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‘Singapore and Australia are natural partners.’ said Australian Prime Minister Malcolm Turnbull in the Australian Financial Review on October 12 2016 at the time of welcoming the Prime Minister of Singapore, Lee Hsien Loong to Canberra for bilateral talks. Singapore and Australia shares a close relationship in many respects, most interestingly in trade.
Updating the Singapore –Australia Free Trade Agreement (SAFTA) is key in maintaining the two nations’ relevance in the fast evolving global economy. The third update of the SAFTA was witnessed by Singapore Prime Minister Lee Hsien Loong and Australian Prime Minister Malcolm at Canberra’s Parliament House on October 13, 2016. This marked the start of many new initiatives in areas such as trade, defence, scientific research and also tackling drug trafficking. Some of the new initiatives include establishing a framework to support mutual recognition of professional qualifications, increasing recognition of Australian tertiary qualifications in Singapore, cross-border services for financial service providers, better support for Australian start-ups in Singapore, greater certainty for cross border working rights and no customs duties on digital products. These new amendments in the SAFTA are expected to enter into force in 2017.
According to the Department of Foreign Affairs and Trade in Australia, Singapore is Australia’s fifth largest trading partner with two-way trade accounting for AUD$28.5 billion in 2014-2015. SAFTA entered into force on July 2003, allowing all Australian products to enter Singapore tariff-free. The third update of the SAFTA will allow further facilitation in trading of cosmetics, medical devices, distilled spirits and wine.
One of the key new initiatives of the third update includes a full schedule of product-specific rules of origin, which will provide greater flexibility to meet requirements to claim preferential treatment in each nation’s market. This aims to simplify administration and decrease compliance costs. A Wine and Distilled Spirits annex will also provide guidance on requirements on product labelling for wine and spirits, allowing for greater standardisation between the two nations, which will reduce uncertainty and lower cost of doing business for all relevant parties.
Based on Euromonitor International’s figures, the wine market in Singapore in 2015 is a great opportunity for Australian exporters to better position themselves in the very fragmented and rapidly growing category. Wine volume sales are expected to grow from 2.5 litres per capita in 2015 at legal purchasing age to 3.0 litres in 2020. Economy brands are mainly distributed in supermarkets and hypermarkets while mid-priced brands are widely distributed through foodservice and retail channels. Singapore’s growing appreciation of wine drinking and burgeoning food culture is driving consumers towards drinking better quality wine both at home and in foodservices. Wine is considered as a sign of sophistication and as Singapore consumers become increasingly refined in their taste in alcohol, pairing wine with food will be increasingly popular.
The top 4 brands in the wine market in Singapore consist of Australian branded wine, which collectively account for almost 30% of total volume sales in 2015. The new amendments in the free trade agreement will allow Australia wine manufacturers to take advantage of the new initiatives by allowing for an easier and more inclusive wine trade between the two nations, which improves product availability and prices for consumers. This can possibly lead to a larger slice of the fragmented wine market for Australian wine in Singapore in the future.
Euromonitor International Limited, Alcoholic Drinks 2016
A closer strategic relationship will allow for greater opportunities in goods and services for a wide range of Australian exporters and also provide an opportunity for Australia to improve on its competitive advantage across various industries in Singapore. The reduction of trade barriers and elimination of tariffs, which impeded flow of the manufactured goods, will allow both nations to better react and accelerate the trading process in a rapidly evolving global economy. This will further integrate both nations’ economies, providing many opportunities for growth for both nations.
Australia currently has trade initiatives or agreements in place with a number of countries globally, which is signalling their continuing intentions to maintain strong bilateral relationship with many nations. In a bid to position better in the global economy, Australia needs to continue to preserve its independence and maintain and create more opportunities for bilateral or regional partnerships with other regions such as the post-Brexit free trade deal between Australia and the UK and the Trans-Pacific Partnership.