On February 4, the 12 member nations of the Trans-Pacific Partnership (TPP) signed the trade deal which has been under negotiations for over five years. The signing of the TPP took place in Auckland, New Zealand. However, the signing does not bring the agreement into force.
The TPP will come into effect only if a minimum of six of the twelve countries, constituting 85 percent or more of the combined GDP (of the 12 member nations), approve it within two years. The ratification will not be possible if the six countries which approve the TPP do not make the required 85 percent of the combined GDP.
Lim Hng Kiang, Singapore’s Minister of Trade and Industry, believes that TPP will transform Asia-Pacific into a region with reduced tariff and other barriers for free movement of goods and services, resulting in increased investment in sectors well-suited to the modern interconnected economy.
TPP is likely to have a very positive impact on Singapore. While the direct benefits of the TPP are evident, the indirect impact it will have on Singapore is not as obvious. Once the TPP is ratified, the features of the agreement that will indirectly benefit the country are:
No United States duty on imported cars
TPP will result in the discontinuation of the US duty of 2.5 percent on imported cars and the additional levy on auto parts that exists today. As a result, Japan’s exports in the automobile sector will likely get a boost. As trade between these two countries increases, it will indirectly benefits Singapore shipping companies that extend shipping and trade finance services to them to facilitate the physical movement of cars from Japan to the US.
Opportunity to bid for government contracts
The TPP agreement has a separate chapter on government procurement which states that all the member nations will have the opportunity to bid for government contracts in each other’s country. The rules governing the foreign government procurement process will be fair and transparent. The businesses in the TPP countries will be treated equally, and no advantage will be given to domestic suppliers in this process. Prior to the TPP agreement, countries such as Mexico, Malaysia and Vietnam disallowed foreign bidding. Singapore companies will now be able to bid for government contracts in these countries.
‘21st century’ modern agreement
For the transmission of digital goods electronically, no import duty will be imposed; this will help the country’s businesses (as well as end users) that rely on digital products. The agreement outlines rules to ensure that there is no hindrance to cross-border e-commerce trade. Governments of the member nations will have to introduce common standards on various types of intellectual property rights. The new standards will enhance the ease of intellectual property registration in the new markets – a big boon to Singapore’s large IP Rights segment.
Special consideration to SMEs
The Small and Medium-sized enterprises (SMEs) have been given special consideration in the TPP. The member countries will establish websites specifically dedicated to SME’s. Each website will discuss the TPP provisions as applicable to SMEs. Basic information regarding company registration, taxation rates, employment regulations and intellectual property rights protection will also be available on the website. 99 percent of Singapore firms and businesses fall under this category and they will benefit from these provisions.
The main aim of the TPP is to allow free trade and investment which will help promote economic growth. The TPP will increase market access and opportunities for the exporters of goods and services in the country. The agreement will also facilitate investment by creating an efficient and transparent regulatory environment. As per the provisions of the TPP, the other nations in Asia, if desired, could also join the agreement at a later stage. All of these provisions will help Singapore firms expand since they are already very efficiently run and have deep experience in selling into foreign markets.
Even though the signing of the TPP is a big step , many hurdles still remain in the ratification process. Whether the TPP will actually come into effect is still a valid question. Please continue to visit our blog to track the latest developments on TPP and its impact on Singapore.