EU Update – European Union and Singapore Initial Free Trade Agreement
- The establishment of a free trade area between the EU and Singapore is expected to have significant benefits for Singapore and EU companies. Annual EU exports to Singapore could rise by EUR 1.4 billion over 10 years and annual exports by Singapore companies (including EU companies based in Singapore) could rise by EUR 3.5 billion.
- Key arrangements include elimination of customs duties and relaxation or elimination of regulatory and technical requirements and further market liberalization.
- The agreement also provides for consolidation of existing protection of Intellectual Property, standards of labour and environmental law, promotion of sustainable development and an improved dispute resolution mechanism.
- This agreement may act as a catalyst for the establishment of more free trade areas between the EU and ASEAN member states, and in the long-term an agreement between the EU and all ASEAN countries.
The European Union and Singapore have initialled an agreement to establish a free trade area between the EU and Singapore after several years of negotiations. The EU-Singapore Free Trade Agreement (“EUSFTA”) is expected to enter into force in late 2014 or early 2015 and will give Singapore and EU companies further access to each other’s markets.
The EUSFTA is expected to have significant benefits for Dutch and other EU companies exporting products or services into Singapore, as well as for companies that have operations in Singapore (including Dutch and other EU companies) and import into the EU. The EUSFTA will also benefit the services industry, with improved possibilities to penetrate the Singapore market, re-establishing a level playing field with other foreign industry players.
Under the EUSFTA, there will be enhanced public procurement opportunities which should increase business opportunities in various sectors in which Dutch companies are active around the world. The EUSFTA is also considered an important step towards bilateral free trade agreements between the EU and other ASEAN member states.
This Legal Alert highlights the EUSFTA’s main features.
Trade barriers removed: best treatment approach
Free trade agreements remove trade barriers by eliminating customs duties, relaxing or eliminating regulatory and technical requirements and liberalising markets. The EU and Singapore, under the EUSFTA, are to grant each other favourable arrangements at least on par with comparable free trade agreements. Some of the key arrangements are outlined below.
Elimination of customs duties:
- The EU is to eliminate virtually all customs duties for imports from Singapore within five years, with 75-80% of the duties being eliminated when the EUSFTA enters into force. Currently, approximately half of the imports from Singapore into the EU are free of customs duties.
- Singapore is to continue the existing status of no customs duties on most EU imports into Singapore and eliminate remaining customs duties, such as the current customs duties on beer. Singapore, as part of its open economy strategy, already unilaterally applies no duties to most imports. The EUSFTA will provide comfort to EU exporters that this situation will not change.
Relaxation or elimination of regulatory and technical requirements and further market liberalisation:
- Further access to the services market for both Singapore and the EU, including for the financial and insurance sectors, engineering and maritime transport
- Mutual recognition of technical standards and certifications in different areas, such as cars, electronics and green technologies; and reduction of technical barriers to trade, including beneficial rules on marking and labelling, reducing the barriers and associated costs
- Simplification of customs procedures and rules of origin, reducing trade transaction costs, while improving cooperation for the safety and security of legitimate trade
- Re-evaluation and updating of Singapore’s import approval procedures for raw or processed products of animal and plant origin, in particular meat
- Greater transparency over the award of licences
- Improved transparency on pricing of / reimbursement for pharmaceutical products
- Improvement of level playing field through rules on competition, including antitrust and state aid, and avoidance of detrimental licensing requirements affecting market accessibility and competition
- Widening of access to public procurement, expanding parties’ existing commitments under the WTO
- Government Procurement Agreement
The EUSFTA also provides for:
- Consolidation of existing protection of Intellectual Property, and agreement on the basic rules of (noncriminal) enforcement; and better protection for geographical indications (GI) for European products in Singapore
- Detailed arrangements regarding standards of law in the area of labour and the environment
- Promotion of sustainable development including corporate and civil social responsibility
- An improved dispute resolution mechanism, reducing time required and increasing transparency
Significant economic benefits for EU and Singapore companies
Singapore, with a population of 5.3 million, accounts for approximately one-third of all the trade between the EU and the ASEAN countries, making Singapore the EU’s largest trading partner in ASEAN (which has a consumer base of some 600 million people). There are more than 9,000 European companies established in Singapore. In 2012 the EU was the second largest trading partner of Singapore (after neighboring Malaysia) with an 11% share of Singapore’s total trade.
The Netherlands is an important economic partner to Singapore. Dutch companies in Singapore are involved in a wide range of industries, such as electronics, fast-moving consumer goods, food processing, oil & gas, chemicals, engineering, transport, financial and other services. In 2012, the Netherlands was Singapore’s third largest trading partner in the EU.
An economic analysis prepared by the Chief Economist Unit of the European Commission’s Directorate General for Trade states that as a result of the EUSFTA the annual EU exports to Singapore could rise by EUR 1.4 billion over 10 years and annual exports by Singapore companies (including EU companies based in Singapore) by EUR 3.5 billion.
Expected catalyst for free trade agreements with other ASEAN member states
The EU and ASEAN countries started discussions on a free trade agreement in 2007. Following slow progress the EU abandoned discussions in 2009 and started pursuing bilateral agreements. The EU is currently pursuing negotiations on bilateral free trade agreements with ASEAN members Malaysia, Thailand and Vietnam. The detailed arrangements negotiated between the EU and Singapore can be expected to assist those negotiations, acting as a catalyst for the establishment of more free trade areas between the EU and ASEAN member states, and in the long-term an agreement between the EU and all ASEAN countries.
The draft EUSFTA is currently being translated into all official EU languages and will then be submitted for approval / ratification by the relevant authorities of the EU and Singapore.
The EU and Singapore are currently still negotiating arrangements on investment protection. The initialed version of the EUSFTA already includes an empty chapter for this topic and parties intend to include the outcome of these negotiations in the EUSFTA before it enters into force.