An Overview of Singapore’s Free Trade Agreements

Singapore’s extensive free trade agreements (FTA) and transparent administrative system have been credited with accelerating the country’s transformation to a first-world economy. The country’s 15 bilateral, 12 regional FTAs and digital economy agreements (DEAs) include some of the largest combined trade agreements in the ASEAN-China, ASEAN-India, and ASEAN-Hong Kong trade blocs—providing Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.

Despite regional players maintaining strong FTA networks, they are not as extensive as Singapore’s. Due to these factors, the country will continue to be the default location for businesses seeking to expand into Southeast Asia and neighboring regions.

What are the types of FTAs?

There are two types of FTAs: bilateral (agreements between Singapore and a single trading partner) and regional (signed between Singapore and a group of trading partners).

How to apply for tariff concessions for exporting goods from Singapore

Once a Singaporean company has identified its target market, it can start applying for tariff concessions through the Enterprise Singapore website.

Digital economy agreements

Through a digital-only trade agreement, Singapore aims to develop international frameworks to support businesses engaging in cross-border digital trade and e-commerce. DEAs will encourage greater cooperation in nascent areas, such as artificial intelligence (AI), and facilitate interoperability between digital systems, providing organizations the capacity to trial new technologies across different countries.

DEAs are part of the Singapore government’s strategy to strengthen underlying infrastructure to build up its footprint as a global tech and e-commerce hub, as well as add to the country’s extensive FTA network. 

Singapore’s Digital Economy Partnership Agreement (DEPA) with New Zealand and Chile came into effect on January 7, 2021. DEPA was first signed in June 2020 and is the world’s first ‘digital only’ trade agreement. On February 25, 2022, Singapore and the United Kingdom signed the UK-Singapore Digital Economy Agreement (UKSDEA), making the agreement the first digitally-focused trade deal ever signed by a European nation.

In addition to the DEPA and UKSDEA, Singapore has signed the following DEAs:

• The Singapore-Australia Digital Economy Agreement (SADEA);
• The EU-Singapore Digital Partnership (EUSDP); and
• The Korea-Singapore Digital Partnership Agreement (KSDPA).

How can businesses benefit from DEPA?

DEPA will establish new approaches to digital trade issues, such as data innovation and ease of cross-border data flow to promote AI. The digital economy agreement will ultimately help businesses lower the costs of operations and improve access to each other’s markets.

Paperless trade

A key feature of DEPA is that it will encourage paperless trade, thus reducing time for cargo clearance and any document transits.

Technology can be used to ensure document authenticity and provenance, which improves the efficiency of the trade. A Singapore exporter, for instance, can simply apply for an e-certificate of origin and SPS certificate for their shipment. These trade documents will then be sent digitally to the customs of the destination country.

Research conducted by Maersk and IBM found that paper trade documents can add as much as 20 percent of the costs of moving goods, in addition to a 10-day waiting time for the documents to be processed.

Fintech and e-payments

DEPA will encourage greater acceptance of e-payment solutions due to greater interoperability between payment systems. This will also enable secure cross-border payments and support more non-financial institutions, such as fintech firms, to offer such services.

Moreover, to complement this digital trade agreement, Singapore approved the country’s first digital banking licenses in early December 2020, enabling non-bank entities to offer the same services as traditional banks except they operate without a physical setup.

Electronic invoicing

DEAs will allow e-invoices in Singapore to be recognized in Chile, UK, and New Zealand in addition to increased accuracy, efficiency, and reliability of commercial transactions.

Singaporean small- and medium-sized enterprises (SMEs) can also participate in the country’s e-invoicing network by adopting the Pan-European Public Procurement On-Line (PEPPOL) e-invoicing solutions. Through PEPPOL, e-invoices are generated, transmitted, and processed digitally, without requiring manual inputs. PEPPOL is in use in over 30 countries and as of December 2020, over 27,000 local businesses are connected to the system.

Digital identities

DEAs like DEPA will enable countries to develop safe and secure digital identities. This can significantly streamline business processes from opening bank accounts to company registration.

Partners within DEPA can facilitate initiatives that promote the compatibility of different digital identity regimes. In doing so, procedures such as Know-Your-Client (KYC) checks by banks can be done more efficiently and in any DEPA partner country, since the bank only requires the company’s digital identity. This due diligence process currently can take over three months to complete. 

Data innovation and artificial intelligence

Parties to a DEPA will allow data to flow freely across borders which, in turn, facilitates a conducive environment for businesses to develop new products and services from data-driven innovations. This includes the adoption of an ethical AI governance framework so that DEPA partner countries harness AI in a responsible manner.

Furthermore, this digital agreement means businesses can pilot and commercialize their data-driven products and services with overseas counterparts from the DEPA, therefore accelerating cross border innovation.

Personal data protection

DEPA will ensure greater personal data protection, particularly as data will be transferred across borders. Businesses in Singapore can currently apply for APEC Cross Border Privacy Rules (CBPR) certification. If they secure this certification, it will demonstrate the company’s robust data protection policies consistent with the APEC Privacy Framework.

Further, CBPR-certified businesses can exchange data with similarly certified companies from across Singapore’s DEA network, as well as with other jurisdictions that have adopted the APEC CBPR System.

Conclusion

For businesses looking to expand their operations at scale and tap into Southeast Asia’s economic potential, Singapore’s network of FTA and DEA agreements will help them leverage key market strengths—access to preferential markets, reduced import tariffs, and enhanced intellectual property regulations. They can also future-proof their enterprise by digitizing operations and streamlining financial processes in a secure manner to increase efficiencies and lower costs while ensuring ease of trade.

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