The European Union and Singapore today (16 December) announced that they have reached agreement on a free-trade deal, 33 months after they began formal negotiations.

This is the second free-trade agreement struck by the EU in Asia; the first – with South Korea – came into force in July 2011.

The EU began negotiations with Singapore in March 2010 after its hopes of lowering barriers with the ten-country Association of South-East Nations (Asean) were dashed in 2009, and Karel De Gucht, the European trade commissioner, said today he hoped the deal would “open the doors for FTAs [free-trade agreements] with other countries in the Asean region”.

The European Commission is currently negotiating trade terms with two other members of Asean – Malaysia and Vietnam – and hopes that a bloc-to-bloc deal may eventually emerge. Although Singapore has a population of just five million, it has invests more in the EU than any other Asian country except Japan, and the EU’s trade with Singapore is growing faster than with any other partner, the European Commission says: trade between the two rose by 40% between 2009 and 2011, with the balance €8 billion in favour of the EU. In 2011, trade between the two amounted to €74bn, making Singapore the EU’s 13th-largest trading partner.

The Commission entered the talks hopeful of reaching a swift conclusion by the end of 2011, as Singapore already had a range of free-trade agreements – including with the US, China, Japan and India – and is a free port with relatively low tariffs and regulatory barriers.

However, the liberalisation of banking services and ‘geographical indications’ – a product name, such as champagne, that reflects its geographical origin – proved to be particularly troublesome. Singapore was concerned about the rights of non-European companies that have secured trademarks for products bearing the same designation. The European Commission says that Singapore has agreed to create a new register for regionally specific and recognised foodstuffs, wines and spirits.

The Commission expects companies in the electronics, pharmaceuticals, chemicals, and processed food sectors to benefit particularly from the removal of tariffs.

However, as Singapore’s tariffs were already low, the focus of the talks was on behind-the-border barriers, such as the rules of business and the standards expected of products, and on the services sector. Today’s agreement means that Singapore will – for example – recognise EU car standards as adequate, and that professional qualifications will be accepted by both sides. The market for government contracts will also be opened up.

The Commission believes that the scope of the liberalisation of services sets a new benchmark for the EU. It also describes this as the first green free-trade agreement, saying that it is aligned with the ambition of the EU’s ‘2020 strategy’ to boost green growth and contains commitments about environmental services, environmental criteria and about illegal logging.

Success in the talks was announced today even though the terms of protection for European investments in Singapore have yet to be settled. The EU has since the Lisbon treaty came into force in 2009 been able to negotiate on investment-protection provisions on behalf of all 27 member states. The Commission says that it hopes that the agreement will be initalled in the spring. After that, the approval of the EU’s member states and of the European Parliament is needed before the agreement can come into force. The Commission would like to see the process completed by the end of 2013.

The timeline for implementation of the agreement would differ for both sides: for example, Singapore would lift import tariffs immediately, while the EU would have five years.

The EU last week secured the European Parliament’s backing for a regional trade deal with six central American states, and a trade deal with Colombia and Peru. The Commission hopes to complete another agreement – with Canada – before the end of the year. However, it is struggling to make headway in talks with India, which began in 2007. In November, it secured a mandate to start talks on what would be the largest EU trade deal yet, with Japan.

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