CECA and Other Free Trade Agreements – An Explanation

CECA and Other Free Trade Agreements – An Explanation

1. Singapore is extremely dependent on trade. In fact, we have the HIGHEST trade to GDP ratio in the entire world , at over 300%. Between 2008 and 2011, it even averaged 400%.

2. This makes Singapore extremely vulnerable to anti-trade measures, such as tariffs. Conversely, we also disproportionately benefit from free trade agreements.

3. Not only is Singapore highly dependent on trade, because of our size, our negotiating power is very low. This is especially in bilateral trade agreements with large countries, where we have to convince these larger markets to open up, in exchange for access to our far smaller market.

4. Singapore also has very few weapons at our disposal for retaliation, if some larger country ever engages in a trade war with us. Access to our domestic market is a rounding error for most countries.

5. We thus want to be party to as many free trade agreements as possible, with as many countries as possible.

6. This includes CECA, a bilateral free trade agreement with India, one of the largest countries in the world.

7. Trade of good and services cannot be done without human beings involved. This is common sense. You need people to carry out trading of most goods, and all services.

8. Therefore free trade in goods and services, BY DEFINITION, will require some freedom of movement of people. I cannot emphasise enough this obvious point.

9. CECA and all free trade agreements will thus include a clause that allows the freedom of movement of people to carry out the trade of good and services. This is by definition true and unavoidable.

10. This freedom of movement of people between India (or any other country who has a FTA with us), is always narrowly defined so as to only include activities necessary to carry out trade of goods and services. It does NOT also allow permanent long term employment.

11. For example, bona fide business visitors and short term suppliers must not be subject to stringent rules and conditions.

12. The controversial clauses in CECA are the allowance of the entry of professionals and inter-corporate transfers. However, this is also common sense. Let me explain.

13. Professionals are defined as specialists who are allowed to stay in Singapore for up to ONE YEAR only. Professionals are required to deliver services. You cannot have a FTA that allows freedom of trade in services if you do not have the professionals to deliver it. Common sense.

14. Inter-company transfers are senior executives in a foreign (Indian) firm that sets up in Singapore in order to deliver trade in good or services. They must have been previously employed in that company overseas for at least 6 months, and may not stay for more than 2 years initially. This can be extended for two more 3-year contracts if the company justifies that these foreign staff are needed for their continued operation.

15. These foreign staff are not stealing jobs from Singaporeans. The companies/subsidiaries were set up as a result of the FTA, and would otherwise have been based in their home countries. Because of the FTA, some Singaporeans are employed by these new companies set up in Singapore. But they will need to send some of their old staff from India (or any other country) to set up and operate these companies. The companies also pay local taxes, and generate economic value and jobs by spending money in Singapore. This is the whole point of a free trade agreement.

16. All the above points may not be obvious to the common person, who can only see the foreigner physically in Singapore.

17. However, this should be obvious to politicians who purportedly want to be elected as leaders of the country. It is extremely irresponsible to fan the flames of anger towards foreigners, without explaining the details of free trade.

In summary, Singapore is highly reliant on trade. We cannot survive without trade. We need trade to be free, and we need to be party to as many free trade agreements as we can. And people are needed to carry out trade and services. We cannot have a free trade agreement with a foreign country, without allowing foreigners to carry out the trade of goods and services. This is however not the same as giving foreigners the freedom to be permanently employed in jobs that could otherwise be filled by Singaporeans.

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