The focus of Free Trade Agreements (FTAs) is to reduce trade and investment barriers between countries or regions. They are used to reduce import costs, increase export competitiveness, improve market access and generate investment opportunities.
In the case of trade in goods, FTA partner countries are expected to provide preferential treatment. This is done by lowering or eliminating tariff or customs duties and minimising non-tariff measures. This can be over and above the commitments under the World Trade Organisation (WTO) agreements.
Why should SMEs in Singapore care about FTAs?
Since the early 2000s, Singapore has been strengthening its trade internationally using FTAs. In turn this has provided SMEs opportunities to expand their businesses.
Singapore’s free trade agreements open up new markets for Singapore exporters by providing substantial reductions in cross border taxes (tariffs), greater market certainty in terms of rules of origin and documentation procedures, and a stronger commitment to opening up the services sectors.
Here’s some of the key benefits they provide for Singapore businesses:
- Tariffs: SMEs have gained greater market access due to a strong commitment bilaterally and regionally to manage taxes. Singapore exports has a competitive edge over other markets because of the wide range of tariff concessions and a deep commitment to help exporters. Savings from these preferential tariff concessions make exports from Singapore and FTA member countries more competitive compared with non-member countries.
- Non-Tariff measures: For real benefits to be derived from tariff concessions, FTA rules need to address non-tariff measures such as anti-dumping and safeguard measures, sanitary and phyto-sanitary measures and technical barriers to trade. This ensures that tariff savings are not negated by these non-tariff measures. In Singapore’s FTAs, commitments are given by the partners not to impose such non-tariff measures, unless in accordance with the FTA or WTO rules.
- Transparency and clear documentation requirements have led to cost savings. More online facilities and standardization of trade platforms has allowed rules of origin requirements to be streamlined and simplified.
Singapore’s Free Trade Agreements
In the graphic below we have outlined all 23 of Singapore’s currently implemented FTAs. This will give you a better idea of which one might be right for your business. Think of it as a quick reference guide.
You can find out if your product qualifies for tariff concessions and what its rules of origin are here.
Key Terminology
Free Trade Agreements can be confusing and difficult to understand because of the legalistic phrasing they use. To help you cut through some of the industry jargon, we’ve explained what some of the key terms mean below.
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- Tariffs – Tariffs are taxes imposed on goods moving from country A to country B. They are a schedule of duties imposed on foreign goods.
- Non Tariff Measures – Non-Tariff Measures (NTMs) have a very broad definition covering policy measures, apart from customs duties, that can have an economic and price effect on traded goods. They could include technical measures or commercial policies such as quotas and export restrictions.
- Certificate of Origin – A certificate of origin (CO) is an important international trade document confirming that the goods in a particular shipment have been wholly obtained, produced, manufactured or processed in a particular country. COs may be requested by importing countries’ Customs Departments, importers, freight forwarders or banks (for letter of credit clearance).
- ASEAN Cumulation – These are rules that allow certificates of origin for different materials to accumulate and qualify to tariff concessions. This is popular in regional agreements.
- Back to Back Shipments – The back-to-back Preferential Certificate of Origin (CO) is issued by the issuing authorities in the intermediate Free Trade Agreement (FTA) country for re-exports of goods, based on the Preferential CO issued by the first exporting party.
Further Learning
Over the past few years, it has become clear that companies in Singapore are not fully utilizing the benefits of free trade agreements to help them address their business challenges. Part of this is because FTAs can be difficult to understand.
But getting a clear understanding of Singapore’s free trade agreements is worth it because they bring many benefits; you can access new customers in foreign markets, tap into a whole new world of suppliers and reduce your costs by learning how to benefit from tariff concessions.
However, before you start the application process for tariff concessions under an FTA, it is important that you are comfortable and adept at using them. To help, we created a three hour interactive online course and certificate programme that will teach you all the essentials. You can find out more about the Free Trade Agreement Certificate here.
Contributors to this article:
With thanks to Maler Ratnam who helped us write this article. Maler is the Principal Trainer for Globalab, an enterprise provides training, lectures, consultancy and writing services for government and the corporate sector. One of their areas of core expertise is economic policy making and development (trade, SME and investment) strategies.
Maler is also the author of our online certificate programme, the Free Trade Agreement Certificate.
Maler Ratnam (Ms)
Principal Trainer and Director
Globalab Pte Ltd
Email: maler@globalab.biz
HP: +65 96995470