On July 22, 2021, Mr. Gan Kim Yong, Singapore’s Minister of Trade and Industry, together with his counterparts from the members states of the Pacific Alliance – Mexico, Chile, Colombia, and Peru, announced the conclusion of negotiations of the Pacific Alliance – Singapore Free Trade Agreement (PASFTA).
Singapore will become the first Asian-Pacific associate state of the Pacific Alliance (“PA” or “Alliance”) once the pact is signed, which is expected to happen by the end of the year. This is an important milestone in the economic integration between the PA region and Asia-Pacific and is a crucial development for the necessary economic reactivation of the two regions.
The Ministers of Trade agreed that the PASFTA represents an interest in the economic integration of the regions and the improvement of the commercial relationship, attracting investments and expanding access to goods and services. In particular, The PASFTA will enhance trade and deepen cooperation in areas like the digital economy, energy sector, technology, urban solutions, customs, maritime services, and infrastructure.
Latin American and Singapore businesses should take note of this development and where possible, take advantage of the significant trade opportunities and economic growth that this trade agreement will generate.
The Pacific Alliance: main objectives and member
The Pacific Alliance is a trade agreement between Chile, Colombia, Mexico, and Peru, created in 2011 and officially signed in 2013. It has two main objectives: 1) to promote the development of their member states with deeper economic integration and 2) to become a platform for member states to enhance trade with Asia-Pacific in a coordinated way.
The achievements of the PA in its first ten years include: i) eliminating 92% of all tariffs among the four member states and continuing to liberalize services and investment markets; ii) facilitating the flow of people and talent across borders by removing short-term and business visa requirements; and iii) establishing an integrated stock exchange, known as the Mercado Integrado Latino Americano (MILA).
As of 2021, there are 59 nations with observer status in the PA. Observer status nations work on strategic issues with members and have agreed to the principles and objectives set forth in the Framework Agreement of the Alliance. In addition, an observer may ask to become a candidate to adhere to the PA if it has a free trade agreement with at least half of the member states. An observer may also request to be considered an associate state. Singapore is now expected to become the first associate state by the end of 2021 once the formal agreement is signed during the PA Summit scheduled to take place in Colombia this coming December.
What does it mean for Singapore to be an “associate member”?
As an associate member, Singapore will have access to the eighth-largest exporter in the world (i.e., the PA region), with a combined population of 230 million, a per capita gross domestic product of US $19,000, and annual exports totaling US $627 billion.
Singapore’s access to the PA through the PASFTA, will enhance the economic partnership already existing between the two regions with the Trans-Pacific Strategic Economic Partnership Agreement, the Peru-Singapore FTA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. In particular, the PASFTA is the first free trade agreement between Singapore and Colombia.
As businesses from Singapore navigate growth and transformation prospects to tackle these challenging times, they must consider the strategic opportunities that the expansion or investments in the PA region can provide. Likewise, Singapore-based exporters and investors stand to enjoy a myriad of benefits like tariff concessions, preferential access to particular sectors, faster entry into markets, among other beneficial agreements.
Businesses from the member states in Latin America can benefit from the significant trade opportunities and economic growth that the PASFTA will bring to the PA region. The benefits will be generated not only by the opportunity to access the Singapore market but also by the potential access to the Asia-Pacific region. In particular, the possible access to the countries signing the Regional Comprehensive Economic Partnership, which provides access to 30% of the world population and about 30% of the global GDP, will be of great benefit to the Latin American businesses.
About Duane Morris & Selvam LLP Duane Morris & Selvam LLP (DMS) is a joint law venture between international firm Duane Morris LLP (DM) and Singapore-based firm Selvam LLC. DMS runs a unique Latin American-Asian practice out of Singapore, with a team of international lawyers qualified in multiple jurisdictions including Singapore, the US, the UK, Canada, Mexico and Colombia, with substantial experience in international transactions and disputes. DMS also has a wide cooperation network with some of the best Latin American and Asian law firms.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.
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