Trade Policy and the Role of Regional and Bilateral FTAs: The Case of New Zealand and Singapore 9789812307521

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TRADE POLICY & THE ROLE OF REGIONAL & BILATERAL FTAs

The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publishing, an established academic press, has issued almost 2,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publishing works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world.

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TRADE POLICY & THE ROLE OF REGIONAL & BILATERAL FTAs The Case of New Zealand & Singapore

Edited by

Rahul Sen

I5ER5 Institute of Southeast Asian Studies

First published in Singapore in 2008 by ISEAS Publishing Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2008 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the editors and contributors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Trade policy and the role of regional and bilateral FTAs : the case of New Zealand and Singapore / edited by Rahul Sen. This book is a collection of papers presented at a Trade Policy Seminar held in Singapore on May 10, 2007. 1. Free trade—Singapore—Congresses. 2. Free trade—New Zealand—Congresses. 3. Singapore—Commercial policy—Congresses. 4. New Zealand—Commercial policy—Congresses. 5. Singapore—Foreign economic relations—New Zealand—Congresses. 6. New Zealand—Foreign economic relations—Singapore—Congresses. I. Sen, Rahul, 1965– HF1595 Z4N45T76 2008 ISBN 978-981-230-745-3 (soft cover) ISBN 978-981-230-752-1 (PDF) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Seng Lee Press Pte Ltd

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CONTENTS

Foreword K. Kesavapany

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About the Contributors

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Regional and Bilateral FTAs in the Asia-Pacific Region: Benefits and Risks Richard Grant A Sharing of Singapore’s Perspective on Regional and Bilateral FTAs in Asia-Pacific Loh Wai Keong Enhancing Bilateral Economic Linkages through New Regionalism: The Case of Singapore and New Zealand Rahul Sen

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FOREWORD

Free trade agreements (FTAs) are viewed as superhighways that connect Singapore to major economies and new markets. It is in the above context that Singapore has been engaged in negotiating bilateral FTAs with its major trading partners who are like-minded in terms of willingness to undertake comprehensive measures to liberalize trade and investment among themselves. At the APEC Leaders Meeting in New Zealand in 1999, APEC endorsed the legitimacy of using bilateral FTAs as a means to achieve multilateral trade liberalization. Following that historic decision, Singapore concluded its first FTA with New Zealand. Since then, Singapore has concluded FTAs with many of its major trading partners, including the United States, Japan, India, Australia, and Korea. It has also concluded a plurilateral TransPacific Strategic Economic Partnership (SEP) Agreement in 2006 that also involves New Zealand, along with Brunei and Chile. The Agreement between New Zealand and Singapore for a Closer Economic Partnership (ANZSCEP) that came in force in January 2001 assumes important significance as it has been the first comprehensive bilateral FTA that was ever signed involving Singapore, and also the first bilateral FTA of an ASEAN member, thus initiating the process of “new regionalism” in Asia. As is the case with any FTA, the primary aim of this agreement was to liberalize trade and investment flows between the two countries, reduce business costs, and strengthen bilateral economic linkages. Since the ANZSCEP agreement is the only one among Singapore’s regional trading agreements (RTAs) that has been in

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Foreword

force for close to five years now, the time is ripe to study some early effects of the FTAs between Singapore and New Zealand on bilateral economic relations, if any. In this context, the New Zealand High Commission in Singapore hosted a one-day Trade Policy Seminar on 10 May 2007 at Four Seasons Hotel, Singapore. This book is a collection of papers presented at the above seminar by three experts on the subject. It provides a deeper understanding about motivations of New Zealand and Singapore to enter into bilateral FTAs, and the visible impact that may be observed since their implementation. ISEAS is glad to be publishing such books that document the unique features of each FTA negotiation and to seek to learn lessons from them. Two more books, on the Korea-Singapore FTA and the EUASEAN FTA, are also expected to be published as part of the above outreach effort. K. Kesavapany Director Institute of Southeast Asian Studies 4 July 2007

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ABOUT THE CONTRIBUTORS

Richard Grant is High Commissioner of the New Zealand High Commission, Singapore. Loh Wai Keong was former Deputy Secretary of the Ministry of Trade and Industry, Singapore. Rahul Sen is Associate Fellow, Institute of Southeast Asian Studies, Singapore.

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Regional and Bilateral FTAs in the Asia-Pacific Region

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1 REGIONAL AND BILATERAL FTAs IN THE ASIA-PACIFIC REGION Benefits and Risks Richard Grant

I want to give you the New Zealand perspective on the benefits of regional and bilateral free trade agreements in our Asia-Pacific region. Singapore is one of New Zealand’s important trading partners in the region. Singapore is also, of course, one of our early free trade agreement (FTA) partners. And our two countries have pretty similar views on how to increase global trade flows, either bilaterally, regionally, or through the World Trade Organization (WTO). As a relatively small and distant economy, New Zealand is committed to a liberal multilateral trading environment within the rules-based system of the WTO. We are doing what we can to ensure an ambitious outcome from the current Doha Round of the WTO. It is our top trade priority because of the potential gains for the New Zealand economy and because it is the only way we can tackle large trade distortions such as subsidies. Of course the benefits of a successful Round will not accrue to New Zealand alone — the global gains are likely to be very significant. As you will know, New Zealand’s trade is dominated by landbased exports. We are one of the world’s powerhouses of

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agriculture trade. Agriculture accounts for more than half of our total merchandise exports1 and dairy products are our largest single export earner.2 We export more than 90 per cent of our lamb, and more than 80 per cent of our beef.3 While New Zealand accounts for only 7 per cent of world sheep meat production, we are responsible for 51 per cent of world trade — 75 per cent in the case of lamb. Likewise we are the world’s largest trader in dairy products. This is despite the fact that agriculture is the most distorted sector in world trade. For example, the European Union (EU) has an average tariff for agricultural products of 18.6 per cent; this compares with 4 per cent for non-agricultural products. This average hides tariff peaks of 146 per cent for frozen beef and 168 per cent for skim milk powder. In the United States, dairy products also face high tariffs: 108 per cent for whey powder, 122 per cent for dairy spreads, and 92 per cent for butter. Agriculture is also the most heavily subsidized sector in world trade. On average, support to agriculture producers in OECD countries has been estimated at US$273 billion per year between 2003 and 2005. The EU and the United States subsidize their dairy industries at levels 60 to 140 per cent greater than the total value of New Zealand’s dairy production.4 So you can see why New Zealand is interested in progress in the agriculture negotiations. The Doha negotiations are at a crunch point. Agriculture has been at the centre of negotiating difficulties. After a six-month break, negotiations resumed this January, and leaders of the G4 and G6 — the European Union, the United States, India, Brazil, Japan and Australia — have recently reaffirmed their commitment to getting a deal done by the end of the year. There will be formidable challenges ahead if that deadline is to be met, but it is

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essential that all members engage constructively in order to give us the best chance of meeting it. Alongside our strong commitment to multilateralism — it is our first priority — New Zealand is seeking to negotiate highquality FTAs with our key trading partners. We have also been strong advocates of Asia-Pacific regional economic integration. There will always be some countries willing to liberalize faster and deeper than through the slow-moving multilateral system. This has certainly been the case for New Zealand in trying to secure new market opportunities for our exporters. But the growing patchwork of FTAs in the Asia-Pacific region — often referred to as the “spaghetti bowl” or “noodle-bowl” — presents risks if New Zealand is not included in those agreements. New Zealand began its FTA network in Asia-Pacific with this country. Since then our bilateral FTA with Thailand has come into force. We are in negotiations with Malaysia. We, together with Australia, are in negotiation with ASEAN. We have also negotiated with Hong Kong, but those talks are not completed and are currently in suspense. We are about to begin with the Gulf Cooperation Council. And we are well down the track with China, the first developed economy to do so. Negotiations are also well under way for an ASEAN/Australia/ New Zealand FTA. Although differences remain, we believe the eighth round, which took place in March in Wellington, saw sufficient progress to keep the negotiations on track to an end 2007 completion date. The key challenges heading towards the next round in Indonesia at the end of this month include finalizing the goods modality, and agreement on a way ahead for services and investment. New Zealand, as you know, is committed to a high-quality agreement which provides significant commercial benefit to

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business and encourages two-way trade and investment between New Zealand and ASEAN. We believe the agreement must deliver on quality if it is to capture the interest of business. We have signalled that we can be flexible provided the result is an ambitious single undertaking. For example, we have agreed to ASEAN’s preferred positive list approach in services. We are also prepared to offer relevant economic cooperation, as part of an ambitious overall package. Elsewhere in ASEAN, New Zealand remains committed to completing an FTA with Malaysia, and is hopeful of re-engaging on it this year, to resolve the few outstanding issues. In taking this path, we have to seize opportunities and address risks. As a committed free-trader with a small open economy, New Zealand faces more risks than a lot of our larger trading partners. Our prospective partners already enjoy the fruits of New Zealand’s reforms and so we are not necessarily the first port of call when it comes to FTAs. This means New Zealand has to present a different valueproposition, something more than simple tariff reductions when presenting a case for further economic integration. And that is why New Zealand has been at the forefront of seeking to negotiate high-quality FTAs that can serve as models for others. China has recognized this and this is something I’ll come back to later. But while we want to be front-footed we also increasingly have to pay attention to the prospect of being locked out of markets because of our trading partners’ trade agreements with other countries. The potential competitive disadvantage is real for our exporters. For example, if Japan and Australia — our first and third biggest export markets — conclude a comprehensive FTA that excludes New Zealand, we would experience significant trade

