Nov. 20 – Taiwan has signed a free trade pact with Singapore this month following three years of economic dialogues aimed at boosting cooperation between the two governments. The Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP) will reduce the tariff on goods traded between Taiwan and Singapore, facilitating greater bilateral economic relations.
As Taiwan’s fifth largest trade partner, the ASTEP agreement with Singapore represents the largest of its kind signed by Taiwan, which has faced challenges establishing such agreements under the shadow of Chinese diplomatic power.
“We are seriously lagging relative to our trade competitors, including South Korea, Singapore, and Japan. We must act fast to catch up with the regional trend,” said Taiwan’s President Ma Ying-Jeou, referring to economic integration efforts in the region such as the Regional Comprehensive Economic Partnership (which allies the ASEAN bloc with other Asian neighbors, such as South Korea, China and Japan).
Economists in Taiwan are hopeful the new agreement will pave the way for further economic partnerships.
“Taiwan’s advantage is that it can make another move forward into Southeast Asia, using this deal as a stepping stone. Taiwan wants to sign more agreements for sure and as long as China doesn’t interfere, we’ll see some substantive progress in the years ahead,” said SinoPac Securities’ economist Shi Hsiao-Chi.
David Lin of the Ministry of Foreign Affairs also views the current agreement positively, saying that “this landmark development will help pave the way for Taiwan to join the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership.”
In addition to raising Taiwan’s diplomatic standings, the deal will also provide trade advantages to the island economy through tariff reductions with Singapore.
According to the agreement, Singapore will set all tariffs on imported goods from Taiwan to zero percent and Taiwan will do the same for nearly 99.5 percent of their goods imported from Singapore. While the majority of tariff reductions will go into effect immediately, the agreement allows a 15-year period to bring all trade fees in line with the zero-tariff mandate.
The Chung-Hua Institution for Economic Research, located in Taipei, has calculated a US$701 million boost to Taiwan’s GDP following implementation of the ASTEP partnership. The institute also estimates Taiwanese exports to grow by US$540 million under the economic partnership, with imports rising by US$458 million. The agreement is expected to create over 4,000 new jobs in Taiwan.
Bilateral trade between Singapore and Taiwan stood at US$28.2 billion in 2012, up from just US$28 million in 2008.
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