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SINGAPORE: Updated China Free Trade Agreement Comes into Effect

An updated Free Trade Agreement (FTA) between Singapore and China – the China-Singapore Free Trade Agreement (CSFTA) Upgrade Protocol – has now largely come into effect. The expanded treaty introduces changes across a number of areas, includng trade in services, Rules of Origin (ROO) for the trade in goods, customs procedures, trade facilitation, trade remedial measures, investment protection and general economic cooperation. With regards to the latter, regulations relating to three additional issues – competition policy, e-commerce and environmental responsibility – have been added. While the majority of the amended provision were deemed to apply as of 16 October this year, those relating to ROO will not come into effect until 1 January next year.

In terms of the trade in goods, the updated FTA streamlines the ROO protocols in order to provide preferential treatment to a wider range of Singaporean petrochemical exports. In order to facilitate this, as of 1 November this year, both parties will implement an Electronic Origin Data Exchange System (EODES), allowing traders to electronically submit all required customs clearance documents, including Singapore Customs-verified Certificates of Origin.

In terms of the trade in services, Singapore-based businesses will now have enhanced access to China’s legal, maritime and construction services sectors. In practical terms this means, for instance, that a Singaporean law firm with offices in the Shanghai Free Trade Zone (FTZ) will be permitted to establish a commercial relationship with with its Chinese counterparts within the FTZ in order to offer Chinese domestic and international legal services to clients anywhere in China. Similarly, Singapore-based shipping businesses will be allowed to establish (or acquire a majority stake in) commercial entities in any of the FTZs operating in one of China’s major port cities, including Shanghai, Guangdong, Tianjin and Fujian. By the same measure, Singaporean construction companies established in the Shanghai FTZ, China-Singapore Suzhou Industrial Park, Sino-Singapore Tianjin Eco-city or the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity are to be permitted to undertake joint construction projects anywhere within whichever of the four aforementioned cities they are located in.

In a reciprocal move, China-based companies are to enjoy wider access to Singapore’s services sector, as well as to its e-commerce and environmental protection industries. This means, for example, that a mainland-based business could provide computer reservation system services within Singapore. Similarly, Chinese companies will be permitted to deliver documents and parcels in Singapore or provide refuse collection, disposal and waste management services.

In the field of investment, the updated FTA provides enhanced protection for Singapore companies operating in China via the introduction of a more robust Investor-State Dispute Settlement (ISDS) mechanism. In a further move, both parties have also agreed to discuss greater investment liberalisation via a dedicated Work Programme.

China is Singapore’s largest trading partner with trade between the two countries amounting to US$63.81 billion in the first nine months of 2019, a year-on-year increase of 3.4%. For its part, Singapore is China’s largest overseas investor, a position it has held since 2013.

Content provided by Picture: HKTDC Research
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