TPP: What's in it for Singapore?

(THE STRAIT TIMES)Negotiations on the largest regional trade accord in history concluded last week. Pundits have since weighed in on which groups of nations stand to gain or lose from the Trans-Pacific Partnership (TPP), as the agreement is called.

For instance, Vietnam - whose low-wage economy relies on exports - is estimated to be the biggest winner of the deal that slashes an estimated 18,000 tariffs among the dozen participating countries.

At the same time, countries that signed on to the deal have also had to work doubly hard to convince domestic constituents of its benefits, in a reminder of how tough it can be to champion free trade.

The Canadian government has approved a plan to spend a hefty C$4.3 billion (S$4.6 billion) in compensation to soothe the vocal dairy industry, as the TPP opens up 3.25 per cent of the country's dairy market to foreign products.

But in Singapore - also one of the countries involved in the deal - the response has been relatively muted. This is despite the fact that the TPP is a big deal, in all senses of the word.

It is a far-reaching agreement involving 12 countries which make up 40 per cent of the world economy, and it is viewed as the most important trade deal negotiated in more than 20 years.

The deal was finally struck in Atlanta, United States, after five years of intense negotiations

and must now be signed formally by the leaders of the 12 nations - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam - and ratified by their Parliaments.

The economic benefits of the TPP are hard to quantify, especially as the fine print of the deal has not yet been released.

Singapore is also a very open economy and has free trade agreements with all of the TPP countries except Canada and Mexico.

The trade deal holds special symbolism for Singapore, which was among the first to broach it.

It has its roots in the Trans-Pacific Strategic Economic Partnership, which came into effect in May 2006 between Singapore, Brunei, Chile and New Zealand.

Two years later, the US, Australia and Peru formally indicated their interest in negotiating a free-trade agreement with these four nations. This agreement became known as the TPP. Malaysia and Vietnam formally joined the talks in 2010, followed by Mexico and Canada in 2012, and Japan in 2013.

Others are now lined up to potentially accede to the deal, including Asian economies such as South Korea and the Philippines, and Latin American ones like Colombia.

The TPP countries represent a large market for Singapore, accounting for 30 per cent of its total trade in goods in 2013 and 30 per cent of foreign direct investment here.

Although Singapore is already an open economy, the trade pact is still expected to boost trade and investment links between Singapore and key markets in the region and elsewhere in the world, including in fast-growing Latin America.

Regulators in these markets often impose non-tariff barriers on foreign food products - for instance, mandating the use of enriched flour instead of regular flour, Mr Lee noted.

This drives up manufacturing costs and also the price of the product in those markets.

"Enriched flour is more expensive and we have to specially tailor products for those markets. It's not a level playing field. The TPP should help with lowering barriers," he said.