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diversion. Australia is a key competitor in sectors where New Zealand has strong commercial interests, particularly agriculture, and, given the high levels of protection in that sector, New Zealand exports could be left out in the cold. There are other advantages of FTAs, beyond the static gains from reducing barriers that make exclusion from FTA arrangements a concern. One of the key advantages of an FTA is that economies become more connected. And these international linkages are an important component in helping to drive productivity growth. These connections tend to come at the government to government level initially, but can also stimulate and strengthen relationships in science, research and development, education, and investment and services trade. There is empirical support for this concept. For instance, a seminal paper by Frankel and Romer (1999)5 using sophisticated econometric techniques estimates that a one percentage point increase in the trade to GDP ratio can be expected to increase GDP per capita by between 0.9 and 3 per cent.6 This reflects the fact that openness can affect the factors which determine productivity; these include accumulation of factors of production, particularly human and physical capital, and how production is organized. The size of these so-called “dynamic productivity gains” is difficult to quantify, but they represent another cost for countries excluded from the emerging regional and bilateral free trade architecture. Another risk we all face from the growth in FTAs among our regional partners is that they might reduce the regional ambition for a result from multilateral trade liberalization. A successful outcome from the Doha negotiation will take

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considerable political will. There are some very difficult issues that countries must face, and some of those issues are most keenly felt in our Asia-Pacific neighbourhood. Leaders face domestic pressure to deliver outcomes on trade negotiations, and FTAs are seen as a way of getting more progress faster than can be delivered in the WTO context. WTO rules do provide for this by allowing members to pursue regional and bilateral FTAs, provided they encompass substantially all trade. However, in practice, recent deals have tended to exclude some of the most sensitive and difficult sectors. The FTA between Australia and the United States excludes sugar, and the agreement between Korea and the United States excludes rice. Therefore the risk is that carve outs in the FTA context might set precedents which further entrench trade distortions, and reduce countries’ willingness to tackle difficult issues in the multilateral negotiations. But lest we think that FTAs are all bad, they can generate some significant and important benefits — they’d have to, otherwise no one would agree to them! As I alluded to earlier, the most obvious benefits are economic. Removal of tariffs and unification of trading environments stimulates trade and encourages investment, to the benefit of both trading partners. I mentioned earlier that New Zealand is currently in active negotiations for an FTA with China. When deciding if New Zealand should enter into negotiations, it was estimated that removal of tariffs and unnecessary non-tariff measures would grow Chinese exports to New Zealand by 11 per cent, and New Zealand exports to China by 39 per cent in the first year after an FTA was agreed.7 China is New Zealand’s fourth-largest export market, and the opportunity to grow exports by 39 per cent in our fourth-largest export market is a pretty compelling reason to negotiate an FTA.

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But in this case, because our two economies are so different in scale, the economic advantages probably would not be strictly reciprocal. China is our number four export destination, whereas New Zealand is China’s thirty-first-largest market. So it follows that there must be compelling other reasons for China — and indeed any of our other regional partners — to want to negotiate an agreement with New Zealand. Putting the New Zealand/China FTA in context, it is notable that China and New Zealand have a longstanding and healthy bilateral relationship. This year will mark the thirty-fifth anniversary of diplomatic relations between our two countries, and an FTA will signal a significant step forward, reflecting the maturity of the relationship. Thus, the broader political context of relationship can both stimulate an FTA and be enriched as a consequence of it — beyond pure economic measures of connectedness. The ASEAN/Australia/New Zealand FTA, which I spoke about earlier, is an example of an agreement that should provide benefits for participants beyond commercial and economic ones. In New Zealand’s case, for example, we are looking at the FTA as a means to strengthen our engagement and cooperation with ASEAN — a key goal of New Zealand foreign policy. This point is also supported if we consider the agreements that New Zealand is involved in with Singapore — the Singapore New Zealand Closer Economic Partnership (CEP), and the TransPacific Strategic Economic Partnership between New Zealand, Chile, Singapore and Brunei, the so-called P4. As strongly tradefocused countries, Singapore and New Zealand already had relatively liberal economies for trade, with few restrictions to trade in goods. But in negotiating our CEP we extended this to trade in services, investment, and competition.

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This agreement, and the P4, should provide momentum towards the achievement of the APEC vision of free and open trade and investment in the APEC region by 2010. They also provide a clear signal to international markets of our commitment to integrate into the regional and global economy. As I mentioned earlier, FTAs can also send a strong statement of political will. Two of the biggest economies in the APEC region — the United States and South Korea — recently announced what is estimated to be the world’s largest FTA. Negotiations involved some particularly difficult issues — market access for automobiles and agricultural products in particular. But the fact that they were able to work through these difficulties and hammer out a deal sends a strong signal that these two countries are committed to achieving further liberalization in international trade. In a bestcase scenario such moves will ultimately add to the momentum for multilateral liberalization. It is a fact that at a time when an outcome from the multilateral process is far from assured, countries are persuaded by the benefits of regional and bilateral FTAs and are acting accordingly. In this regard APEC Ministers and Leaders have agreed to discuss the feasibility of an APEC-wide Free Trade Area of the Asia-Pacific region in the coming year. In fact, APEC members are among the most active FTA participants — there are currently between thirtyfive and forty regional and bilateral FTAs either operating or under negotiation in the Asia-Pacific region. This rate of participation is not surprising. The Asia-Pacific region is a dominant player in the global economy. ASEAN plus six, which includes New Zealand, accounts for 25 per cent of world trade, and APEC economies account for roughly half of world trade.8 The very early stages of considering how the sixteen members of the East Asia Summit might create an economic

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community can be seen in the proposal from our Japanese friends — endorsed by EAS Leaders this year in Cebu — that the sixteen countries study a comprehensive economic partnership for East Asia. It is not surprising that we are now seeing such emphasis placed on the development of some kind of regional economic architecture in order to allow us to build on existing cooperative networks such as ASEAN and APEC. Any emergent regional FTA will only serve to underscore the importance of the Asia-Pacific region in the global trading system, and, done properly and comprehensively, will have the potential to mitigate the risks of us ending up in a spaghetti bowl situation with a network of confusing bilateral FTAs. As I have highlighted above, New Zealand sees real benefits in this process and you can expect that we will be fully engaged as regional arrangements continue to take shape. As I have mentioned, the growth in FTAs carries some risks — particularly for those countries excluded from the process. The other side of this is the positive signal we can take from the fact that countries see the benefits of trade liberalization and want to move their trading relationships in this direction as quickly as possible. But I have to say that more than anything, this points to the need for everyone to raise their level of ambition in the multilateral process. We know that there are some significant challenges facing the Doha Round. We will continue to do our bit to try and find a way through these. From our perspective an ambitious outcome in the current Doha negotiations is still the best way we can improve our global trading system for the benefit of all. But whatever the outcome, it is clear that the emerging network of FTAs and developments in the regional economic architecture are set to shape debate about the Asia-Pacific economic landscape

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for the foreseeable future. New Zealand stands ready to play a full and constructive part in that.

Notes 1. 52.7 per cent of commodity exports. New Zealand External Trade Statistics (NZETS), Statistics New Zealand, December 2006, Table 3.03. 2. NZETS, December 2006, p. 1. 3. Meat and Wool New Zealand Economic service. 4. Figures from MAF calculations of notified Aggregate Measure of Support (AMS, a WTO measure of subsidy) and Producer Support Estimates (ex OECD). 5. Frankel J. and D. Romer, “Does Trade Cause Growth?”, American Economic Review 89, no. 3 (1999): 379–99. 6. See also Alacala, F. and A. Ciccone, “Trade and Productivity”, The Quarterly Journal of Economics 119, no. 2 (2004): 612–45. It should be noted that due to the complexity of the growth process it is hard to pin down causal drivers, but trade is one of the few variables found to have a statistically significant effect on growth. 7. Joint Study Report on China NZ FTA, Ministry of Commerce (China) and NZ MFAT, 2005. 8. 49 per cent — APEC at a Glance 2007.

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2 A SHARING OF SINGAPORE’S PERSPECTIVE ON REGIONAL AND BILATERAL FTAs IN ASIA-PACIFIC Loh Wai Keong

It is my pleasure to be here today among such a distinguished audience, to share with you Singapore’s outlook on free trade agreements (FTAs). It is heartening to see so many of you involved in discussions on the pivotal topic of bilateral and regional FTAs. I would like to start by wishing our friends from the Asia-Pacific region, a warm welcome to Singapore.

Introduction In recent years, there has been a multitude of literature written on the benefits and shortcomings of FTAs. With such convincing arguments at both ends of the spectrum, politicians and academics alike have been hard-pressed to conclusively determine the right train of thought. However, discussions, studies, and practices show that what is important is not the dogmatic decision of the right doctrine, but rather the pursuit of policies that benefit our business communities and boost our economies. Countries in the Asia-Pacific region are today the centre of a fast-paced global economy. We have rising giants in China and India. With this, new trade and investment patterns emerge. Our business communities are becoming increasingly interlinked. And

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rightly so, for industries need to evolve as production processes develop and markets become more and more competitive. With this, the role of policy-makers becomes increasingly important, and it is up to us to seize opportunities to create the best conditions for our companies to flourish in, and our economies to thrive. Akin to our Asia-Pacific neighbours, Singapore’s strategy has been to engage in FTAs and in regional integration, while maintaining focus on the WTO.

