Singapore, Australia sign free trade agreement

Singapore, Australia sign free trade agreement

Martin Abbugao Agence France-Presse Singapore

Singapore and Australia signed a free trade agreement Monday, which will eliminate tariffs and open up market access for services in a deal worth billions of dollars for both countries.

Officials said the Singapore-Australia Free Trade Agreement (SAFTA), reached after more than two years of intense negotiations, signals Australia's long-term commitment to Southeast Asia.

Singapore's Trade Minister George Yeo and his Australian counterpart Mark Vaile signed the agreement at a ceremony here. It is Australia's first free trade deal since signing a closer economic partnership with New Zealand 20 years ago.

Both ministers said their commitments to the agreement go beyond those committed to under the World Trade Organization.

Their commitments include the elimination of tariffs on all products, market access for services, transparent customs procedures and mutual recognition in the education sector.

Previously, Singapore's exports faced tariffs of up to 25 percent when entering Australia.

With tariffs brought down to zero, SAFTA will allow up to S$3.3 billion (US$1.9 billion) worth of Singapore products to enter Australia a year, up from the current S$2.6 billion.

Singapore companies are expected to save about $S31.6 million a year from the tariff concessions.

But Vaile said the agreement goes beyond savings from tariff elimination to a potential surge in trade and investments between the two countries.

He said the free trade deal Australia signed with New Zealand has led to a 500 percent increase in total economic activity between the neighbors, and that he was hopeful this will also happen under SAFTA.

Yeo said bilateral trade between Australia and Singapore totaled about S$9.9 billion Singapore last year "and we expect this figure to grow in the coming years, as the FTA brings greater market access opportunities and cost savings from tariff reduction."

Yeo said the pact also "signals Australia's long-term commitment to Southeast Asia."

SAFTA supports the goal of a closer economic partnership between the Association of Southeast Asian Nations (ASEAN) as well as Australia and New Zealand agreed upon in September last year, he said.

The agreement, which will come into force this year, provides a framework for mutual recognition of each country's technical standards and professional qualifications aimed at benefiting business.

For Australia, the free trade deal means it will have easier access to Singapore's banking and financial sector. Wholesale banking licenses are expected to be eased over time.

In the legal services sector, conditions for the establishment of joint ventures between Singapore and Australian law firms will be eased, putting them on the same level with U.S. and British law firms.

Singapore agreed to recognize law degrees from four more Australian universities, raising the total number to eight, while Singapore lawyers can will also be allowed to practice in Australia.

Singapore, a small city-state whose economy is driven by trade, has signed FTAs with New Zealand and Japan and has wrapped up talks with the United States.