward."

As a symbol of trust, the EUSFTA creates opportunities for both Singapore and the EU to pursue similar shared interests in sustainability and the digital agenda.

Singapore recently concluded digital economy partnership agreements with New Zealand and Chile as well as Australia, and Mr Ratnam says Singapore is interested to see how similar agreements can be explored with the EU.

"The EU is an obvious partner - this is an area in which they excel in - in terms of how both sides can align digital rules and standards, enhance cooperation in digital areas such as data flows, AI (artificial intelligence) and digital identities," he says.