Synergies between Bilateral/Regional FTAs and Multilateral Agreements A common claim often heard is that countries pursuing FTAs have little or no incentive to push for multilateral agreements, thus contributing to the erosion of the WTO. For Singapore, this is not true. Maintaining the WTO process is essential to us, a small and open economy, highly dependent on trade. By virtue of a small domestic market, Singapore must look outwards. It is therefore important for us to have access to the global market, in a rules-based, multilateral trading system, which the WTO provides. In this regard, our commitment to the DDA negotiations is paramount. Support of the multilateral system does not contradict the pursuit of FTAs. Singapore does not see bilateral and regional trade liberalization as an alternative to the multilateral process, but rather, as complementary courses. FTAs form the building blocks in our efforts towards greater trade liberalization, while the discipline of a credible multilateral process remains essential to ensure checks and balances for the wider international trading system. The MFN-based multilateral process is also necessary to facilitate the integration of developing countries into the global market.

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Benefits of FTAs Outweigh Risks To date Singapore has signed eleven FTAs, and is in the midst of negotiating ten more. Trade and investment data with our FTA partners show that the FTAs are bearing fruit. With New Zealand, for instance, the first of our bilateral FTA partners, the value of our bilateral trade has almost tripled since our FTA was implemented in 2001. With Japan, a year after our FTA came into force, the net flow of investments from Singapore to Japan tripled to S$523 million from the previous year, and jumped to S$947 million two years later. These boosts to trade and investment flows among FTA partners happen, thanks to trade liberalization knocking down previously prohibitive high tariffs, allowing investors to gain from tariff savings. These savings are no meagre sum. Tariff savings achieved by our companies using our FTAs were more than S$470 million in 2006 alone. FTAs also reduce non-tariff barriers and discriminatory practices, further adding to the incentive for trade and investment. These translate into greater opportunities and lower operating costs for the exporter, more choices and lower prices for the consumer, and the invaluable profit of strong interrelations among economies. With such tangible benefits reaped from FTAs, challenges like the commonly cited “spaghetti bowl effect” are easily outweighed. The argument that a proliferation of numerous FTAs would only overlap and cause technical problems because of differing rules of origin, customs regulations, tariff schedules and regulatory schemes, is considerably weakened when compared with the tremendous gains. Through our FTA negotiations, Singapore has realized that what is needed to counter the potential disadvantages of a “spaghetti bowl”, is well-thought-out policies and approaches to manage and balance

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the various FTAs, so that all complement one another for maximum choice and returns. Keeping the bigger picture in sight is essential, as ultimately, an FTA benefits us all — from the producer to the consumer, the SME to the foreign investor, and the domestic economy to the region.

Towards a Wider Regional Architecture Beyond tangible benefits, FTAs importantly provide a stepping stone to wider regional architecture. In a region as dynamic as the Asia-Pacific, changes to our economic landscape come swiftly. The topic of regional architecture has been prevalent in recent months. And several regional economic integration configurations have been brainstormed, all of which revolve around the AsiaPacific. This is inevitable, with the rise of China and India having resulted in trade and investment patterns more closely linking the Asia-Pacific economies, and having driven home the fact that economies do not, and cannot, work in isolation. Our constantly evolving landscape, however, means that it is difficult to ascertain what form the regional architecture of AsiaPacific will take. Architectures in the forefront of discussions include the ASEAN+3 (comprising ASEAN, China, Japan, and South Korea); ASEAN+6 (comprising the ASEAN+3, India, Australia, and New Zealand); and the FTAAP (which is an FTA of the Asia-Pacific). Remaining actively engaged in the process of evolving architectures is vital. Just as we develop national policies to avoid spaghetti bowl drawbacks, so must we gear our approaches towards shaping a regional architecture that is as balanced and beneficial to the region as possible. In preparation for the wider regional architecture, ASEAN is currently focusing on realizing an ASEAN Economic Community (AEC) by 2015. Recognizing our strategic position as a key node

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in the Asia-Pacific, ASEAN also knows that we would be useless fragmented. Realizing an AEC would mean a single market and production base, with the free flow of goods, services, investments and skilled labour, and the freer flow of capital in ASEAN. This would not only equip ASEAN to face competition from the region and beyond, but would also ensure a firm foundation upon which the wider regional architecture can be built. For Singapore, it is fundamental to ensure a region that is stable, open, and inter-linked through robust trade and investment with one another and with the rest of the world. It is evident that many of our neighbours in the Asia-Pacific share these basic principles. New Zealand is one of our like-minded neighbours — party to the Trans-Pacific Strategic Economic Partnership (or P4), along with Brunei, Chile, and Singapore. Being the first FTA to span four main players across the Pacific, the P4 too has the potential to be a building block towards wider regional economic architectures like the FTAAP. It can also be a model in streamlining various FTA strands, to deftly avoid the spaghetti bowl tangle.

Conclusion To conclude, we have always been mindful of the fact that Singapore’s strategy was not born overnight. We have had to look to other major economies for inspiration and to emulate. We have had to attempt several possible approaches, learn from mistakes along the way, and play catch up to ensure that we are well connected to global economies. New Zealand has all along been an important role model for us. New Zealand is no stranger to FTAs, being one of the pioneers in this process — its Closer Economic Relations (CER) with Australia coming into force in 1983. We have seen how New Zealand’s exports to Australia doubled following the CER and how New Zealand’s companies

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gained access to a combined market of 24 million people — an eight-fold increase from its domestic market of 4 million. And now, New Zealand is negotiating an FTA with China and is well on track to be the first Western country to reap the strategic and economic benefits of China’s huge domestic market and high competitive edge. Singapore’s strong economic relations with New Zealand will no doubt continue through our bilateral and regional FTA partnerships with each other, centred by the same strength of focus on the WTO. Singapore’s first bilateral FTA was with New Zealand, concluded and implemented almost seven years ago. We are confident that this close partnership will drive forward our process towards an ASEAN-Australia-New Zealand FTA and towards the greater economic architecture.

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3 ENHANCING BILATERAL ECONOMIC LINKAGES THROUGH NEW REGIONALISM The Case of Singapore and New Zealand Rahul Sen

1. Introduction In a short span of four decades, the Singapore economy has evolved into a modern city-state economy. As a manufacturing and trading hub for Southeast Asia, it has been one of the most open economy in Asia with a trade to GDP ratio of 321 per cent in the year 2004. Maintaining a policy of outward orientation and reduced barriers to international trade and investment has been the prime focus of its growth strategy over the past decades, which has led its economy to register one of the highest rates of growth in the world, and an average per capita income surpassing many of the developed economies (Rajan 2003). Being a small open economy, Singapore has always been a leading advocate of global trade liberalization. With ASEAN economies recovering from the economic crisis of 1997–98, and largely unsuccessful efforts towards trade and investment liberalization in multilateral and regional fora, viz. the WTO and the APEC, bilateralism has emerged as one of the most

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preferred option to advance free trade goals among major Asian economies. It allows them to explore alternative paths to trade and investment liberalization, while concomitantly pursuing multilateral trade liberalization through the WTO (Sen 2006). This trend has been initiated by Singapore, which begun to pursue bilateralism as a major instrument of its commercial trade strategy through its moves to engage in free trade agreements (FTAs) with its major trading partners since the year 2000. As of March 2007, Singapore has entered into bilateral FTAs with the United States, Japan, Australia, New Zealand, Hashemite Kingdom of Jordan, EFTA, India, Korea, Chile, and Panama. It is also currently in the process of or contemplating negotiations with Mexico, Canada, Pakistan, Peru, China, and the Gulf Cooperation Council, among others.1 Concomitantly, other ASEAN economies, viz. Thailand, Malaysia and Philippines and recently Indonesia, have also been jumping onto this bandwagon, attempting to negotiate similar bilateral deals. This phenomenon of the rapid proliferation of bilateral and regional trading and economic cooperation agreements in the Asia-Pacific, especially in the aftermath of the regional financial crisis in 1997–98, has often been dubbed as “new regionalism”, since these agreements are emerging to be much more diverse in both scope and coverage than traditional FTAs (Rajan and Sen 2005). In this context, the Agreement between New Zealand and Singapore for a Closer Economic Partnership (ANZSCEP) that came in force since January 2001 assumes important significance as it has been the first comprehensive bilateral FTA that was ever signed involving Singapore, and also the first bilateral FTA of an ASEAN member, initiating the process of “new regionalism” in Asia. As is the case with any FTA, the primary aim of this agreement was to liberalize trade and investment flows between the two

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countries, reduce business costs, and strengthen bilateral economic linkages. By pursuing the bilateral route, Singapore’s policy-makers believe that suitably designed, regional trading arrangements (RTAs) and bilateral FTAs can complement the WTO by stimulating further global trade liberalization, and hence play a catalytic role in moving the WTO forward. This thinking is reflected in a recent study on Singapore’s trade policy by Liang (2005) who observes: Singapore’s pursuit of FTAs/RTAs has been driven by perceived economic benefits of regional integration as by strategic and political considerations. Singapore believes that FTAs complement the multilateral trading system in several ways: Firstly, FTAs can provide impetus to multilateral trade liberalization. FTAs allow countries to identify compatible partners with whom to pursue faster and broader liberalization, thus acting as catalyst for multilateral trade liberalization. Second, FTAs create positive competitive dynamics that spur further liberalization. FTAs put pressure on those that are slow to liberalize and in the process; help to push everyone towards liberalization at the regional and multilateral level….What is central is the need to ensure that FTAs/RTAs are WTO-consistent and WTO-plus whereby FTAs would contribute towards catalyzing the WTO liberalization process and regional integration (pp. 13–14).

