Upgraded China-Singapore Free Trade Agreement Provides Expanded Market Access to China
On 12 November 2018, China and Singapore inked a deal to upgrade their bilateral free trade (FTA) agreement and expand the scope of the China-Singapore Free Trade Agreement (CSFTA), potentially deepening trade and investment between the two countries. The upgrade is poised to provide Singapore businesses with improved trade facilitation and expanded market access to China, as well as greater investment protection and simplified customs procedures.
The CFSTA came into force on 1 January 2009 and was China’s first FTA with another Asian country. Under the current CSFTA, 95 percent of Singapore’s exports to China are exempt from duties, while exports from China to Singapore are not subject to tariffs. The upgraded CSFTA will expand bilateral cooperation to the service sector, a crucial sector for Singapore which contributed over 70 percent of its GDP in 2017.
China has been Singapore’s largest trading partner from 2013. In 2017, total bilateral trade between the two countries reached S$137.1, which represented 14% of Singapore’s trade with the world.
Some of the key benefits of the upgraded CSFTA to Singapore and Singapore companies will include:
- Trade in goods – Improved Rules of Origin will allow more petrochemical and plastic exports from Singapore to qualify for tariff savings.
- Electronic Origin Data System (EODES) – Effective July 2019, traders will no longer be required to submit the Certificate of Origin in hardcopy format to China.
- Customs procedures and trade facilitation – Traders will enjoy increased efficiency and predictability in the areas of Release of Goods, Advanced Rulings and Express Shipments that go beyond the commitments in the World Trade Organization Trade Facilitation Agreement.
- Investment – Singapore investors will benefit from enhanced investment protection standards with a more robust Investor-State Dispute Settlement (SDS) mechanism and compensation clause. In addition, Singapore companies will gain from any future preferential treatment that China grants to other foreign investors.
- Trade in services – Singapore companies in the legal, construction and maritime services industries will be exempted from ownership caps in various parts of China.
The upgraded CSFTS will also include three new chapters in e-commerce, competition policy and the environment.
The e-commerce chapter details the commitment to develop an international regulatory environment to benefit the development of e-commerce. Several technical aspects of e-commerce such as electronic authentication, electronic signature, online consumer protection, and personal data protection, paperless trade and trade transparency are covered.
The competition policy chapter states that both countries will undertake to eliminate anti-competitive business practices, and will adhere to the principles of transparency, non-discrimination and procedural fairness in competition law enforcement.
The environment chapter ensures a mutual commitment to promote environment protection and sustainable development. The two countries also pledge not to promote trade and investment at the expense of reducing environmental protection levels, and not to manipulate environmental standards for trade protection purposes.
The signing of the CSFTA Upgrade strongly reflects China and Singapore’s commitment towards closer bilateral economic ties and the development of an open world economy. The upgraded CSFTA will take effect after both countries have ratified the CSFTA Upgrade Protocol.