Singapore-EU free trade deals to boost chems, plastic shipments

SINGAPORE (ICIS)–The latest trade agreements between Singapore and European Union could help boost the city-state’s slowing base chemical and plastic shipments to the trade bloc, but competition from other regions would put a lid to polymer imports from the southeast Asian nation.

(Source: PATRICK SEEGER/EPA-EFE/REX/Shutterstock)

The European Parliament on 13 February gave its green light to the EU-Singapore Free Trade Agreement (EUSFTA), EU-Singapore Investment Protection Agreement (EUSIPA) and EU-Singapore Partnership and Cooperation Agreement (ESPCA).

The new agreements, which now need to be formally ratified, will see Singapore removing tariffs on all EU products entering Singapore, while the EU will remove tariffs on 84% of all Singapore products entering the EU within the first year, and the remaining 16% over a period of 3 to 5 years.

The EUSFTA will proffer liberal and flexible rules of origin (ROO) for the EU’s and Singapore’s key exports to each other’s markets including automobiles, chemicals, clothing and textiles, electronics, machinery, pharmaceuticals, and petrochemicals, Singapore’s Ministry of Trade and Industry (MTI) said in a statement.

The latest data from the European Commission showed that organic chemicals has the biggest share (23%) in the EU’s total imports from Singapore at €4.62bn in 2017.

Pharmaceutical products was the second largest at €3bn in 2017, making up 13.8% of the overall share of EU merchandise imports from Singapore that year.

Plastics made up 1.77% of the overall share at €365m in 2017, taking up the last spot in the 10 top EU imports from Singapore, but this potentially grows once the new trade deals come into effect.

However, based on official Enterprise Singapore data, non-electronic non-oil domestic exports (NODX) to the EU has slowed significantly since November last year, dragging down Singapore’s overall petrochemical shipments abroad. (please see interactive below)

Singapore-based polyethylene (PE) and polypropylene (PP) may not be able to compete with the US, the world’s top economy, even though Europe remains in trade deficit for polymers, according to market players.

Singapore is seen lacking an edge over the US, where PE supply is extremely long due to their recent expansions.

The city-state will also contend with the Middle East, another major exporter.

For all intents and purposes, it is highly unlikely that Singapore can compete with the US and the Middle East, market sources opined.

From their vantage point, both the US and the Middle East enjoy lower freight given the proximity to the EU, and it will be an uphill task for Singapore to match up on competitive imports taking freight into account.

For PP, there is a certain degree of hope though, since there are no major US expansions. Middle East is one of the biggest exporters to Europe. Southeast Asia does export to Europe, but Singapore per se, not so much.

For example taking January’s trade data, Singapore exported 96,751 tonnes of PP copolymers, of which only 6,393 tonnes was to Europe (including UK), which is less than 7% — opening the door of possibility for further exports once the trade agreements are in place.

Meanwhile, freight rates to the EU may increase because of a possibility of a significant increase in Singapore-origin polymers to the EU.

However, shipping sources said that this will not happen dramatically and suddenly because Singapore-based producers will need to boost their imports of feedstock material if they feel they can have a bigger market share in the EU.

The EUSFTA and EUSIPA are the first trade and investment agreements concluded between the EU and an ASEAN member state.

Singapore and the EU launched negotiations of the EUSFTA in 2009. The Good and Services Agreement was concluded in 2012, and the Investment Protections Chapter in 2014.

The agreement will come into force after it is signed and ratified by both parties.

The ratification of the EUSFTA has been delayed due to the European Commission’s decision to request for a European Court of Justice’s opinion on its competences with regard to the EUSFTA.

“Following the approval by the European Parliament [on 13 February this year], both the EU and Singapore will undertake their respective internal administrative processes to enable the EUSFTA to enter into force as soon as possible,” the MTI said.

“As a mixed agreement, the EUSIPA under the EU’s processes will be sent to the regional and national parliaments of the EU member states for approval before entry into force,” it added.

With additional reporting by Leanne Tan and Yaw Min Jie

Focus article and interactive by Nurluqman Suratman