The above indicates that Singapore has been engaged in negotiating bilateral FTAs with its major trading partners who are like-minded in terms of willingness to undertake comprehensive measures to liberalize trade and investment among themselves, and this strategy has also helped Singapore to solve the “convoy problem”, whereby least willing members

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within ASEAN could slow the pace of trade liberalization (Rajan, Sen, and Siregar 2001). The principal objectives behind the pursual of Singapore’s RTA strategy have been twofold. First, these agreements are aimed to enhance and deepen its economic and strategic links with its major trading partners in the global economy, viz. the United States and Japan. Second, the RTA strategy aims to forge new economic and strategic partnerships by seeking market access in the economies of its other trading partners which have hitherto not been contributing substantially to Singapore’s trade, and would thus help to diversify its external economic linkages beyond Southeast Asia. It is towards achieving this second objective that Singapore entered into negotiations with New Zealand to seal the ANZSCEP deal. It has also recently entered into a plurilateral agreement called the Trans-Pacific Strategic Economic Partnership (SEP), also involving New Zealand, as well as Brunei and Chile. This Agreement was first launched in October 2002 at the APEC Leaders’ Economic Meeting in Los Cabos, Mexico. Prior to Brunei’s participation as a party to the Agreement, the Trans-Pacific SEP was known as the Pacific-Three FTA. The inclusion of like-minded parties such as Brunei to the Agreement demonstrated the potential of the Trans-Pacific SEP to grow into a larger strategic agreement for trade liberalization. Chile, New Zealand, and Singapore signed the Trans-Pacific SEP Agreement on 18 July 2005, while Brunei signed on 2 August 2005. The Agreement entered into force on 28 May 2006 between New Zealand and Singapore, on 12 July 2006 for Brunei and on 8 November 2006 for Chile. Although there have been a number of studies on the motivations and rationale behind these RTAs and the expected welfare gains in entering into such an agreement, most of them have been simulation exercises based on the pre-RTA situation.

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Not much research has been done on the changes in trade and investment patterns post-RTA, compared with a situation wherein the RTA did not exist. One of the attempts in this direction was by Krueger (1999) that analysed the early effects of the North American Free Trade Agreement (NAFTA) and in particular, on Mexico’s entry into this RTA. The paper used the traditional theoretical arguments of trade creation and trade diversion to conclude that in the first three years of entry of force of NAFTA, the relative impact on trading patterns of its members in terms of trade creation or diversion was insignificant. In the Singapore context, there have been no previous studies in this area. One of the primary reasons is the fact that most of Singapore’s RTAs have come into force only after 2001, and have been in force only for about two to three years, which is a short time period to gauge its economic impact. Further, as acknowledged by Banda and Whalley (2005) in a recent paper, application of traditional modelling techniques of trade creation and trade diversion to understand the phenomenon of RTAs evolving out of the new regionalism in Asia and their welfare implications is challenging due to the complex nature and diverse coverage of these agreements, which covers not only liberalization of goods trade, but also that in services and investments, as well as negotiations on other issues, viz. trade facilitation, government procurement, intellectual property protection, and competition policy. It is thus expected that any credible impact of such RTAs especially in terms of investment flows and trade in services, which have a long gestation period, is unlikely to emerge soon. Since the ANZSCEP agreement is the only one among Singapore’s RTAs that is in force for close to five years now, the time is ripe to study some early effects of the FTAs between Singapore and New Zealand on bilateral economic relations, if any.

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This paper thus aims to assess the early effects of the FTAs not only with respect to merchandise trade, but also in the area of trade in services and investments flows. This has hitherto not been attempted in previous studies that have largely restricted the analysis to merchandise trade flows. The remainder of the paper is organized as follows. Section 2 analyses as well as compares and contrasts the salient features of the ANZSCEP and the Trans-Pacific SEP agreement and its expected impact on the Singapore economy. The next two sections analyse the extent of bilateral economic linkages between Singapore and New Zealand comparing the pre- and the post-RTA period in terms of merchandise trade (section 3) and trade in services and investment flows (section 4). The analysis in this section is severely constrained by the unavailability of bilateral services trade data among both countries. Section 5 provides an analysis of the implications of this agreement and other emerging RTAs involving these two countries, for other Asia-Pacific economies in the region, and concludes the paper.

2. FTAs between Singapore and New Zealand and Its Expected Impact on the Singapore Economy2 FTA efforts of Singapore were initiated with the launch of the negotiations on Agreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP), jointly announced by the Prime Ministers of New Zealand and Singapore during the APEC Leaders’ Summit in Auckland on 11 September 1999. After six rounds of negotiations, the ANZSCEP was signed on 18 August 2000, and came into effect on 1 January 2001. This was Singapore’s first bilateral and comprehensive FTA covering trade in goods and services, investment, government procurement, and intellectual property protection, among other areas. The TransPacific SEP, while also being a comprehensive agreement covering

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the above areas, also contains an added dimension of strategic partnership in selected areas, and includes a Memorandum of Understanding (MOU) on Labour Cooperation and an Environment Cooperation Agreement. The ANZSCEP and the Trans-Pacific agreement consist of the following provisions.

Trade in Goods and Rules of Origin Under the ANZSCEP, all bilateral tariffs have been eliminated with the agreement coming into force since 2001. Since Singapore already operates a close to zero tariff regime, tariff reductions have been more substantial on the New Zealand side in manufacturing industries within the electric machinery, nonelectric machinery and manufactured articles sectors. It is thus expected that in the post-RTA period, Singapore’s exports to New Zealand in these products would increase substantially, and it would gain preferential market access in exports of these products. These commitments have also been locked in by the two countries in the Trans-Pacific SEP Agreement. In that agreement, Chile has agreed to eliminate tariffs on 89.3 per cent of domestic exports to member countries upon entry into force, with tariffs on a further 9.57 per cent eliminated by 2009, with an aim towards complete elimination by six years of entry into force. Brunei has agreed to a market access package to complement Singapore’s under AFTA, in the Trans-Pacific SEP agreement. The above is of course subject to the exporter fulfilling the Rules of Origin (ROO) criteria under this agreement for nonoriginating goods, which is a regional value content rule that a product qualifies for preferential treatment under ANZSCEP if at least 40 per cent of the cost is of New Zealand or Singapore origin, and if the last place of manufacture is in New Zealand or in Singapore, with manufacturers being able to source inputs from overseas and including it in the New Zealand or Singapore

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component of these inputs towards the 40 per cent. In contrast, the Trans-Pacific SEP allows for liberal change of Tariff SubHeading rule, or where so stipulated, if at least 45 per cent of the cost originates from members, provided that total value of nonoriginating materials must not exceed 55 per cent of the value of the good, with outward processing (OP) recognized for tariff preferences.

Trade Remedies Under the ANZSCEP, New Zealand and Singapore have agreed to abolish the use of emergency safeguard measures and export subsidies on goods, including export subsidies on agricultural products under the ANZSCEP. Both countries have agreed to bring greater discipline to anti-dumping investigations and to minimize the opportunities to use anti-dumping in an arbitrary or protectionist manner. The plurilateral agreement agrees to maintain WTO Status Quo in these matters.

Trade Facilitation Three main initiatives have been undertaken with respect to ANZSCEP. First, paperless trading is to be introduced. Second, risk management has been emphasized on high-risk goods and travellers. This allows legitimate low-risk goods and travellers to be cleared expeditiously at the Customs checkpoints. Third, there would be certification for ROO with both New Zealand and Singapore assisting in the verification of claims for tariff preferences made by importers. Similar provisions also apply in case of Trans-Pacific SEP, except for paperless trading among all members. Further, New Zealand and Singapore have concluded a Mutual Recognition Agreement (MRA) on electrical and electronic

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equipment within the ANZSCEP. Under this agreement, electrical and electronic equipment tested in New Zealand or Singapore will no longer require a second round of testing when exported to the other country. They have also agreed to start on a work programme on the mutual or unilateral recognition of standards, regulations and test results, and the harmonization of standards. This work programme covers six sectors, including telecommunications equipment, pharmaceuticals and chemicals. Under the Trans-Pacific SEP, all members, including Singapore and New Zealand have agreed to put in place eight Implementing Arrangements with respect to sanitary and phytosanitary measures setting out the details of agreed procedures for trade to take place. In the area of technical barriers to trade, members have agreed to work towards mutual or unilateral recognition of standards, regulations and test results, and harmonization, on areas such as electrical and electronic goods, beef grading and shoe labelling. The above measures are expected to lower costs of exporting these products to New Zealand, and thus lead to an increase in their exports.

