Trans Pacific Partnershipsh
Trans Pacific Partnership
The Trans Pacific Partnership (TPP) was an international deal 6 years in the making. A trade treaty between Singapore, US, and 10 other countries, the TPP sought to lower trade barriers amongst participating members. The agreement brought promise of greater trade, boosting investment & business opportunities for all nations involved, including Singapore.
In order for the TPP to proceed, all countries have to be in agreement, with their respective leaders formally signing the deal. However, with the US presidency changing hands, new US President Donald Trump signed an executive order withdrawing the US from the deal.
Singapore Prime Minister Lee Hsien Loong explained the significance of the US pulling out of the agreement:
Here’s what the TPP was slated to accomplish, and what the change could mean for your business.
The TPP would have opened an opportunity between Singapore and two new countries: Canada and Mexico. Despite its many existing trade deals worldwide, Singapore does not have any such agreements with these nations. After TPP, it was expected that 99% of Singapore export tariffs to Canada and 96% to Mexico would be cutii. Moreover, Mexico’s 130 million strong population presented great potential for market expansion.
Ultimately, SMEs that participate in international trade are the ones that are most affected by the change.
Ostensibly, goods manufacturers and exporters stood to gain the most from the pact. According to the Ministry of Trade and Industry, the TPP had the power to “eliminate import tariffs across substantially all trade” enabling “duty-free treatment on more types of goods than what our previous trade agreements provided for.”iii
This change was expected to affect most Singapore industries. Now, automotive businesses miss out on the 2.5% US duty on imported cars over 25 years. In the shipping and trade sector, increased trade between the bigger players would have promised growth opportunities. The increased transparency afforded by the pact would have also resulted in faster customs clearance, enabling faster import and export.
The agreement would also have given businesses in the IT, construction and consultancy sectors the ability to bid for government projects in Malaysia, Mexico and Vietnam, an option currently closed to foreign bidders.iv
Overall, the TPP presents more loss of potential, especially with Canada and Mexico, rather than direct impact on SMEs’ bottom lines. The Singapore Business Federation reports that ‘“the local business community has "not expressed any concerns so far with regard to the TPP"’.v
Should the TPP have no hope of pulling through, there are still other initiatives and bilateral trade agreements like the Regional Comprehensive Economic Partnership (RCEP) for Singapore businesses to fall on.
Furthermore, with such alternative deals currently in place, Singapore SMEs already see the highest average annual exporting per-company-revenue at US$ 2.21 millionvi. As Kurt Wee, president of the Association of Small and Medium Enterprises (ASME) foresees, local businesses can still flourish without the deal, as long as they “remain agile and continue reinventing their e-commerce and other service delivery platforms to thrive.”