SINGAPORE AND NEW ZEALAND – A MOST “FTA-ed” RELATIONSHIP

Stephen Jacobi continues his posts from his Singapore sojourn.

Spending time in Singapore reminds me of the several visits I made in 2000-02 when I was serving as Private Secretary to Trade Minister Jim Sutton.  Jim concluded the first free trade agreement with Singapore, NZ’s first since CER with Australia in 1983.  Today we have six co-existing, complementary FTAs with Singapore – the first bilateral (upgraded in 2020), the “P4” agreement (with Brunei and Chile, 2006), the Trans Pacific Partnership (TPP, 2016), the ASEAN-Australia-NZ FTA (AANZFTA, upgraded in 2022),  the Comprehensive and Pacific Agreement on Trans Pacific Partnership (CPTPP, 2018) and, although not strictly speaking an FTA, the Digital Economy Partnership Agreement (DEPA, 2021).   That makes Singapore the most “FTAed” of any of NZ’s FTA relationships!

Born in 2002, a partnership still going strong

It was no mean feat to negotiate that first FTA. The Labour-led Government was in a coalition with the trade-sceptical Alliance Party.  The Singaporeans were (and are) tough negotiators and the Alliance raised continual objections, including the need to “protect” NZ’s manufacturing industries against low labour rates in Singapore. (If anything New Zealand posed more of a “threat” to Singapore – in 2002 Singapore’s per capita GDP was US$22,159 and New Zealand’s was US$16,874, but today the gap is even wider – US$78,000 vs US$42,000).

As noted above that FTA soon morphed into successive agreements, showing the power of a good example to others and the quickening pace of trade liberalisation in the region.  While New Zealand and Singapore have distinctly different trade concerns, both of us share fundamental interests in the rules-based multilateral trading system. As small, open trading nations, we need those rules to protect us from the trade restrictive actions of others.  And, as we maintain important relationships with both the United States and China, we are equally concerned about current geo-political tensions. As Singapore’s Prime Minister Lee said at the Boao Forum in March, “the bifurcation in technological and economic systems is deepening. And this will impose a huge economic cost on countries, as well as further exacerbate rivalries and frictions”[1].

Our best bet – growing CPTPP

Singapore and New Zealand are both founder members of the original P4 and then TPP, as the Asia Pacific’s most ambitious regional FTA.  Deeply disappointed by then President Trump’s abrupt departure from TPP in 2017, we worked together to conclude CPTPP between the 11 remaining members.  CPTPP has been purposefully designed as an “open plurilateral” meaning that it is open to accession by others who can meet its high standards.  Today the UK is poised to join, while China, Chinese Taipei, Ecuador, Costa Rica and Uruguay have all deposited applications.

New Zealand is taking its turn to chairing CPTPP and the annual Ministerial will be held in Auckland 15-16 July.  By then the final steps in the UK’s accession process will hopefully be complete, but what of the other applicants?  China’s accession would be a very big deal, not that it would give either Singapore or New Zealand much if anything by way of additional market access – both of us have upgraded FTAs already in place.  But Chinese accession would serve to anchor China more deeply into the framework of trade rules in the region. 

A key question is whether China is serious about accession and whether it is prepared to adapt its trade regime in key areas, such as state owned enterprises and intellectual property, in order to comply with CPTPP rules and standards.  Other members may not be so ready to welcome China to the fold, but if the original promise of CPTPP is to mean anything at all, the agreement must continue to expand as a pathway to the goal of an eventual Free Trade Area of the Asia Pacific (FTAAP), something which the APEC Business Advisory Council (ABAC) continues to advocate strongly. China’s accession should ideally be advanced at the same time as others, no easy task for negotiators.  

CPTPP also needs to continue to evolve.  The original agreement was concluded some years ago and its core disciplines need updating to take account of more recent developments in the way business is being done in the region. Not to expand CPTPP through new accessions or to deepen the agreement through updated commitments risks consigning this great enterprise to an uncertain and probably irrelevant future.

New kid on the block – IPEF

Another instrument, although not an FTA,  is making headway in the region – the US-led Indo Pacific Economic Framework (IPEF).  IPEF is not necessarily a rival of CPTPP.   Again as Prime Minister Lee said in Boao: “These groupings are not mutually exclusive. They have varying memberships, and often overlap with one another. Not every country needs to be in every group. But collectively, the different groupings build a resilient and interlocking network of cooperation among countries in Asia”. 

IPEF relies on collaborative mechanisms to foster co-operation amongst the 14 members. Rather than removing tariffs IPEF seeks to make progress in other areas like trade facilitation, supply chain resilience, the digital economy, decarbonisation, anti-corruption and labour rights.  Some in the United States see this as a new model for trade policy.  We are not so sure but New Zealand and others are participating actively, albeit without the expectation of market access gains.  Singapore may be less concerned about this as it already has a bilateral FTA with the US.   China has not been invited to participate, but India is involved, but not in the trade pillar, as is Fiji.

The most recent round of IPEF negotiations took place in Singapore in early May.  There seems to have been a quickening of the pace, especially on work on supply chains – how can these be made resilient at a time of crisis like the pandemic ? It is a good thing that the United States is engaging in this way with IPEF’s members. It will be interesting to see whether this results in concrete commitments or simply a lot of committees.  The way in which labour rights, always a delicate subject for developing countries, are included in IPEF will also be something to watch.

The exemplary trade partnership between Singapore and New Zealand is a key element of New Zealand’s trade strategy.  We need our like-minded friends. As the world continues to evolve, and not always in a positive direction, there is ample scope to continue the work Trade Minister Jim Sutton began in 2002.

This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum.

[1] https://www.pmo.gov.sg/Newsroom/PM-Lee-Hsien-Loong-at-the-Boao-Forum-for-Asia-Annual-Conference-2023