IN JANUARY this year, Singapore became the first country with whom the Pacific Alliance (PA) countries have collectively signed a free trade agreement (FTA).
The signing of the Pacific Alliance-Singapore FTA (PASFTA) came after 4 years of negotiations, and before other countries that would be perceived to be much closer to the Pacific Alliance, both geographically and economically.
The 4 Pacific Alliance member states are Chile, Colombia, Mexico and Peru.
As Mexico takes over the pro-tempore presidency of the Pacific Alliance for 2022, it is clear that the time is now for Mexican and Singaporean companies to explore collaboration and plant the seeds to be ready to leverage the agreement when ratified.
The PASFTA is significant for 3 key reasons.
First, access to opportunities in increasingly integrated, sizable regional growth markets with an expanding middle class.
With the agreement there is an additional channel for companies to access opportunities and do business in a new region.
For Singapore companies, it opens an increasingly integrated collective market that makes up the eighth-largest economy in the world with a combined GDP of over US$2 trillion in 2021.
For Latin American companies, Singapore offers a base to tackle an also increasingly integrated Southeast Asian market in Asean, comprising 10 countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) with a combined GDP of US$2.8 trillion in 2021.
Singapore's trade and investment with the Pacific Alliance forms a significant portion of its trade with the Latin America and Caribbean region.
There are already over 100 Singapore companies doing business in the Pacific Alliance, and they span diverse sectors, including agri-food, technology and innovation, and infrastructure.
Examples of such companies include Banyan Tree Hotels & Resorts, Boustead Singapore, Grupo Kaybee, Olam International, Pacific International Lines and Shopee. There are also Pacific Alliance companies that are becoming more interested in Asia.
Second, diversification of Singapore sources of imports and the Pacific Alliance's export destinations.
It will also contribute to strengthening supply chain resilience for both regions. This is important, especially in situations where traditional export or supply markets face a shortage.
It also provides leverage to find better prices. This has been evident in the recent times of uncertainty during the global pandemic.
The Pacific Alliance countries are also able to increasingly export food products and other raw materials for Asian industries, enhancing the existing exports of chemicals, frozen salmon, and cherries from Chile; coffee from Colombia; avocados and medical instruments from Mexico: and minerals and chilled vegetables from Peru.
Now there is also an opportunity to consolidate and create better volumes to increase the "return cargo" from Latin America into Asia, which will improve the feasibility of more direct and better shipping routes.
Third, the PASFTA has laid the foundation for Singapore to be the first associate member of the Pacific Alliance.
We will be exploring new areas of collaboration, such as the digital economy and the green economy, 2 areas we have started to explore with Chile but are keen to expand to the other Pacific Alliance states.
The Digital Economy Partnership Agreement - signed by Singapore, Chile and New Zealand - supports businesses engaging in cross-border trade and e-commerce by facilitating seamless end-to-end digital trade, enabling trusted data flows, and building trust in digital systems.
We are also keen to collaborate with the Pacific Alliance on initiatives such as green energy and carbon credits.
For example, Singapore and Chile signed a Memorandum of Understanding on low-carbon hydrogen last year to foster cooperation on projects and initiatives to advance the deployment of hydrogen as an alternative energy source.
The PASFTA includes modern provisions that cater to today's business needs and realities. It builds on existing agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
There are a number of new and innovative chapters that complement the traditional areas of trade in goods, services, and investment.
Some examples are the chapters on:
- Small and medium-sized enterprises (SMEs), which aims to promote an environment that supports the growth and competitiveness of SMEs.
- Good regulatory practices, which aims to promote an open, fair, and predictable regulatory environment for businesses; and
- Economic and trade cooperation, which facilitates collaboration in the areas of industrial services; innovation, science, and technology; trade infrastructure; and transport and urban mobility infrastructure.
- The PASFTA is also Singapore's first FTA with a dedicated maritime chapter. This aims to grow international maritime transport services between the Pacific Alliance and Singapore, enhance our physical connectivity, and foster cooperation in maritime activities through the exchange of best practices, knowledge, and training opportunities.
With the PASFTA, we are excited to deepen relations between Singapore and the 4 Pacific Alliance countries.
Beyond the benefits of the deal itself, the PASFTA builds new bridges, links, and friendships between 2 regions.
As we emerge from the Covid-19 pandemic, we are confident that trade will continue to be a key driver of the global economy.
The writer is Regional Group Director for Latin America at Enterprise Singapore.
Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.