Trade in Services Under the ANZSCEP, New Zealand has committed to liberalize a range of engineering services, dental services, computer services, equipment repair services, info-communication technology (ICT) services, market research services, management consulting services, financial services, manufacturing services, land surveying services, printing services, courier services, environmental services and maritime, air and auxiliary transport services for Singapore service providers. It has agreed to further liberalize its regime for intra-corporate transferees, doing away with the residency

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requirement for some professions and occupations, and binding the threshold for investments subject to the New Zealand Overseas Investment Commission (OIC). For investments above the threshold, New Zealand has assured that the approval by the OIC will be conducted in an open, transparent, and predictable manner. Singapore has in turn committed to liberalize its architecture, financial, and engineering services, and has committed to continue to maintain open regime in sectors such as nursing services, research and development services, rental services, management consulting services, courier services, telecommunications services, certain health services, distribution services and university and technical education services. Both countries have agreed to regularly review their service sector commitments and to progressively expand them. Both countries have also agreed to work on the mutual recognition of professional qualifications and registration, including the recognition of degrees from each other’s universities. These commitments have been locked in by both countries in the Trans-Pacific SEP. Further, New Zealand and Chile have significantly improved on their commitments at the WTO, thus granting Singapore service suppliers preferential treatment over their competitors from other countries in sectors like medical services, private education services, computer and related services, construction services, real estate services and distribution services. These commitments are not applicable initially to Brunei, with two years of adjustment period granted to it before it is ready to liberalize services trade in these areas among member countries. Under the ANZSCEP, if trade in certain services sectors is not fully liberalized by 2010, the parties to the agreement would meet by 1 January 2008 to identify a list of such services sectors and measures and to consult on a mutually acceptable solution. Thus, while a positive list approach has been adopted in the

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ANZSCEP, the Trans-Pacific SEP adopts a negative list approach to services liberalization, with scope for liberalization for new services not explicitly covered under current schedule of commitments. Both agreements have clauses on improving domestic regulation with respect to services trade and provide MFN treatment for service providers from member countries. While the Trans-Pacific SEP aims to negotiate on liberalizing temporary movement of professionals between member countries, the ANZSCEP includes substantial liberalization commitments for movement of intra-corporate transferees and business visitors. The substantial commitment to liberalize a range of services trade including professional services, financial services and environmental services is expected to open up significant opportunities for Singapore service providers who wish to export these services to New Zealand.

Investment Under the ANZSCEP agreement, New Zealand and Singapore have committed to a framework of investment rules to promote and protect bilateral investment. Besides granting national treatment and MFN treatment to investors from Singapore, New Zealand guarantees that Singapore investors are allowed to transfer and repatriate funds freely in any useable currency at the prevailing market exchange rates. It is also agreed that in the event of a dispute between a Singapore investor and the New Zealand government, the Singapore investor can raise the issue at the International Centre for Settlement of Investment Dispute, with New Zealand’s consent. These commitments to a framework of investment rules to promote and protect bilateral investments thus guarantee a minimum standard of access and protection of investments in the

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respective countries and are expected to boost Singapore investments in New Zealand and vice versa. The investments could be further boosted when the Trans-Pacific SEP also negotiates a similar commitment, which it expects to do so within two years of entry into force.

Government Procurement New Zealand and Singapore have also committed to establish a single government procurement market to maximize competitive opportunities and to reduce costs of doing business for both the government and industry. Suppliers from the two countries will be given equal and non-discriminatory access to government tenders valued at above Special Drawing Rights worth about S$110,000. Procurement will be conducted based on the principles of transparency, value for money, fair dealing, accountability, due process, non-discrimination and open and effective competition. These provisions would allow private businesses in either country to sell goods and services to governments of the other, through bidding for contracts. In the Singapore context, these commitments would benefit their suppliers who would now enjoy equal and non-discriminatory access to all government tenders worth above S$110,000 in New Zealand. Under the Trans-Pacific SEP, each country would grant equal and non-discriminatory access to government tenders in excess of the agreed monetary thresholds to suppliers from other parties to the Trans-Pacific SEP. The agreed threshold for goods and services (excluding construction services) is Special Drawing Rights (SDR) 50,000 (approximately S$120,000), for construction services is SDR 5 million (approximately S$12 million). Members have also committed to call for an open tender except for specific situations. The coverage of the chapter is quite extensive.

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Intellectual Property Protection (IPP) In the area of intellectual property protection, both countries have agreed to abide by the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), which is expected to govern all intellectual property issues arising under the ANZSCEP and the Trans-Pacific SEP. As such, Singapore investors are not provided any additional IP protection for knowledge-based investments, as in case of its other RTAs, viz. that involving the United States.

Competition Policy These provisions facilitate the maintenance of an environment supportive of competition. They encourage both parties to implement the ANZSCEP and the Trans-Pacific SEP in a procompetitive manner. Both parties are also encouraged to consult one another when developing new competition measures.

Dispute Settlement Both agreements have agreed to set up a robust process for consultation or settlement of disputes between the two countries.

General Provisions To promote transparency, both countries have agreed to make public all laws, rules and regulations that affect trade in goods, services, and investment between the two countries, and provide the opportunity to comment on them, with appropriate exemptions allowed for either party to adopt measures to protect public order or morality or to support creative arts of national value, among others, provided such measures are not used arbitrarily or discriminatorily or as a disguised restriction on trade. It allows for reviewing the ANZSCEP every two years and the Trans-Pacific

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SEP three years after implementation. Both agreements are allowed to be terminated by any party within six months notice. The Trans-Pacific SEP further adds in a strategic partnership framework for cooperation between two or more Trans-Pacific SEP parties across five fields — economic, education, primary industry, cultural, and science, research and technology. All members, including Singapore and New Zealand, have agreed to build on existing cooperative agreements between them and to strengthen mechanisms for the sharing of information and experiences.

Accession to New Members The ANZSCEP has been left open to accession or association by any member of the WTO or by any other country, provided both countries agree, with the two trade Ministers agreeing to meet every two years to review and expand on the commitments under the ANZSCEP. A general review of the ANZSCEP agreement was conducted in 2005. Singapore and New Zealand, being both members of the Asia-Pacific Economic Cooperation (APEC) grouping, have thus initiated the ANZSCEP as a building block towards the creation of an APEC-wide FTA. In line with this objective, the Trans-Pacific SEP is also left open for accession to new members on same terms and conditions, in line with the principle of open regionalism followed by APEC members. The above indicates that both the ANZSCEP and the TransPacific SEP agreement has been intended to not only provide greater market access for Singapore’s trade and investment flows into New Zealand and vice versa, but to also facilitate and enhance broader economic cooperation between the two countries. Being an agreement with simplified rules of origin, and covering substantially all bilateral trade between the two countries, and as

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well as being open to accession for new members, these are one of the few agreements that may be termed as being “WTOconsistent” in the closest sense. However, it is observed that the Trans-Pacific SEP is still evolving and its commitments, though largely matching those in the ANZSCEP, are also different in important areas such as ROO and coverage of services trade liberalization.

3. Singapore’s Bilateral Trade Linkages with New Zealand Trends in Merchandise Trade Singapore, being an entrepot trading city-state, is a major player in global trade. Thus, according to the WTO, in 2003, Singapore ranked sixteenth in terms of world merchandise exports and fifteenth in world merchandise imports, accounting for about 2 per cent of global exports and 1.5 per cent of global imports respectively.3 However, if the entrepot component of re-exports is excluded, its ranking slipped to twenty-fourth in global merchandise exports in that same year. In contrast, New Zealand was the world’s fifty-second largest trading nation in global merchandise exports, and forty-eighth in terms of global merchandise imports accounting for about 0.2 per cent of global exports and 0.2 per cent of global imports respectively. Its total value of merchandise trade (US$35.3 billion) was far lesser than that of Singapore (US$272.0 billion) in 2003 (WTO 2005). Figure 3.1 displays the trends in Singapore’s total merchandise trade with New Zealand over the past decade (1989– 2004). The share of New Zealand in Singapore’s overall merchandise trade during this period averaged 0.27 per cent, which increased, post-FTA, to about 0.29 per cent and 0.35 per cent respectively in 2003 and 2004. Most of this expansion was contributed by Singapore’s exports to New Zealand, which more

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US $ billion

Total Exports

Imports Bilateral Trade Surplus

Year

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Computed from UN-Comtrade database.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

FIGURE 3.1 Trends in Singapore’s Merchandise Trade with New Zealand, 1989–2004

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than doubled during this period, and also expanded in its share from 0.25 to 0.35 per cent over the post-FTA period of 2002–2004 (Figure 3.2). During the entire decade, Singapore registered a continuous bilateral trade surplus with New Zealand that registered a peak of US$0.67 billion in 2004 (Figure 3.1). Notably, the rank of New Zealand in Singapore’s total merchandise trade improved from twenty-seventh to twenty-third over the 2001– 2004 period (Department of Statistics 2005). It is important to note that a significant entrepot component of re-exports is constituted in Singapore-New Zealand merchandise trade. Thus, in 2004, nearly a third of Singapore’s total exports constituted of re-exports, which constituted of goods that underwent some value-addition in Singapore, while being transshipped from other ASEAN countries. Figure 3.3 indicates that over the past decade, the share of re-exports in Singapore’s total exports to New Zealand has declined, with the importance of Singapore’s domestic exports (exports that originate from Singapore) having increased in recent years, especially since the ANZSCEP came into force. Indeed, if calculated as a share of Singapore’s total exports, the share of domestic exports destined for New Zealand has increased from 60 per cent to 66 per cent, with an increase of 150 per cent in volume over the 2002–2004 period. This is a substantial increase compared with the previous years, and could perhaps be interpreted as in indication of the ANZSCEP agreement’s success in expanding Singapore’s exports to New Zealand, especially if its growth has been fuelled by exports of those products on which tariffs have been eliminated under the agreement, or of that by exports of new products, indicating greater market access for its exports. In contrast, New Zealand’s trade with Singapore has constituted an average of about 1.6 per cent of New Zealand’s global merchandise trade in the same period. Singapore was New

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%

Share in Total Share in Imports

Share in Exports

Year

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Computed from UN-Comtrade Database.

