Singapore has signed a free trade agreement (FTA) with the MERCOSUR trade bloc which consists of Brazil, Paraguay, Argentina, and Uruguay under the MERCOSUR-Singapore Free Trade Agreement (MCSFTA) on 8 December 2023. This is Singapore’s first FTA with these individual countries and the bloc’s first such deal with a South-east Asian nation.
Through the MCSFTA, Singapore, and MERCOSUR will aim to deepen economic integration by fostering greater trade flows through reduced tariff rates, establishing transparent and predictable investment conditions, and promoting collaboration in areas such as trade facilitation, entrepreneurship, digitalization, sustainable development, food supply security, and SME development.
Upgraded relationship between Singapore and MERCOSUR
MERCOSUR bloc has a combined population of more than 295 million people and a GDP of US$2.2 trillion. Singapore’s total trade with the bloc accounts for half its trade with Latin America, totalling an estimated S$10 billion (US$7.5 billion) in 2022.
Over 100 Singaporean companies are based in the MERCOSUR markets, operating in sectors such as energy, agri-business, manufacturing, hospitality, and infrastructure. Examples include Changi Airports International, Wilmar International Limited, and SEA Group. Simultaneously, there are more than 100 MERCOSUR companies registered in Singapore.
The MCSFTA marks a historic milestone as the first-ever trade deal between Mercosur Member States and Singapore, also standing as Mercosur’s inaugural free trade agreement with a Southeast Asian country.
In January 2022, Singapore further solidified its ties with Latin America by signing a Free Trade Agreement (FTA) with the Pacific Alliance, a trade alliance comprising Peru, Mexico, Chile, and Colombia. These strategic agreements create a new bridge between Southeast Asia and Latin America, bringing two regions closer together.
Key highlights of the FTA
- Trade in goods
- Gradual reduction of import tariffs for approximately 96 percent of products over the next 15 years.
- Immediate tariff-free access for 25 percent of products.
- Focus on simplifying custom procedures, competition law enforcement, e-commerce, and cybersecurity.
- Trade in services
- develop a more favourable business environment to grant market access for businesses in R&D services, construction, and IT services.
- Rules of origin
- Singapore-based exporters will enjoy flexible rules of origin for goods to qualify for preferential tariffs when imported by a MERCOSUR member.
- Government regulation
- Non-discriminatory and fair treatment for Singapore companies competing for government contracts in MERCOSUR markets.
- Equal opportunity for MERCOSUR-based companies in Singapore government contracts.
- Facilitate the expansion of MSMEs to both jurisdictions through cooperation in capacity building.
- Promote paperless trading and digital trade facilitation.
- Strengthen trust in the digital economy through enhanced online consumer protection.
Introducing trade remedies
In the area of government procurement, the Agreement guarantees access to Singapore’s public procurement market for Brazilian companies. Brazil, however, has reserved some exceptions in its offer in order to protect strategic sectors and implement public policies aimed at micro and small companies.
Addressing potential challenges, the agreement includes provisions for trade remedies. In cases of import surges resulting from bilateral liberalization that could harm domestic industries, the agreement allows for the application of bilateral safeguards for a two-year period, with the option of a one-time extension.
Next steps: approval and ratification
After signing, the next crucial steps involve gaining approval from the Parliaments of Singapore and the Mercosur member countries. Once approved, the agreement will undergo ratification, paving the way for its entry into force and the initiation of a new era of economic cooperation between Mercosur and Singapore.