[ Keidanren ] [ Policy ]
Provisional translation

Expectations for the Japan-Singapore
Free Trade Agreement

October 2, 2000

Japan Federation of Economic Organizations


Following the agreement reached at the Japan-Singapore Prime Ministers' Meeting in December of last year, the two countries established a Joint Study Group comprising business leaders, academics and government officials, to examine the feasibility of signing a bilateral free trade agreement (FTA). Keidanren, for its part, also established a Task Force (TF) within the Committee on Asia & Oceania, to consider the significance of such a FTA between Japan and Singapore for Japan's private sector. As an outcome of these deliberations, the TF has already submitted to the Japanese government its main requests concerning the Japan-Singapore FTA on two occasions.

Keidanren also announced, in July of this year, a proposal entitled "Urgent Call for Active Promotion of Free Trade Agreements - Toward a New Dimension in Trade Policy," advocating that Japan simultaneously pursue more active use of FTAs as a new pillar in its trade policy while remaining strongly committed to the World Trade Organization (WTO) system.

Amidst the current globalization of corporate activities it is urgently needed in Asia to improve the business environment through the liberalization of the individual national systems and through their harmonization. Under these conditions, it is of paramount importance for Japan to embrace a new commitment to the opening of her market through further deregulation and pursue the possibilities of economic integration by entering into formal negotiations with Singapore, which aims to become a hub of trade and finance in Asia, for concluding a FTA. This is the primary objective of a "New-Age FTA."

From this standpoint, the business community in Japan strongly supports the initiation of formal negotiations with a view to concluding the FTA between Japan and Singapore and makes the following suggestions as to the form the agreement should take.

1. Improvement in the Business Environment

Although both Japan and Singapore have made substantial progress in the liberalization of trade and investments, there are still many problems calling for a further commitment in terms of making greater progress in improving the business environment. The improvements required in Singapore include the relaxation of regulations on the ownership of real estate by foreign companies and the standardization of contracts for construction work put out to contract, as well as the simplification and speeding up of tax procedures and the further deregulation on financial transactions. There is also a need for Japan to speed up its system reform in order to improve the business environment in terms of the flow of people, goods, money, and information. There are also many issues on which the two countries need to cooperate in a commitment to simplify and speed up their customs clearance procedures, to achieve greater deregulation in the movement of people, and to intensify human exchange.

The signing of the Japan-Singapore FTA offers a promising potential for addressing this wide range of issues and creating a business environment that will facilitate and activate globalization-driven corporate activities.

2. Strengthening the Competitiveness of Industry

Through the greater liberalization of trade and investment under the FTA and through the domestic structural reform associated with this, the industries of both countries will be exposed to fiercer competition. This will inevitably force the industries to strengthen their competitiveness. In this context, the signing of the FTA with Singapore which is known to have an advantage in terms of information technology, distribution and finance, will encourage system harmonization in the service sector, including information and communications and finance, and promote cooperation on technology and know-how transfer. Consequently, this can be expected to strengthen the competitiveness of industry in both countries.

It should also be borne in mind that as a result of the establishment of closer economic ties with Singapore consequent upon the FTA, the industrial circles concerned will learn much more from and about each other and pursue strategic tie-ups and this may lead to the joint development of new industrial areas and the expansion of trade with third countries.

It will therefore be essential that the FTA with Singapore should transcend the framework of previous FTAs that have centered on the removal of the tariff and non-tariff trade barriers in the goods and service sectors, and that it should encompass the broad ranging scopes spanning the entire economy, including the mutual recognition of standards and conformity assessment, the electronic processing of trade related procedures, electronic commerce, intellectual property rights, competition policies, dispute settlements, science and technology, the environment and human resource development.

3. Promoting Closer Economic Ties in the Asian Region

The worldwide trend in the area of international trade policy is to promote liberalization by using both a multilateral and a bilateral or regional approach. Under such circumstances there is reason to expect that the signing of the Japan-Singapore FTA will supplement the WTO-led liberalization moves and also encourage regional liberalization approaches, including AFTA and APEC.

In order to achieve sustainable development in Asia it is highly important that this multi-tier liberalization approach should lead to greater specialization within the Asian region on the basis of economic rationalization and thereby create closer economic ties. It is thereby expected that companies will be able to engage in activities in Asia without being conscious of national boundaries.

In this sense, the Japan-Singapore FTA should also serve as a good example and provide impetus for the signing of FTAs with many other countries not only in Asia but also in other regions of the world. In concluding the FTA between Japan and Singapore it will therefore be essential to ensure that the FTA is consistent with WTO rules and has a comprehensive scope and high-level status so that it may provide a model for the establishment of future agreements.

4. Opening Japan's Market and Clarifying the Vision of Japanese Trade Policy

As Japan enters into negotiations with Singapore on the signing of a FTA it is first needed for Japan itself to make a strong commitment to further open up the Japanese market and expand imports through liberalization. Moreover, it is highly expected that Japan strengthen the commitment to its own economic structural reform, including the elimination or relaxation of various regulations and the redressing of high-cost factors. This will surely stimulate domestic industries, bringing about greater efficiency, which in turn would benefit consumers. The challenge of fiercer competition that will be generated from the opening of the market should be met by industry's own efforts to strengthen its competitiveness. In the event, however, that the rapid liberalization of imports should inflict serious damage upon certain domestic industries, the government will need to take realistic countermeasures such as the flexible application of safeguard measures, ensuring that these remain within the scope allowed under the WTO Agreement.

In view of the negotiations on the bilateral FTA it will be essential that the grand design of Japanese trade policy be made clear.

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