0.00

0.10

0.20

0.30

0.40

0.50

0.60

FIGURE 3.2 Shares of New Zealand in Singapore’s Merchandise Trade, 1989–2004

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US$ billion

Domestic Exports

Re-Exports

Year

1989 199 0 1991 199 2 1993 1994 199 5 1996 1997 1998 199 9 2000 2001 2002 2003 200 4

Source: Computed from Department of Statistics, Singapore (2005).

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

FIGURE 3.3 Singapore’s Exports to New Zealand, 1989–2004

Enhancing Bilateral Economic Linkages through New Regionalism 35

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Zealand’s eighth largest trading partner, with its merchandise trade with Singapore valued at US$0.54 billion in the year 2004. Its imports from Singapore were valued at US$0.3 billion during the same period, thus making Singapore the eighth largest source for New Zealand’s imports (Statistics New Zealand 2005). Figure 3.4 displays the trends in its total merchandise trade with Singapore, over the period 1989–2004. It is observed that although the volume of its bilateral merchandise trade with Singapore has been growing over the decade, there is no significant increase being observed after the ANZSCEP agreement came in force in 2001, except for a 34 per cent growth in its exports to Singapore in 2004, compared with 2003, which is by far its highest export growth over the past fifteen-year period. This is to be expected as Singapore was already operating under a zero-tariff regime prior to the ANZSCEP. The trends in shares of Singapore in New Zealand’s merchandise trade (Figure 3.5) confirms this fact, with post-FTA shares of Singapore being much lower in New Zealand’s total exports, compared to the pre-FTA period. Comparing Figures 3.1 and 3.4, it is observed that both Singapore and New Zealand have reported bilateral trade surpluses with each other in some years over the 1989–2004, which is statistically impossible. One of the reasons behind this discrepancy is likely due to the fact that New Zealand reports its imports from Singapore according to country of origin, and therefore does not include Singapore’s reported re-exports in its import data. Indeed, studies by Sen (2000) on Singapore’s entrepot trade role have concluded that trading partners of Singapore that have a high entrepot component of re-export do report such discrepancies.4

Commodity Composition of Merchandise Trade The preceding section has so far focused only on broad trends in aggregate trade linkages. However, it is necessary to examine the

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US $ billion

Exports Total

Imports Current A/C balance

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Computed from UN-Comtrade Database.

-0.30

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

FIGURE 3.4 Trends in New Zealand’s Merchandise Trade with Singapore, 1989–2004

Year

Enhancing Bilateral Economic Linkages through New Regionalism 37

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%

Source: Computed from UN-Comtrade Database.

Exports

Imports

Total

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20

0.0

0.5

1.0

1.5

2.0

2.5

FIGURE 3.5 Share of Singapore in Ne w Zealand’s Merchandise Trade, 1989–2004

Year

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commodity composition or growth of merchandise trade between Singapore and New Zealand to understand how the ANZSCEP agreement on goods might have affected the commodity composition of merchandise trade between the two countries, especially from the Singapore side since it has been observed in the previous section that Singapore’s exports have expanded into New Zealand after the NAZSCEP agreement was signed. Table 3.1 compares the composition of Singapore’s overall merchandise exports and exports to New Zealand by commodity groups at the SITC 3-digit level in 2000 (pre-FTA) and 2004 (postFTA), in order to analyse any possible changes in merchandise export or import composition that might have possibly resulted from the FTA. It is observed that for both the periods, Singapore’s global merchandise exports were concentrated in five major product categories of electronic and petroleum products, i.e., SITC 776, 334, 752, 759, and 764. However, during this period, the share of these goods went down from 61 per cent to 56 per cent of Singapore’s total world merchandise exports. In the case of its exports to New Zealand, during 2000 as well as in 2004, most of the top ten products consist of electronic and petroleum products, i.e., SITC 334,752, 759, 776, 764, 778. Besides these products, musical instruments (SITC 898), polymers of ethylene (SITC 571) and motor cars (SITC 781) also figured in the list of top ten products for both years, although their ranking in the export basket changed significantly. Over this period the share of these products in total exports destined for New Zealand went up drastically from 57 per cent to 70.5 per cent, which could be a possible impact of entering into the ANZSCEP agreement. Comparing across 2000 and 2004, two products seem to have significantly gained their shares in Singapore’s major exports to New Zealand, and have thus improved their rankings significantly

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Automatic Data Proc Equip Petroleum Products Parts for office machines Telecom Equip parts nes Musical Instruments etc Transistors, valves, etc Photo Cinematograph suppl Electric Mach. Appart nes Polymers of Ethylene Pass. Motor Vehicles elc bus

New Zealand

Transistors, valves, etc Automatic Data Proc Equip Petroleum Products Parts for office machines Telecom Equip parts nes Electric Mach. Appart nes Elec Switch Relay Circuit Musical Instruments etc Oth Mach, Pts, Spcl Industry Organo-Inorganic Compounds

World

Product Description

72.7 24.4 22.9 19.8 19.3 13.8 11.6 10.4 8.5 7.1

34,436.3 19,424.0 12,877.3 11,258.6 5,860.7 3,387.5 3,261.8 2,469.8 1,763.2 1,294.8

Value (US$ million)

Note: Commodity composition at SITC 3-digit level. Source: Computed from UN-Comtrade database.

752 334 759 764 898 776 882 778 571 781

776 752 334 759 764 778 772 898 728 515

Product Code

19.7 6.6 6.2 5.4 5.2 3.7 3.1 2.8 2.3 1.9

25.0 14.1 9.3 8.2 4.3 2.5 2.4 1.8 1.3 0.9

Share in total

Top 10 products exported from Singapore to the World and New Zealand, 2000

334 752 759 776 781 764 778 898 571 792

776 334 752 759 764 515 931 772 778 898

Product Code

Petroleum Products Automatic Data Proc Equip Parts for office machines Transistors, valves, etc Pass. Motor Vehicles elc bus Telecom Equip parts nes Electric Mach. Appart nes Musical Instruments etc Polymers of Ethylene Aircraft, Associated Equipnt

New Zealand

Transistors, valves, etc Petroleum Products Automatic Data Proc Equip Parts for office machines Telecom Equip parts nes Organo-Inorganic Compounds Spec Transaction not classified Elec Switch Relay Circuit Electric Mach. Appart nes Musical Instruments etc

World

Product Description

358.3 52.6 49.8 40.7 38.5 34.6 30.9 22.6 18.9 14.4

46,932.6 16,089.9 15,859.2 11,635.5 9,299.4 6,013.5 5,808.5 3,746.6 3,123.9 2,605.8

Value (US$ million)

38.2 5.6 5.3 4.3 4.1 3.7 3.3 2.4 2.0 1.5

26.3 9.0 8.9 6.5 5.2 3.4 3.3 2.1 1.8 1.5

Share in total

Top 10 products exported from Singapore to the World and New Zealand, 2004

TABLE 3.1 Top 10 Products of Singapore’s Total Exports to the World and New Zealand, 2000 and 2004 40 Rahul Sen

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in the post-FTA period. These include refined petroleum (SITC 334) that expanded nearly sixfold in its share, from 6.6 per cent in 2000 (ranking second) to about 38.2 per cent in 2004, ranking as the top-most product of merchandise exports, as well as passenger motor vehicles and automobiles, n.e.s. (SITC 781), whose share more than doubled from 1.9 per cent to 4.1 per cent over the same period, and improved its ranking in the export basket from tenth to fifth position after the FTA came into force. Another product that exhibited a discernible increase in export share to New Zealand during this period was that of electronic valves (SITC 776) from 3.7 per cent to 4.3 per cent (improving its ranking from sixth to fourth position over 2000–2004) and electrical machinery and apparatus (SITC 778), although there was not much improvement in the ranking. All the other electronic products, viz. SITC 752, 759, and 764, experienced a decline in their shares in total exports to New Zealand after the FTA. Since most of the above products were provided preferential tariff reduction after the ANZSCEP came into force in 2001, the changes in composition as indicated above are likely to be a result of the agreement, more so since similar changes are not observed in Singapore’s total exports to the world. Indeed, the tariff data from UNCTAD-TRAINS suggests that over 2000–2002, preferential tariffs facing exports of SITC 334 and SITC 781 from Singapore into New Zealand were brought down from 1.03 per cent and 10 per cent in 2000 to zero in 2002 for both products respectively, which might explain the surge in their bilateral exports to New Zealand. Table 3.2 documents the same for composition of Singapore’s imports from the world and New Zealand in the 2000–2004 period. It is noted that for both this period, Singapore’s global imports are concentrated in six product categories, viz. electronics and petroleum products (SITC 776, 333, 334, 759, 764 and 752), which

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21.9 14.0 13.8 11.3 11.1 10.4 7.9 6.3 5.0 4.6

30,556.3 9,869.1 8,737.6 7,452.2 6,363.4 4,832.4 3,748.4 3,675.6 3,546.3 2,684.3

Milk and Cream Fish etc prepared, preserved nes Medicaments Fruits, Nuts Excl. Oil Nuts Bovine Meat Paper and Paperboard Butter, Other Fat of Milk Alcohol, Phenol, etc. deriv Vegetables Telecom Equip parts nes

New Zealand

Transistors, valves, etc Parts for office machines Petroleum Oils, Crude Petroleum Products Automatic Data Proc Equip Telecom Equip parts nes Electric Mach. Appart nes Elec Switch Relay Circuit Oth Mach, Pts, Spcl Industry Measure, Control Instrument

World

Product Description

Value (USD million)

Note: Commodity composition at SITC 3-digit level. Source: Computed from UN-Comtrade Database.

