The Importance of a Free Trade Agreement Between the Two Nations
In the light of exiting the European Union (EU), the United Kingdom (UK) is rallying as many friendly partners as possible to ensure trades with them runs smoothly. Since the Brexit, the UK and EU have eleven months to decide and negotiate a new trade deal. In the meantime, the trading relationship remains the same. It merely means that even though the UK is no longer a member of the EU, their cross border trade regulations stay the same within the eleven months. However, the eleven months transition is coming to an end just around the corner. Both blocs are still aiming for a new trade agreement ready to roll on 1st January 2021. Hence, besides a new trade deal with the EU, the UK also needs to negotiate trade deals with other nations. Thus, recently, Singapore signs a free trade agreement (FTA) with the UK. Historically, the UK and Singapore go way back even before the island became a global trading hub.
It does not mean that trades between signed parties are without charges. It means that cross border trade will be much easier. For example, if the signed countries agree on similar rules such as the shape of electrical appliances plugs, the less likely the goods need checking. Free trade encourages trade by making it cheaper. It helps when both governments agree to reduce or remove charges for trading goods across borders. However, not all goods from either country will be less expensive for sale in the other. For instance, if both countries produce cars, there will be a tariff on car imports to protect local car makers.
Singapore – UK FTA
As of now, Singapore already has an agreement with the EU. But since the UK is no longer part of the EU, it needs to make a new trade deal with Singapore. The historic moment took place in Singapore just recently, and the trade deal will extensively cover a trade relationship of more than $22 billion. Most of the trade deal is quite similar to Singapore’s trade deal with the European Union. Both parties agree to remove tariffs and give both countries access to each other’s markets in services. It will also cut non-tariff barriers for vehicle parts, cars, pharmaceuticals, medical devices, electronics and renewable energy generation. Import duties will be non-existent by November 2024, similar to the trade pact between Singapore and the European Union.
Privilege to Singapore
With a free trade agreement in place, Singapore will be able to sell unique Singapore food products to the UK. Not limiting to food, Singaporean companies will also get a chance to bid for more government projects in the United Kingdom. Singapore is touted as the global financial and trading hub. It will serve as a functional benefit for multinationals operating in Southeast Asia and soon the UK.
When Singapore signs a free trade agreement with the UK, it becomes more of a symbolic deal. The trade deal is not significant in scope or scale as Singapore makes up a fraction of the UK’s total export. Nevertheless, the two countries go way back. Singapore was a former British colony and many of its citizen study or work in the UK. Singapore is also the strategic gateway for businesses to access the rest of the Asian region.