The many benefits of the European Union-Singapore FTA

The landmark free trade deal can serve as a pathfinder for similar EU agreements with other Asean member states, says former European Parliament member David Martin.

Janice Heng
Published Wed, Dec 2, 2020 · 09:50 PM

IN the decade-long journey behind the European Union-Singapore Free Trade Agreement (EUSFTA), former Member of the European Parliament David Martin has seen the coming and going of trade ministers and ambassadors; the spinning-off of the investment protection elements into the EU-Singapore Investment Protection Agreement (EUSIPA); and even the agreements being cited in EU law.

As rapporteur for the EUSFTA and EUSIPA, he has had a front-row seat to proceedings, and a first-hand understanding of what kept the team going.

Singapore is an extremely important market in its own right, with over 10,000 EU companies here, he tells The Business Times in an interview. But of course, it is also crucial as a connection to the fast-growing region of South-east Asia.

One major perceived benefit for Europe, at the start of negotiations, was to get protection for geographical indications (GIs).

These identify goods - usually food or beverages - as being of specific geographical origin, where this is essential to the good's quality or reputation.

"We were aware that they largely didn't exist in Asia, with some exceptions," recalls Mr Martin. The United States, too, had and still has "serious reservations" about GIs. "So persuading Singapore to accept GIs was, for us, a big win."

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GIs are important for both sides, he adds. "Hopefully Singapore consumers, if it worries them, will know that their parma ham really comes from Parma," he quips.

"The reason they are so important to Europe, though, is it keeps jobs local. If you really have to produce a generic product in the region where it originally comes from, you keep the jobs there, and the jobs cannot go."

In turn, Singapore gained concessions in other areas: "So a lot of Singapore specialist foods, for example, now have access to the EU market where they didn't before."

Food products were one of the few areas where there were still tariffs and quotas, he notes. If Singaporean food products can enter Europe without tariffs, consumers in Europe can pay less for a taste of Singapore.

That all goes back to the point of trade and trade deals, he says: "It should generally create jobs, generally reduce prices, generally create more competition in public sector contracts and so on, and so should advance both the economy at the macro level and individual welfare."

The EUSFTA's benefits go beyond goods, of course. "We keep talking about goods and services. In actual fact, they are almost one, in many cases," he notes.

"If you sell a high-tech product, you have to service it - you have to send engineers to install it, you have to send people to train (the client) in how to use the product, and that's a service."

"I think what will benefit some Singapore companies is the fact that they can now attach service contracts to the products."

Apart from facilitating firms, the EUSFTA gives more opportunities to Singaporeans, making it easier for them to go to Europe to provide such attached services.

But the road to these accomplishments was not easy. One early stumbling block was some scepticism about Singapore's labour laws, and worries over labour exploitation.

"If people don't know Singapore well, there's sometimes ... a very false impression of what the economy's built on," says Mr Martin.

To correct this, Singapore engaged the European Parliament and explained its labour laws, tax system, and so on.

The Friends of Singapore group of European parliamentarians were also true to their name, doing work in Brussels as well as bringing groups here to show what was really happening in the Singapore economy.

Other snags had to do with the complexity of the EU. In 2011, the EU gained the right to negotiate investment agreements.

Investment protection was thus added to the deal. But that would turn the EUSFTA into a "mixed agreement", requiring extra ratification - so in the end, those provisions were hived off as the EUSIPA.

"Actually, it may not have been such a bad thing," muses Mr Martin. If the deal had gone to the European Parliament in its original form, it might have been voted down. "It wasn't the reason that the commission (hived it off), but it might have saved the day."

As the matter had been brought to the Court of Justice of the European Union, it became an important precedent. The judgement is now quoted in European law, regarding the division of competencies between the EU and member states.

Says Mr Martin: "Singapore probably didn't expect to be part of setting European law!"

The EUSFTA may set something of a precedent in other ways, too: as a pathfinder for EU agreements with other Asean member states.

"We see Singapore as a template for the rest of Asean," says Mr Martin. The potential gains are great. Unlike Singapore, where few tariffs remained even before the EUSFTA, there is plenty of scope to bring tariffs down with other countries.

Across the region, there are also major opportunities for European countries in areas such as public procurement and services, he adds.

Having the EUSFTA made it easier to conclude the EU-Vietnam FTA, which entered into force this August; in turn, the hope is that both the EUSFTA and EU-Vietnam agreement will make it easier for future deals with Malaysia, Thailand and others.

"Every set of talks is unique, of course. But if you can start with a general framework, it really does help the process," he says.

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