022 037 542 057 011 641 023 512 054 764

776 759 333 334 752 764 778 772 728 874

Product Code

11.4 7.3 7.2 5.9 5.8 5.4 4.1 3.3 2.6 2.4

22.7 7.3 6.5 5.5 4.7 3.6 2.8 2.7 2.6 2.0

Share in total

Top 10 products imported to Singapore from the World and New Zealand, 2000

022 023 037 011 792 759 776 057 713 012

776 333 334 759 764 752 792 772 778 728

Product Code

63.8 18.4 14.2 11.8 10.5 10.1 9.9 7.8 7.3 6.2

36,226.6 12,122.8 12,109.7 10,343.0 8,694.3 49,84.2 3,955.9 3,622.8 3,347.0 3,301.4

Milk and Cream Butter, Other Fat of Milk Fish etc prepared, preserved nes Bovine Meat Aircraft, Associated Equipnt Parts for office machines Transistors, valves, etc Fruits, Nuts Excl. Oil Nuts Internal Combustion Pstn Engine Other Meat, Meat Offal

New Zealand

Transistors, valves, etc Petroleum Oils, Crude Petroleum Products Parts for office machines Telecom Equip parts nes Automatic Data Proc Equip Aircraft, Associated Equipnt Elec Switch Relay Circuit Electric Mach. Appart nes Oth Mach, Pts, Spcl Industry

World

Product Description

Value (USD million)

24.0 6.9 5.3 4.4 3.9 3.8 3.7 2.9 2.7 2.3

22.3 7.5 7.4 6.4 5.3 3.1 2.4 2.2 2.1 2.0

Share in total

Top 10 products imported to Singapore from the World and New Zealand, 2004

TABLE 3.2 Top 10 Products of Singapore’s Total Imports from the World and from New Zealand, 2000 and 2004 42 Rahul Sen

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constituted nearly 50–52 per cent of Singapore’s total world imports. Both crude and refined petroleum (SITC 333 and 334) together constituted around 12–13 per cent of Singapore’s global imports. Electronic valves (SITC 776) has been the top ranked product in Singapore’s overall imports, constituting more than one fifth of the total. Analysing Singapore’s import basket of goods from New Zealand, it is observed that milk and cream (SITC 022) has been the top ranked product in Singapore’s imports from New Zealand for both in 2000 and 2004, with its share more than doubling from 11 per cent to about 24 per cent in Singapore’s total imports from New Zealand after the FTA came into force. Butter and other fat of milk (SITC 023) was among the other product that also increased its share in Singapore’s imports from New Zealand and its ranking in the import basket (from seventh to second) during this period. Among the top ten products, only five of them (all food products) were common for both these years, viz. SITC 022, 023, 037, 011, and 057, although the share of many of these products (SITC 037, 011 and 057) declined during the post-FTA period. Comparing the export and import basket of Singapore-New Zealand merchandise trade, there are no significant overlap of products, indicating that possibilities of intra-industry trade between the two countries have been limited, even after the entry into force of the agreement.

4. Trade in Services and Direct Investment Services Trade in New Zealand and Singapore and Possible Impact of the ANZSCEP With increasing globalization of the world economy, various activities in the services sector are now being opened up for commercial trading purposes among international service providers, and the services sector has been rapidly expanding and

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increasing its prominence in production and employment structures of developed as well as developing countries in the world. It is notable that in the case of both the economies of New Zealand and Singapore, the services sector is the largest contributor to GDP (about 65 per cent in 2003) (World Bank 2005). According to the WTO rankings of commercial services trade in 2003, New Zealand ranked forty-first in global exports of commercial services and forty-fourth in global imports of commercial services, accounting for 0.4 per cent of world service exports and 0.3 per cent of world service imports, respectively. In contrast, Singapore ranked eighteenth in the global export of commercial service and seventeenth in the case of imports, accounting for about 1.7 per cent of world service exports and 1.5 per cent of world service imports, respectively (WTO 2005). Therefore, while Singapore’s ranking is more or less similar in both world merchandise trade and in world trade in commercial services, New Zealand’s ranking is much higher in commercial services compared to that of merchandise trade. Analysing the composition of commercial services trade of Singapore and New Zealand in 2003, it is observed that while other commercial services (comprising of ICT and professional business services, and all other services except travel and transportation) consisted nearly half of Singapore’s commercial services exports, about 62 per cent of New Zealand’s service exports are observed to be dominated by travel services, indicating the tourism sector to be the single largest export earner among its commercial services (Figures 3.6A and 3.7A). On the import side, it is observed that while transportation services (45.7 per cent) and other commercial services (35.7 per cent) constituted the bulk of Singapore’s service imports, establishing its importance as a logistics hub, New Zealand’s services imports have also been

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Source: WTO (2005).

Other Com m ercial Services 48.4%

Travel Services 13.1%

Transport Services 38.5%

FIGURE 3.6A Composition of Singapore’s Commercial Services Exports, 2003

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Source: WTO (2005).

Travel Services 16.7%

Other Com mercial Services 37.6% Transport Services 45.7%

FIGURE 3.6B Composition of Singapore’s Commercial Services Imports, 2003

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Source: WTO (2005).

Travel Services 62.4%

Other Commercial Services 16.5%

Transport Services 21.1%

FIGURE 3.7A Composition of New Zealand’s Commercial Services Exports, 2003

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Source: WTO (2005).

Travel Services 32.1%

Other Commercial Services 32.6% Transport Services 35.3%

FIGURE 3.7B Composition of New Zealand’s Commercial Services Imports, 2003

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significantly constituted by these two categories, with travel services imports accounting for only 32 per cent of the total (Figures 3.6B and 3.7B). As noted earlier, the ANZSCEP agreement has pursued bilateral services trade liberalization as a stated objective and several of New Zealand’s services (that falls in the category of other commercial services) has been liberalized for Singapore’s service providers, while similar commitments have also been announced from the Singapore side, granting preferential access to New Zealand’s service providers in their market. While these measures were expected to significantly improve market access for both countries in services trade for both countries, quantifying these benefits in terms of actual market access gained is rendered impossible in the post-ANZSCEP period unlike the case of merchandise trade. This is because bilateral services trade (with the possible exception of visitor arrivals) remains unavailable for Singapore, as well as for New Zealand even on an aggregate basis, in spite of the latter being an OECD member.5 This is part of the general problem with services trade analysis since in most cases, available data on services trade are not comprehensive, detailed, timely or internationally comparable, largely due to the distinct nature of services trade that it is non-storable, and involves a simultaneous producer–consumer interaction. Further, even if bilateral data were to exist, it would be difficult to argue that an increase in volume of bilateral services trade may have necessarily been a result of the ANZSCEP, since literature argues that in many cases, it is the market forces that drive growth in services trade, with liberalization playing only a facilitating role. However, since FDI or commercial presence that constitutes Mode 3 of service supply provision is a major driver of cross-border services trade, especially in the services liberalized

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by the ANZSCEP, one might assert that a discernible increase in bilateral FDI flows between New Zealand and Singapore may be taken as a signal of an expansion of bilateral services trade in the post-ANZSCEP period.

Direct Investment Flows Bilateral flows of FDI have been a major instrument in the development of economic linkages between Singapore and New Zealand in recent years. These have been facilitated by a largely open and transparent economy, a business-friendly environment for foreign investors, and similarities in the legal system. As indicated earlier, the ANZSCEP has provided measures to liberalize, facilitate, and protect bilateral investments between the two countries. Figure 3.8 provides the trends in the stock of bilateral investment flows between the two countries over 1997–2003. It is observed that while Singapore’s stock of direct investments in New Zealand amounted to about S$1.4 billion at the end of 1997, it registered a significant decline thereafter. However, direct investment flows into New Zealand more than doubled from S$0.5 billion in 2001 to S$1.1 billion in 2003, when the ANZSCEP agreement came into force. In terms of shares, that of New Zealand in Singapore’s total direct investments abroad increased from 0.4 per cent to 0.7 per cent over this period. This indicates that perhaps the ANZSCEP agreement has had some limited degree of success in expanding bilateral investments from Singapore, although the levels remain lower than those already achieved in 1997. In contrast, New Zealand’s FDI stock in Singapore is observed to be virtually stagnant over the same period, with a decline in FDI stock from S$0.20 billion to S$0.16 billion over the post-

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0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1997 1999 2000

2001

2002

2003

Total Stock of Singapore's Direct Investments in New Zealand (end of period) Total Stock of New Zealand's Foreign Direct Investments in Singapore (end of period)

1998

Source: Department of Statistics, Singapore (2005).

S $ billion

Year

FIGURE 3.8 Trends in Bilateral Investment Flows between Singapore and Ne w Zealand, 1997–2003

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ANZSCEP period of 2001–2003. Indeed, compared to the United States, EU, and Japan, who are the major investors in Singapore, New Zealand’s investments in Singapore have been rather negligible in magnitude, with New Zealand’s average share in Singapore’s total FDI stock being to the tune of 0.1 per cent over the 1997–2003 period. The above indicates that on a comparative basis, New Zealand investors may not have fully utilized the investment potential of Singapore as a regional investment hub in Asia even after the ANZSCEP, while Singapore investors have ventured into New Zealand more aggressively for investment opportunities after this agreement provided more greater certainty in business environment for their investments. In order to analyse changes in composition of bilateral investments of Singapore into and from New Zealand after the FTA, Figures 3.9A and 3.9B provide snapshots of the composition of the stock of Singapore’s direct equity investments in New Zealand in the years 2000 and 2002 respectively. It is observed that within a span of two years, during which the ANZSCEP agreement came into force, the share of financial services activities doubled, while that of commerce almost tripled in Singapore’s outward direct equity investments in New Zealand, providing an indirect evidence that trade in financial services from Singapore into New Zealand is likely to have significantly expanded due to its liberalization under the ANZSCEP. Investments in manufacturing also expanded in share during this period, albeit by a smaller margin. Figures 3.10A and 3.10B analyse these trends from the New Zealand perspective by analysing the composition of stock of Singapore’s inward direct investments from New Zealand. It is observed that as in the case of outward investments, financial

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Other s 3.9%

Source: Department of Statistics, Singapore (2005).

