By Peng Jin
On 12 November 2018, China and Singapore signed the Protocol to Upgrade China-Singapore Free Trade Agreement (Upgrade Protocol) in Singapore to amend the China - Singapore Free Trade Agreement (CSFTA).
Overview of the China-Singapore Free Trade Agreement
The Free Trade Agreement between the Government of the People’s Republic of China and the Government of the Republic of Singapore (a.k.a. China-Singapore Free Trade Agreement, or CSFTA) was originally signed in October 2008 and implemented on 1 January 2009. It consists of the Preamble and 14 chapters: Initial Provisions, General Definitions, Trade in Goods, Rules of Origin, Custom Procedures, Trade Remedies, Technical Barriers to Trade, Sanitary and Phytosanitary Measures, Trade in Services, Movement of Natural Persons, Investment, Economic Cooperation, Dispute Settlement, Exceptions and General and Final Provisions, and 7 annexes.
The Upgrade Protocol – consisting of the Preamble, 8 chapters, 2 annexes and one exchange of letters –adds 3 new chapters: E-commerce, Competition Policy and Environment. It also, upgrades 6 aspects of the CSFTA such as rules of origin, custom procedures and trade facilitation, trade remedies, trade in services, investment and economic cooperation.
Upgrade focusing on Investment
According to the Ministry of Commerce of the PRC, the greatest change is in the Investment part of the Upgrade Protocol, expanding from “merely one or two paragraphs” to a separate chapter of 40 pages, representing a quarter of the Protocol in length. Reflecting this focus on investment, Premier Li Keqiang, expressed his welcome for Singapore’s increased investment in China (“more and more investment from Singapore”) for three times repeatedly, in his speech delivered in English at the 44th Singapore Lecture.
Specifically, in the area of investment, when the Upgrade Protocol comes into effect (see more information on this below), the Agreement between the Government of the People's Republic of China and the Government of the Republic of Singapore on the Promotion and Protection of Investments signed in November 1985 will terminate. Pursuant to the Upgrade Protocol:
• both sides give each other’s investors high level investment protection involving refund of tax, minimum treatment and transfer clauses;
• both sides also give each other post-entry national treatment as well as most-favoured nation (MFN) treatment;
a series of exception clauses such as financial prudential measures, fundamental security, confidential information, have been set up to keep the government’s space of policy on management of foreign investment, and a more robust Investor-State Dispute Settlement (ISDS) mechanism has been incorporated to provide full protection and remedies for both sides’ investors.
In addition, both sides are also committed to discussing further investment liberalisation through a Work Programme to allow more investment opportunities for investors in both countries.Discussions for further liberalisation will start within one year after the Upgrade Protocol enters into force. The responsible person of International Trade and Economic Affairs Department of the Ministry of Commerce of the PRC said that the “Investment” chapter in the Upgrade Protocol reflects the most recent development of our country’s practice of concluding international investment agreements, and better represents our country’s emphasis and protection of both inbound and outbound investments.
Other Upgraded Areas
In the area of customs procedures and rules of origins, both countries will push forward trade facilitation to a higher level and reduce trade costs for enterprises. The Protocol has also streamlined the product-specific rules of origin for certain chemical products. In the area of service trade, the two sides have upgraded their trade commitments compared to those set forth in the current FTA for express delivery, environment, air transport, legal, construction and shipping services etc. to mutually enhance service trade liberalization. In relation to people movement, the two countries concluded the Memorandum of Understanding between the Government of the People's Republic of China and the Government of the Republic of Singapore on the Transparency and Facilitation of Employment Pass Applications.
The Upgrade Protocol includes three new chapters for e-commerce, competition policies and environment sectors. A summary of the highlights are provided as below:
The e-commerce chapter primarily covers electronic authentication, electronic signature, online consumer protection, personal data protection, paperless trade and trade transparency. China and Singapore will work together to create favorable international regulatory environment to benefit the development of e-commerce, enhance bilateral trade facilitation, boost the cooperation between and expansion into the other country by e-commerce enterprises from China and Singapore, and foster the healthy development of bilateral trade in the long run.
In the competition policy chapter, the two countries undertake:
• to eliminate anti-competitive business practices, and promote and ensure fair competition environment in the administration of their domestic competition laws and regulations;
• to follow the principles of fairness, non-discrimination and due process in the enforcement of competition law; and to enhance exchanges and technical cooperation in competition law enforcement and continue to strengthen their respective enforcement capabilities in this aspect.
In the environment chapter, the two sides reiterate that each country has the sovereign right to determine its own targets and priority areas for environmental sustainability and to develop or amend its environmental laws and policies which each country will strive to ensure to benefit and foster environmental protection and implement effectively. The two sides pledge not to promote trade and investment at the expense of deteriorating environmental protection levels and agree not to manipulate environmental standards for trade protection purposes. They also vow to effectively implement multilateral environment agreements to which both countries are signatories, to carry out negotiation and cooperation on environmental issues when appropriate, and meanwhile conduct and deepen, when appropriate, cooperation in areas mutually beneficial based on current bilateral agreements. Further, the two countries have set up contact points to strengthen communication in order to facilitate the implementation of the environment and trade chapters.
When to Take Effect
The Upgrade Protocol will enter into force upon the completion of statutory ratification procedures of both countries. As provided in the Law of the People's Republic of China on the Procedure of the Conclusion of Treaties, the Upgrade Protocol is subject to the approval by the State Council or by the Standing Committee of the National People's Congress and subsequently by the President as the case may be.
In 2017, total bilateral trade between Singapore and China reached S$137.1 billion. In 2016, Singapore’s cumulative investment in China amounted to S$123.5 billion while China’s cumulative investment in Singapore amounted to S$24 billion. China is Singapore’s largest trading partner while Singapore is China’s largest foreign investor since 2013. The Upgraded CSFTA will definitely further “upgrade” the bilateral trade and economic cooperation and stimulate economic development for both countries.
Source: Press Release by the MINISTRY OF TRADE AND INDUSTRY of Singapore on CHINA AND SINGAPORE SIGN UPGRADED AGREEMENT on 12 NOVEMBER 2018.