Singapore/Australia FTA: a closer look - free trade agreement - Cover Story

Business Asia, June, 2003 by Peter Yin

As trade barriers crumble and market liberalisation takes shape in the region, Australia stands at the forefront to grasp the opportunities created by a natural evolution of the new economy.

Singapore and Australia have entered an historic free trade agreement (FTA) that will pave the way for increased trade and investment, enhanced professional, financial, telecommunications and other services, and for greater intellectual property protection. SAFTA is the first bilateral trade agreement for Australia in almost 20 years, since New Zealand in 1983.

For Singapore, it comes hot on the heels of the FTAs Singapore has concluded with New Zealand, Japan and the European Free Trade Association, as well as commencing discussions with the United States in recent months.

The FTA will benefit not only the economy of the participating countries but also many business sectors, particularly Australia's service industry.

Benefits

The agreement will cover tariff free access for goods, improved market access for services (particularly telecommunications, financial services and professional services), and cooperation in areas such as e-commerce, education and customs procedures.

The benefits of FTAs on the member countries and the people, in terms of more trade and investment and employment opportunities, have been clearly demonstrated.

For example, under the North American Free Trade Agreement (NAFTA), which comprises the US, Canada and Mexico, Canada experienced:

* merchandise trade with the US soaring 80 per cent in the first five years of NAFTA, reaching $475 billion in 1998. Canada's merchandise trade with Mexico doubled over the same period to $9 billion; exports to the US and Mexico jumping 80 per cent and 65 per cent to $271.5 billion and $1.4 billion respectively; and

* Inbound investment from the US rising 63 per cent to $147.3 billion, while investment to Canada from Mexico tripled to $464 million. These substantial investment flows from the NAFTA partners accounted for 68 per cent of the direct foreign investment into Canada.

Strong relationship

Australia and Singapore have traditionally had a strong strategic relationship based on long-standing political, defence, educational, trade and tourism links.

Singapore is Australia's seventh most important destination in terms of merchandise exports, bringing in over $4.9 billion in 2001-2. It is also a major source of merchandise imports, at around $4 billion in the same period. Singapore is our largest trade and investment partner in ASEAN.

The main advantage to Australian businesses will lie in the improved market opportunities and the "national treatment", with each country treating each other's service suppliers on the same terms as their own businesses.

Norm

FTAs must become the norm in today's global trade. They are a boon to the participating countries as the benefits of more trade, investment and employment enhance their respective economies. More trade means more business for cargo carriers.

As the air express industry leader and an ardent supporter of free trade and open skies, FedEx welcomes such free arrangements.

The SAFTA is a new golden opportunity for us to facilitate the expected growth in cargo traffic between the two countries through fast, reliable and real-time services. Opportunities for more cargo business are also opening up in ASEAN, in trade between ASEAN and other Asian countries, and Australia and New Zealand.

* Peter Yin is the regional vice president, FedEx South Pacific