Tr ansport & Communi cati on 45.2%

Commer ce 4.7%

Real Estate 9.1%

Manufactur i ng 11.6% Fi nanci al Ser vi ces 25.4%

FIGURE 3.9A Sectoral Composition of Singapore’s Direct Equity Investments in New Zealand, 2000

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Source: Department of Statistics, Singapore (2005).

Real Estate 14.4%

Commer ce 12.3%

Tr anspor t & Communication 0.2% Other s 4.1%

Financial Ser vices 50.9%

Manufactur ing 18.1%

FIGURE 3.9B Sectoral Composition of Singapore’s Direct Equity Investments in New Zealand, 2002

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Others 1.7%

Source: Department of Statistics, Singapore (2005).

Financial & Insurance Services 41.6%

Construction & Real Estate 0.6%

Manufacturing 0.6%

Transport, Storage & Com m unication 45.0%

Com m erce 10.4%

FIGURE 3.10A Sectoral Composition of Stock of New Zealand’s Direct Equity Investments in Singapore, 2000

Enhancing Bilateral Economic Linkages through New Regionalism 55

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Others 2.8%

Source: Department of Statistics, Singapore (2005).

Financial & Insurance Services 77.4%

Construction & Real Estate 0.8% Com m erce 17.7%

Transport, Storage & Com m unication 0.9%

Manufacturing 0.5%

FIGURE 3.10B Sectoral Composition of Stock of New Zealand’s Direct Equity Investments in Singapore, 2002

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services have dominated the bulk of Singapore’s inward investments from New Zealand over the 2000–2002 period, expanding in share from 41.6 per cent to 77.4 per cent, followed by investments in commerce activities that also expanded in share from 10.4 per cent to 17.7 per cent over the same period. This indicates that the ANZSCEP agreement is likely to have influenced the composition of bilateral investment flows from New Zealand, with an expansion towards financial services and commerce, matched by a significant decline in investments in transport, storage and communication activities. As observed, the investment linkages between Singapore and New Zealand are predicted to grow more significantly in the future with the liberalization of investment norms under the ANZSCEP agreement. The agreement, which has focused to a large extent on liberalization of investment rules as well as on protection of intellectual property rights, is expected to provide a strong impetus for knowledge-based investments to flow among the two countries. In this context, it is noted that in 2002, New Zealand set up its first overseas technology centre in Singapore to support New Zealand companies in commercializing technologies and internationalizing business. Further, since 2001, the Singapore Economic Development Board has mounted eight investment promotion missions to New Zealand. As observed by MTI (2005), the number of New Zealand companies incorporated in Singapore has risen from 97 in 2001 to 135 in 2003, and these involve large companies providing engineering consultancy services, travel and technology services, and IT services. The New Zealand-Singapore Film Co-production agreement is another example of the way in which the ANZSCEP agreement has facilitated creative and innovative cooperation between Singapore and New Zealand. Similarly the MOU signed between NZTE and International

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Enterprise (IE) Singapore is expected to facilitate cooperation between the two agencies in efforts to develop commercial opportunities in third countries (MTI 2005).

Concluding Remarks The ANZSCEP agreement between Singapore and New Zealand, in force since January 2001, being the first bilateral FTA of Singapore, has assumed significance in the context of being one of the initial attempts of Singapore to expand its economic linkages beyond Southeast Asia. This agreement was also one of the first comprehensive bilateral agreements initiating the process of new regionalism in Asia. Although in force into its fifth year, available data indicates that the ANZSCEP agreement is likely to have positive influenced expansion of Singapore’s merchandise exports to New Zealand, particularly in petrochemical products and in passenger cars on which there has been immediate tariff elimination under the agreement. There is an indirect evidence to suggest that the agreement has also facilitated expansion of bilateral services trade, especially in financial services, and has also changed the composition of bilateral investments flows between the two countries. Overall, the ANZSCEP seems to have made a limited impact on New Zealand’s trade and investment flows with Singapore, although several new economic cooperation initiatives have been launched which might foster its growth in the near future. Nevertheless, it is early days for the ANZSCEP (and even more for the Trans-Pacific SEP), and a more significant expansion in economic linkages may prosper in the near future. However, apart from the ANZSCEP and the Trans-Pacific SEP, both countries are actively seeking bilateral deals with its major trading partners, and have also entered into new agreements that overlap both trading partners. These include the ongoing

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negotiations for an ASEAN FTA with the Closer Economic Relations (CER) grouping that involves Australia and New Zealand. Emergence of such overlapping agreements involving both countries might reduce the effectiveness of the ANZSCEP and the Trans-Pacific SEP in the future, especially if such deals are to subsume the existing bilateral agreements (Rajan and Sen 2005; Sen 2006). In conclusion, it is argued that although the FTA may have succeeded in expanding economic linkages of Singapore, it is too early to expect that other bilateral agreements that are proliferating or are already in force in Asia would meet with a similar degree of success. This is particularly so as unlike the ANZSCEP and the Trans-Pacific SEP, many of the evolving RTAs are not necessarily evolving to be WTO-consistent since many of them involve complex rules of origin, excludes a significant proportion of their trade, as well as do not open their agreement for accession to new members as observed by Sen (2006). Therefore, even if the ANZSCEP and the Trans-Pacific SEP may be evolving as a building block towards free trade, some of the other bilaterals in the region may end up being a stumbling block. Thus, it would be extremely important for both New Zealand and Singapore to continue their strong support for multilateral trade liberalization under the WTO, while concomitantly pursuing bilateralism, since theoretically, multilateralism remains the first best solution towards achieving global free trade.

Notes An earlier version of this paper was first presented at the Singapore Economic Review (SER) Annual conference held in Singapore on 4–6 August 2005. This paper draws heavily on an earlier ISEAS Working Paper by the author on this subject and the presentation made at the New Zealand Trade Policy Seminar at Four Seasons Hotel, Singapore on 10 May 2007.

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1. See for further details on Singapore’s FTAs. 2. This section draws on Sen (2004). 3. It is important to note here that this ranking excludes Singapore’s trade with Indonesia since the Singapore authorities do not publish the same. 4. This is due to the fact that Singapore uses the GTS system under which all goods imported into or exported from Singapore are included in its external trade statistics, barring a few exceptions (Sen 2000). 5. While OECD publishes detailed data on aggregate bilateral services trade by trading partners in its publication OECD Statistics on International Trade in Services, such a data is unavailable for New Zealand, wherein only the total services trade data is reported.

References Banda, O.G.D. and J. Whalley. “Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of natural Persons and Broader Cooperation Provisions of Recent FTAs involving ASEAN countries”. NBER Working Paper no. 11232. Cambridge, MA, 2005. Department of Statistics, Singapore. Yearbook of Statistics 2005. Singapore: Department of Statistics, 2005. Krueger, A.O. “Trade Creation and Trade Diversion under NAFTA”. NBER Working Paper no. 7429. Cambridge, MA, 1999. Liang, M. “Singapore’s Trade Policies: Priorities and Options”. ASEAN Economic Bulletin 22, no. 1 (2005): 49–59. Ministry of Trade and Industry (MTI). “Agreement Between New Zealand and Singapore for a Closer Economic Partnership (ANZSCEP)”. Legal text and review available electronically at . Accessed 31 July 2005. Rajan, R.S. “Singapore’s Bilateral Merchandise Trade Linkages with Japan and the United States: Trends, Patterns and Comparisons”. Asian Economic Journal 10, no. 2 (1996): 133–63. ———, ed. Sustaining Competitiveness in the New Global Economy: The Experience of Singapore. Cheltenham, UK: Edward Elgar, 2003.

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Rajan, R., R. Sen, and R. Siregar. Singapore and Free Trade Agreements: Economic Relations with Japan and the United States. Singapore: Institute of Southeast Asian Studies, 2001. Rajan, R. and R. Sen. “The New Wave of FTAs in Asia: Implications for ASEAN, China and India”. Asian Economic Cooperation and Integration, pp. 123–60. Manila: Asian Development Bank, 2005. Sen, R. “Analysing Entrepot Trade in a Small Open Economy: The Case of Singapore”. ASEAN Economic Bulletin 17, no. 1 (2000): 23-35. ———. “Singapore-India Economic Relations in the context of their Globalization Strategies”. Unpublished Ph.D. Thesis. National University of Singapore, Singapore, 2002. ———. Free Trade Agreements in Southeast Asia. Southeast Asia Background Series no. 1. Singapore: Institute of Southeast Asian Studies, 2004. ———. “New Regionalism in Asia: A Comparative Analysis of Emerging Regional and Bilateral Trading Agreements involving ASEAN, China and India”. Journal of World Trade 40, no. 4 (2006): 553–96. Statistics New Zealand. . Accessed 31 July 2005. World Bank. World Development Indicators, 2005. United Nations. UN-Comtrade Database. 2005. World Trade Organization (WTO). International Trade Statistics, 2004. WTO: Geneva, 2005.

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