Singapore: Free Trade Variations

2002

Professor Richard Broinowski

During its first four years in office, the Howard government was reluctant to negotiate bilateral free trade agreements (FTAs). Like Keating before him, Howard saw multilateral arrangements as the main game, against which FTAs were seen as a distraction. Thus Howard refused opportunities in 1996 to negotiate FTAs with Canada and Chile. The only exception was the Closer Economic Relations (CER) package with New Zealand, concluded in 1997.

But governments were becoming impatient with the slow progress of negotiations under APEC and the WTO. As alternatives, bilateral arrangements were sought between Japan and the Republic of Korea, and between Canada, Chile, New Zealand, Singapore, and the United States in bi-, tri-, or even quadrilateral arrangements. So far, little has come of these trans-Pacific negotiations. Refusal by the United States Congress to renew the Executive’s ‘fast track’ negotiating authority has been one of the main impediments. Nonetheless, the trend towards bilateralism is strong, and is likely to continue.

Since the end of 2000, the Australian government has begun to respond to the new realities, and there are prospects that Australia will negotiate FTAs with Singapore, Thailand, and, eventually, the United States.

Negotiations with Singapore began in November 2000 and, in spite of delays, are the closest to finalisation. Australian Trade Minister Mark Vaile has announced that Singapore and Australia expect to sign their FTA in the next few months. Agreement was delayed by elections in both countries, and by the effects on international commerce of the terrorist attacks on the New York World Trade Centre on 11 September 2001. But these are not the only impediments. Singapore has been negotiating a tough line on services – it does not recognise Australian legal and architectural qualifications, nor certain Australian insurance standards. It also insists that products with only 40 per cent made-in-Singapore content should be allowed as duty-free imports into Australia. (New Zealand agreed to 40 per cent, but Australia is holding out for 60 per cent). Australia wants access to niche areas in Singapore for its telecommunications equipment, but Singapore, despite obtaining a major shareholding in Optus from Cable and Wireless in 2001, is resisting, seeking to protect Singtel’s monopoly.

Still on hold are prospects for some kind of trade integration between CER and the ASEAN 10. Any arrangement is likely to fall short of an FTA, but it would certainly widen the web of bilateral and regional trading arrangements to which Australia has to turn as alternatives to the WTO. It is significant that of the world’s 100-plus FTAs, agricultural-protectionist Japan is party to only one – with entrepot Singapore.

WATCHPOINT: Both Singapore and Australia have much to gain from genuinely free trade. Political considerations may stand between them and an agreement for longer than expected.

 

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