At the latest MERCOSUR summit, held on Thursday (07.12.2023) in Rio de Janeiro, the signatory States of the economic bloc completed negotiations on a Free Trade Agreement with Singapore, which will enter into force for the Parties after the completion of internal legal procedures.
This is the first of its kind between MERCOSUR and a member country of ASEAN (Association of Southeast Asian Nations). In this sense, the Agreement strengthens the international projection of the bloc and constitutes a concrete result of successful joint negotiations for all the States Parties.
How big is the Singapore market?
With a population of 5.6 million people, Singapore is a key commercial, transport and financial centre in Asia. With a heavily service-oriented economy, it has an extensive network of trade agreements and is a founding member of ASEAN and the Trans-Pacific Partnership (CPTPP).
How much is MERCOSUR's trade with Singapore?
For MERCOSUR, Singapore is one of the main export destinations and one of the most important investment partners of the bloc, with bilateral trade in 2022 of approximately 10.000 billion dollars, according to the MERCOSUR Secretariat.
Singapore has very little agricultural land, so it meets its food needs with imports.
Among the main export products of MERCOSUR are poultry products, pork, beef, ferroalloys and iron ores.
Meanwhile, among the main products imported by MERCOSUR are insecticides, integrated circuits, medicines and vessels.
Singapore is one of the world's leading capital providers with huge investment potential, with sovereign wealth funds ranking among the top 10 globally.
Likewise, in 2022, Singapore's foreign direct investment in South and Central America and the Antilles was 127 billion dollars and globally it was more than 930 billion dollars.
What does the MERCOSUR-Singapore agreement regulate?
In general terms, the agreement MERCOSUR-Singapore The purpose of this Act is to promote economic and social development, create new employment opportunities, improve living standards and ensure high levels of protection of health, safety and the environment. It therefore regulates a range of new issues, while at the same time introducing some significant changes in the treatment of disciplines that were already present.
What are the key benefits?
Trade in goods. The agreement provides for the immediate elimination of tariffs on all products imported by Singapore from Mercosur upon its entry into force. Mercosur will grant exemptions to 95,8% of goods from the Asian country, but this will occur gradually over a maximum of 15 years. Once the instrument enters into force, only 25,6% of this total will benefit from tariff elimination. Products considered most sensitive by Mercosur were excluded from the coverage of the agreement.
Rules of origin.Modern verification and control methods were agreed upon
Services and Investments. The chapter on trade in services sets out advanced commitments, with a view to providing greater transparency and predictability to market access conditions and the treatment offered to foreign service providers between countries. National service regulation disciplines and sectoral annexes on financial, professional and postal services were also agreed upon. The disciplines aim to provide greater security, transparency and predictability to the flow of investments between the parties, in addition to establishing a governance structure oriented towards cooperation between countries, through a joint subcommittee and the figure of Focal Points or “Ombudspersons”, with the objective of stimulating investment flows.
EcommerceWith Singapore, Mercosur members adopted, for the first time, a chapter on electronic commerce in an agreement with an extra-regional partner. It establishes basic principles to support the development of electronic commerce and promote exchange in the digital sphere. Commitments included topics such as electronic authentication, online consumer protection, unsolicited commercial communications (spam), paperless trade and electronic invoicing. No obligations are assumed regarding taxation of express shipments. The chapter also supports the promotion of cooperation between the parties on topics such as facilitating the flow of cross-border data, exchanging experiences on the protection of personal data, promoting the participation of small businesses in the digital economy and promoting access to information technologies for indigenous populations and people living in remote areas.
Government Procurement. The agreement also includes a chapter on government procurement, establishing commitments to transparency and equal treatment of foreign suppliers between countries.
Customs Procedures and Trade Facilitation. The commitments undertaken are based on the principles of transparency, efficiency and simplification of procedures related to import, export and transit, which will mean shorter times and costs for operators. Thus, the agreement provides for the adoption of international standards and the intensive use of information technologies to speed up and simplify bureaucratic procedures (OAS).
Trade Defense. In the trade defence chapter, the agreement guarantees the right of MERCOSUR and Singapore to adopt the trade defence measures provided for by the WTO (anti-dumping measures, compensatory measures and global safeguards), as well as some additional provisions. The text provides for the use of bilateral safeguards, which guarantee MERCOSUR protection from sudden increases in imports resulting from the bilateral liberalisation process that cause or threaten to cause serious damage to national industries. The mechanism can be used for both industrialised and agricultural products. Safeguards may be valid for up to two years, extendable once. The chapter provides for the granting of compensation to exporters of goods subject to these safeguards.
Sanitary and phytosanitary measures. In the chapter on Sanitary and Phytosanitary Measures, commitments were established that guarantee greater predictability, agility and mutual knowledge between health systems, allowing for better interaction between the health authorities of the countries. One of the most notable aspects is Singapore's recognition of the pre-listing principle, a type of qualification in which the health authorities of one country begin to accept the direct indication of the producing establishments in the other; a faster process, which reinforces confidence in the health system of the MERCOSUR countries. The chapter includes the commitment that the measures cannot be used as unjustified barriers to trade.
MSMEs. There is also a special chapter on the promotion and development of Micro, Small and Medium Enterprises, recognizing their importance in domestic markets and their contribution to achieving inclusive economic growth, with sustainable development and increased productivity. Among the priority areas of cooperation are: internationalization of MSMEs, development of capital and business culture, optimization of clusters in strategic sectors for competitiveness, digital transformation. In addition, the promotion of access to financing and guarantees, the use of regulatory frameworks and information and communications technology instruments to facilitate access to international markets and also the promotion of women's participation and entrepreneurship.
Intellectual property. The Agreement covers issues of copyright, patents, trademarks, industrial designs, geographical indications (GIs) and protection of undisclosed information.
Finally, you can access the preliminary version of the agreement at the MERCOSUR Secretariat. here.
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