Benefits of Asia-Pacific Free Trade Area for ASEAN and Singapore

Mr Christopher de Souza asked the Minister for Trade and Industry how will the establishment of a free trade area within the Asia Pacific region benefit ASEAN and Singapore economically.

Mr Lim Hng Kiang: At the APEC Summit held in Beijing in November last year, APEC Leaders 1 endorsed a roadmap towards a Free Trade Area of the Asia-Pacific (FTAAP). As part of the roadmap, a collective strategic study will be done on how to realise the FTAAP. The study will look into the details of the FTAAP, including its membership, scope and coverage. The study is due for completion at end-2016 and will better inform us of the shape the FTAAP will take 2 . The extent of the FTAAP’s economic benefits would depend on the scope and ambition of its negotiated outcome.

Notwithstanding this, regional trade agreements like the FTAAP, will naturally bring economic gains to Singapore and ASEAN. I outlined some of these in my response to Mr de Souza’s Question No 42 on the Order Paper for the sitting on 19 January 2015, on the benefits of an ASEAN Economic Community (AEC). Like the AEC, the FTAAP will facilitate and enhance the flow of goods, services and investment. Tariffs and other trade barriers would be reduced. Trade rules would be improved for an environment that better supports businesses. Our companies would thus be able to operate with reduced costs and greater certainty. Our region would be even more attractive to investments. Our citizens would benefit from having more choices and jobs created.

With the FTAAP linking economies from both sides of the Pacific, Singapore and ASEAN would have a further expanded economic space. This means greater trade and investment opportunities. The FTAAP would offer a potential market of more than 2.8 billion people 3 . The Asia Pacific market is significant to Singapore and ASEAN. Singapore’s trade with APEC economies currently stands at more than USD560 billion (or more than 70% of Singapore’s total trade) 4 . ASEAN’s trade with APEC stands at almost US$2 trillion 5 . Singapore’s investments in the APEC region account for more than 60% of our outward investments. More than one-third of foreign direct investment in Singapore comes from APEC economies 6 . An FTAAP, when realised, will further enhance this.

In addition, an FTAAP ensures that major economies, like the US and China, continue to have an economic and strategic stake in the continued prosperity and stability of our region.

Note(s) to Question No(s) 17:

1 The 21 APEC economies are: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Peru, Russia, Singapore, Chinese Taipei, Thailand, the US, and Vietnam.

2 Singapore has FTAs/RTAs (either in existence or under negotiation) with all the APEC economies, except for Russia and Papua New Guinea (PNG). We would thus already enjoy benefits from these FTAs/RTAs. Nonetheless, the value-add of an FTAAP would be an agreement with all APEC economies in a single trading bloc. The configuration of the FTAAP has, however, not yet been decided. It remains uncertain if it will include all the APEC economies and what the breadth and depth of commitments would be – details which the collective strategic study is expected to address.

3 Source: "RCEP and TPP: Possibility of Convergence for a FTAAP?" by Sanchita Basu Das (Fellow and Coordinator, Singapore APEC Study Centre, Institute of Southeast Asia Studies), published by the Institute of Southeast Asia Studies (ISEAS). Most FTAAP studies assume that its membership would consist of APEC member economies, which currently covers 40% of the world's population of 7 billion. If the FTAAP is an amalgamation of the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP), it would include non-APEC economies such as India, Cambodia, Lao PDR and Myanmar. The coverage would then increase to 55.6% of the world's population, or 3.9 billion people.

4 Source: IE Singapore, 2013 Data

5 Source: Direction of Trade Statistics, International Monetary Fund (IMF)

6 Source: Department of Statistics, Singapore, 2013 Data