New Opportunities with TPP – Increasing U.S. Exports to SingaporeJuly 12, 2016
Margaret Hanson-Muse is the Regional Senior Commercial Officer for ASEAN at the U.S. Embassy in Singapore. Amy Vickery is an International Trade Specialist covering Singapore for the U.S. Department of Commerce in Washington, D.C.
Singapore is a reliable trading partner, strategic ally, and friend to the United States.
Consistently ranked the easiest place in the world to do business and among the best on indices of competitiveness and perceptions of corruption, Singapore offers a hospitable business climate for American companies exporting, investing and operating abroad. As a shipping and logistics hub and first-world financial center, Singapore is an ideal entry point to the ten ASEAN countries, and even to India and China. As such, over 3,600 U.S. companies have already established a presence in Singapore, with many designating Singapore as their regional and sometimes even second global headquarters. Mirroring U.S. industry’s enthusiasm for operating in Singapore, the U.S. Department of Commerce established its regional commercial office for ASEAN at the U.S. Embassy in Singapore in 2012.
Underpinning our strong bilateral commercial relationship is the U.S.-Singapore Free Trade Agreement (FTA), in force since 2004. The U.S.-Singapore FTA was the United States’ first FTA in Asia and has contributed to a 48 percent increase in U.S. exports to Singapore since implementation. In 2015, Singapore was our 13th largest goods export market and 17th overall largest trading partner. Singapore’s foreign direct investment into the United States reached nearly $20 million last year. Goods exports to Singapore totaled $28.7 billion in 2015, yielding a trade surplus of $10.4 billion—the sixth largest trade surplus for the United States. This goods surplus demonstrates that FTAs work and that U.S. economic well-being is inextricably linked to the Asia market.
Successful implementation of the Trans-Pacific Partnership (TPP) Agreement will be the next chapter in our strong bilateral commercial relationship with Singapore. The TPP, which involves 12 countries, including the United States and Singapore, will help U.S. exporters once it is approved and implemented. As Singapore already has an open economy and existing FTAs with the United States and all other TPP parties except Canada and Mexico, the bulk of economic gains for U.S. firms vis-à-vis Singapore will not come through direct tariff reductions. In fact, Singapore currently maintains the lowest tariff levels of the TPP parties, with an average Most Favored Nation (MFN) applied tariff rate of 0.2 percent. Instead, benefits to U.S. companies will come from the TPP’s improvements on the core obligations in existing FTAs and World Trade Organization agreements, reductions in non-tariff barriers that impede trade, and strategic gains as Singapore’s regional hub status is further solidified through simultaneous regional integration efforts.
Let’s explore a few examples of new benefits under the TPP:
The TPP’s expanded “rules of origin” will help both the United States and Singapore, and are an improvement over the U.S.-Singapore FTA. Under the TPP, these rules, which determine whether or not a good qualifies for preferential tariffs, will now allow for “regional cumulation.” This should allow U.S. and Singaporean exporters to get duty-free treatment on a greater range of goods than they can currently under the U.S.-Singapore FTA.
Professional services are an example of an industry sector that will gain from the TPP. In 2014, Singapore’s imports of services accounted for 13.4 percent of its total trade, a larger proportion than any other TPP country. The TPP represents liberalization over the U.S.-Singapore FTA for several professional services, including architectural, engineering, and auditing services. For Singapore, the TPP contains fewer scheduled exceptions for these services than the bilateral FTA does. This should enable greater exports of U.S. architectural, engineering, and auditing services to Singapore.
For more information on new U.S. export opportunities in Singapore under the TPP please see our Singapore TPP factsheet. Additionally, to find out more about best prospect sectors in Singapore, please see our Country Commercial Guide and Top Market Reports. We invite U.S. exporters interested in exploring the Singapore market to contact us.