Modi Woos Singapore Grants Trade Concessions in ASEAN FTA for ASEAN Membership

India and Singapore have clinched a deal to update their Comprehensive Economic Cooperation Agreement (CECA), in a bid to boost bilateral trade and facilitate economic cooperation on multiple fronts. The changes are part of the accord’s second review, with officials flagging in particular the tariffs cuts and simplified rules of origin. 

Following the CECA update, tariffs on 30 products will be slashed or fully eliminated, matching the rates set under a separate free trade agreement between India and the Association of Southeast Asian Nations (ASEAN), of which Singapore is a member. The revised tariffs apply to a variety of sectors, including select foodstuffs and nylon moulding powder.

“The upgraded agreement will enable more Singapore companies to qualify for lower tariffs. This improves local exporters’ access to the Indian market. I encourage our companies to make full use of the upgraded agreement and explore more opportunities for collaboration in India,” said S Iswaran, the Minister for Trade and Industry of Singapore.

The two countries agreed to more flexible general rules of origin, inclusion of a “de minimis” provision, and new product-specific rules for goods such as machinery parts and edible oils. 

General rules of origin refer to criteria applied to determine if a good can qualify for preferential treatment under a free trade agreement, and are also designed to prevent trade deflection by transshipment of goods. A de minimis provision excludes a certain minimal part of goods from other sources from these rules of origin requirements, or sets a certain threshold with regards to fulfilling this origin criteria.

The India-Singapore CECA entered into force in August 2005, with the two sides concluding their first review just over two years later. Along with slashing import tariffs and covering other areas such as investment and trade in services, the deal was also designed to help support a separate deal on avoiding “double taxation,” along with tackling areas such as the movement of people, and putting in place “multiple recognition agreements” for certain products.

Total bilateral trade grew from S$16.6 billion (US$12.4 billion) in 2005 when the CECA was first signed to S$25.2 billion (US$18.9 billion) in 2017, according to statistics released by both sides. They already have significant economic ties, including in relation to other trading partners in the region – India is Singapore’s largest trading partner in South Asia, while the latter ranks as New Delhi’s second largest trading partner within the 10-country ASEAN grouping.

Comprehensive cooperation

During Indian Prime Minister Narendra Modi’s visit to Singapore last week, the two parties also endorsed a series of deals in the fields of the training of public service officials, cyber security, narcotics control, and defence cooperation.

Modi praised current Indian-Singaporean ties as being New Delhi’s “warmest and closest,” highlighting the wealth of opportunities across different policy areas should the two sides continue their efforts at developing deeper ties.

Their deal on nursing, meanwhile, involves a “mutual recognition agreement” aimed at making sure both sides have a “better understanding of the parties’ standards in regulating the training and practice of nursing,” according to an annex linked to a joint India-Singaporean government statement.

In the field of digital cooperation, countries launched a few new digital payment schemes, including RuPay, a new app-based rupee remittance system. Some industry officials and government leaders have suggested that the launch could boost transaction flows by potentially several billion dollars, given the significant travel between the two countries for work or tourism.

Regional outreach

The two parties collaborate within a wider regional realm, given Singapore’s ASEAN membership, along with the free trade agreement (FTA) between the two, as well as their membership in the larger 21-economy Asia-Pacific Economic Cooperation (APEC) Forum.

India and ASEAN signed a free trade agreement in 2003, though some transition time was granted through 2011 for five of ASEAN’s members, namely Brunei, Indonesia, Malaysia, Thailand and Singapore. The other, mostly newer ASEAN members brought the agreement into full effect later, in 2016.

Officials from both countries said that they support ongoing negotiations on the Regional Comprehensive Economic Partnership Agreement (RCEP), which aim to bring the ten ASEAN members and their six FTA partner countries, namely Australia, China, India, Japan, New Zealand, and South Korea, under one overarching trade accord.

“We will work with all, most of all with ASEAN, to reach an early conclusion to Regional Comprehensive Economic Partnership. As India’s engagement with the region grows, Singapore will remain a gateway to ASEAN and the broader East. This year, Singapore’s Chairmanship of ASEAN will take India’s relations with ASEAN further and farther ahead,” Modi added.