The Use of Free Trade Agreements by Manufacturing and Services Firms in Singapore

Hank Lim and Aaron Choo

from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: As a trade-dependent country with a small domestic market, Singapore has a policy of signing regional and bilateral free trade agreements (FTAs) with established trading partners and of opening new economic links. However, there are no official statistics regarding the utilisation of FTAs by companies in Singapore. Feedback from focus group discussions with the relevant organisations in Singapore indicates that the utilisation of FTAs is relatively low. This is in part because the majority of firms in Singapore are small and medium-sized enterprises (SMEs) and are unable to meet the rules of origin (ROO) requirements. However, FTAs are utilised by large Singapore-based firms in the wholesale and retail, chemical and pharmaceutical, and consumer electronic industries. Greater awareness may be necessary to improve the knowledge of FTA procedures and their benefits in Singapore among SMEs. From the perspective of Singaporean firms, it is also important that future FTAs of the Association of Southeast Asian Nations (ASEAN), such as the Regional Comprehensive Economic Partnership, recognise Singapore’s role as a re-export centre and a base for sales agents involved in third-country invoicing.

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