- POSTED: 21 Sep 2013 00:08
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The European Union-Singapore Free Trade Agreement (FTA) was initialled by the chief negotiators from both sides on Friday. Once the FTA enters into force in 2015, European beer could become cheaper for consumers in Singapore.
SINGAPORE: The European Union-Singapore Free Trade Agreement (FTA) was initialled by the chief negotiators from both sides on Friday.
The agreement could have several impacts on both economies once it enters into force in 2015.
European beer could become cheaper for consumers in Singapore because import tariffs levied on alcohol beverages will be removed.
Currently, without the FTA, around 65 per cent of EU imports already have duty-free access.
But restaurant Brussels Sprouts says the removal of import tariffs will translate to cost savings of just 25 Singapore cents for a 330-millilitre bottle of beer with an alcoholic content of 5 per cent.
That is because the bulk of the tax burden -- which is excise duty levied by the Singapore Customs -- still remains.
Co-owner of Brussels Sprouts Emmanuel Stroobant said: "The problem (with) transferring (the cost savings) to the end user or consumer will be that there are too many hands in the pie, so from an exporter from Belgium to an importer in Singapore to a distributor -- already 3 persons (involved). I don't know how it's going to be translated from our point of view, but what I think (it) will be interesting to look at will be how it will translate in the retail market."
Earlier on Friday, the chief negotiators from the EU and Singapore inked the legal text of the FTA.
According to analysis by the European Commission, the agreement could boost Singapore exports to the EU by S$5.91 billion (3.5 billion euros) over a ten-year period.
And EU exports to Singapore could rise by S$2.4 billion (1.4 billion euros) over the same period.
The analysis also estimates that as a result of the agreement, real EU GDP (gross domestic product) will grow by around 550 million euros over ten years, while the Singapore economy is expected to grow by 2.7 billion euros over the same period.
The disparity is due to the large difference in size between the two economies.
EU Chief Negotiator Rupert Schlegelmilch said: "If you look at some of our hard-hit economies in Europe, like Spain, one thing which is going well is exports. So trade is part of the recovery programme, and whatever we can do in the trade area -- by opening up further, by making it easier to have access to other markets, and also to be open to competition from third countries like Singapore, to have our economies made more competitive -- all of that helps. So it's a clear part of our strategy to revitalise and bring Europe back on the growth trajectory."
Singapore Chief Negotiator Keith Tan said: "If a company manufactures products in Singapore, but it imports its inputs and raw materials from ASEAN, it can count those ASEAN materials and inputs as if they were Singapore-originating and therefore this means that a larger number of Singapore products will be able to qualify for the concessions of the FTA."
The Ministry of Trade and Industry says that based on Singapore's latest bilateral trade figures in 2012, S$23.2 billion worth of Singapore goods representing 80 per cent of all EU tariff lines will qualify for immediate tariff-free treatment.
The remaining S$4.3 billion worth of Singapore goods representing 20 per cent of tariff lines will qualify at three or five years after the agreement enters into force.
But with the EU also exploring FTAs with Thailand, Malaysia and Vietnam, experts say it is a matter of time before some of Singapore's first mover advantage -- when it comes to removing tariff barriers on merchandise trade -- gets eroded.
Mizuho Bank senior economist, Vishnu Varathan said: "Some of these benefits that are derived, for example, the ability to get raw materials sourced from ASEAN - that may be on borrowed time, to the extent that neighbouring countries in ASEAN will also want to move up the processing chain, and they would also want to be involved in the competition for processing and exporting food."
Economists say it is the removal of non-tariff barriers that will have a greater impact on Singapore's services-driven economy.
For instance, consumer electronics and telecommunication products that conform to relevant Singapore or EU standards can be sold in the respective countries without additional testing or certification requirements.
There are also provisions in the FTA for the future mutual recognition of professional qualifications.
Mr Vishnu said: "Over 65 per cent of (the Singapore) economy is the service sector. So the ability to get services across into the EU, I think that will place industries on a better footing. This is where Singapore can leverage its position as a regional hub for a lot of the financial services and legal services (firms)."
The EU-Singapore FTA covers 28 EU member states.
The next step is for the FTA to be translated into 23 other EU languages. It will then have to be approved by the European Parliament.