Taiwan has announced its rise on the world diplomatic scene by launching a free trade pact with Singapore, a step that Beijing tacitly supports. But while Thursday`s agreement marked Taiwan`s largest trade deal with a country with diplomatic relations with China, Taipei announced even greater ambitions. Machinery and electrical equipment account for about two-thirds of trade between the two Asian countries, making the relationship less complementary than other agreements such as the Singapore Pact with the commodity exporter, Australia. This agreement will allow Taiwanese companies not only to access Singapore`s small consumers, but also to enable Singapore`s service providers to complement Taiwan`s industry. Taiwan is taking another step towards the major trading leagues by signing a new free trade agreement with Singapore. For Taiwan, ASTEP (an economic partnership agreement between Singapore and the separate customs territory of Taiwan, Penghu, Kinmen and Matsu) is the first such agreement with a Southeast Asian country and a leading trading partner. Satish Bakhda, Head of Operations at Rikvin, commented on ASTEP`s impact on Singapore businesses such as: «This agreement will allow Taiwanese companies not only to access singapore`s small consumers, but also to enable Singapore`s service providers to complement the Taiwanese industry. This pact is a win-win situation for both, but it is particularly important for Taiwan, which until now had been diplomatically timid. Exports account for two-thirds of Taiwan`s GDP and, as China and Hong Kong account for about 40%, the Singapore agreement is expected to help Taiwan reduce its dependence on the Chinese market. Despite the existing free trade agreement between Singapore and China, the Economic Cooperation Agreement considers Taiwan`s special access to the mainland to be considered attractive to Singapore businesses and helps Taiwan make its industrial structure more service-oriented, ANZ economists Raymond Yeung and Louis Lam said in a research note. ASTEP will also strengthen Taiwan`s international profile.
It is close to another free trade agreement (FTA) with the founding member of the Trans-Pacific Partnership (TPP), New Zealand, which was sealed last July. After more than two years of negotiations, Singapore and Taiwan concluded the free trade agreement last week. Trade and Industry Minister Lim Hng Kiang welcomed the signing of ASTEP: «ASTEP is a high-level, comprehensive agreement that will strengthen economic relations between Singapore and Chinese Taipei, both members of the World Trade Organization (WTO). Businesses on both sides already actively have business opportunities in the other party`s economy. The agreement will further strengthen and deepen trade and investment flows between the two sides. As part of the agreement, Singapore will immediately remove tariffs on all products imported from Taiwan. Analysts say China`s apparent acceptance of Taiwan`s free trade agreement with New Zealand is seen as an expression of improved relations between the two neighbouring countries.