The global economic and business scenario has developed considerably and faced huge dynamics over the decades, most of which can be attributed to the global phenomena like that of trade liberalisations, Globalization, industrial and commercial revolution as well as technological and infrastructural innovations, which in turn have collectively contributed in making the global commercial environment more integrated, inclusive and inter-connected. In the contemporary period, most of the countries in the global framework have set up strong political, social, economic and commercial ties with each other, which have been facilitated by the increase in the connectivity and infrastructural aspects.
This in turn has led to a highly inclusive global business scenario in the contemporary period, which in turn has encouraged increasing number of business to go global and to expand their operations in different markets and different geographical domains, thereby taking advantages of the previously unexplored opportunities. Trade and commerce activities have also increased in the overall economic domains of most of the countries in the global framework. With time and increasing facilities in terms of communication and technological developments, the trade barriers and protectionist policies of different countries are also getting replaced by free trade structures as the multilateral benefits of free flow of trade of commerce in terms of increased efficiencies, cost effectiveness in production due to competition and overall economic growth can be seen to be felt by the countries across the world. Till date, various free trade agreements and deals have been signed among different countries in the global scenario.
Keeping the above discussion about the recent increase in the free trade and commerce among countries and their implications on the growth of such economies into consideration, the concerned report tries to discuss about the free trade deal which is expected to be in action by 2019, between the European Union and one of the most significantly progressive economies of that of Singapore. For discussing the same, the report takes reference of the news article named, “EU-Singapore FTA on track to come into force by 2019: Iswaran”, published on 26th May, 2018. The report also tries to discuss the implications which the concerned agreement can bring upon the economies, in the light of the theoretical and conceptual framework of economics.
The concerned article, taken into consideration for the concerned report asserts that the free trade agreement between the European Union and Singapore, known as the European Union-Singapore Free Trade Agreement (EUSFTA) is expected to be in action from 2019. In this context, the article also highlights the significance of the European Union as the largest investors and one of the biggest trading partners of the concerned country by highlighting the bilateral amount of trade between them (of nearly 98.4 billion USD) in 2017. The article puts forward the perceptions of the Minister-in-charge of Trade in the country, S Iswaran, according to whom, the deal is of immense significance in the aspect of highlighting the ongoing economic ties of the progressing and economically active countries, which can help in decreasing the scepticism regarding the implications of the phenomenon of Globalisation.
The article also highlights the complex environment in which the economies including that of Singapore have been operating in the contemporary period, with a lot of interconnected economic activities, which are not only dependent on the internal and inherent dynamics of the economics themselves but are also subjected to the international dynamics in the global economic scenario, keeping which in the backdrop, involving into more comprehensive and robust trade relationships with other major economies and economic entities becomes immensely important for the country to maintain their productive efficiencies, economic growth, prosperity and long term economic sustainability.
To understand the implications of the free trade agreement between the two concerned economic entities, it is of considerable importance to understand the dynamics and economic implications of the two concerned entities. In this context, the European Union is an economic and political union of 28 member-countries in the European region, which acts as common trade and monetary body to these countries, working to abolish the trade barriers between these countries, thereby facilitating free flow of goods and services as well as of the different human and non-human resources and technological innovations across the member countries, with the areas of benefit being mainly the trade and commerce aspects, research and development, energy and environmental protections.
The main purpose of this body is to create a more competitive and free market place among the member countries. For this purpose, there remains no tariff or duties in the aspects of trade between the member countries in the Union and the same also has a common currency zone, with the currency in usage in nineteen of the member countries being Euro, which in turn is free floating. However, in 2016, one of the primary member countries, the United Kingdom has opted to walk out of the European Union, which, known as the Brexit, is expected to come in action in 2018. Irrespective all these dynamics, the member countries have been seen to be benefited hugely, by the creation of the European Union, especially in the aspects of increase in trade dynamics, free flow of resources of production, technological innovations and other aspects.
ASEAN (Association of Southeast Asian Nations) is another intergovernmental association between ten of the emerging Asian economies, which also has been created with the purpose of promoting economic, social, political and other integration among the member countries, in order to facilitate their economic progress and overall development. This, like that of EU, has facilitated various free trade dynamics between the member countries as well as with many of the non-member ones.
One of the primary and most developed economies in the ASEAN is that of Singapore, which being one of the highly developed market economies is also the most open one in the contemporary global scenario. The economic prosperity of the country can be attributed to its pro-business and less corrupt environment. The economy of Singapore ranks third globally, in terms of purchasing power adjusted Gross Domestic Product. The country has over the years, set up robust and highly contributing trade relations with almost all the other major economies in the world and has also attracted huge investments and industrial settlements, as well as migrants from all part of the world, which have collectively contributed to the commercial, industrial and economic prosperity of the same.
The European countries, especially those in the European Union and the economy of Singapore have already set up robust trade and commercial ties with each other, which have, over the years, contributed in building up the industrial sectors and facilitated in multilateral dynamics of not only goods and services but also investments, technologies and other factors of production among Singapore and the various member countries of the European Union.
Singapore is currently the fourteenth largest trading partners of the European Union (in terms of trade in different products). Apart from the same, the economy of Singapore is the largest trading partner of the European Union, among all the member countries of the ASEAN, as can be seen from the following table:
As can be seen from the above figure, the economy of Singapore poses as both the largest importer (both in terms of goods and services) as well as the largest exporter (both in terms of goods and services) of the ASEAN, for that of the European Union. This is not however only the case in terms of goods and services imports and exports. The same trend can be seen in the aspects of Foreign Direct Investment inflow and outflow between the EU and the ASEAN, which can be seen as follows:
The above table shows that in terms of FDI inflow and outflow with the respect of the European Union also (both stock and flow) Singapore stands ahead of all the member countries in that of the ASEAN.
The volume of exports of Singapore can be seen to be showing a visibly positive trend over the last few years, much of which can be attributed to the robust trade and economic relationship between Singapore and the European Union. The development of the economic union of the 28 European countries and the creation of the common trade and currency zone for the same has also facilitated in creating a huge and comprehensive marketplace, with diverse demand and supply dynamics, which in turn has benefited the economy of Singapore, both in terms of exports and imports over the years, as can be seen from the following figure:
As is evident from the above figure, over the last few years, Singapore has exported huge amount of goods (of valuation of nearly 20 billion) and imported higher amount of goods (of valuation of more than 25 billion and increasing with time). The trade balance however, can be seen, to be positive for the European Union. In the aspects of services also, the exports of the concerned country to the member countries of the EU, can be seen to be increasing visibly, while the imports can be seen to have remained at the same level, thereby increasing the trade balance of Singapore in the recent periods.
The productive trade relationships between Singapore and the European Union has also facilitated in the inflow of investments in the former as can be seen from the following figure:
The inflow of investments in Singapore from the EU can be seen to be much higher than that of the outflow of the same from the country collectively to the member countries of the European Union.
All these statistics and evidences indicate towards the fact that the trade and commercial activities of Singapore, as well as its industrial activities have been highly facilitated by the relationship of the country with that of the EU collectively. This has been discussed in details in the following section of the concerned report.
The trade openness of both the economic entities and the growing economic prosperity of Singapore, over the years, has resulted not only inflow of investment in the country. The industrial sector of Singapore has also attracted nearly 10,000 companies in EU to establish their business operations in the country, thereby building it up as a business hub for the entire South-Pacific region.
Keeping the present trade and commercial ties which, the concerned economic entities enjoy, the EUSFTA, which is expected to come in action in 2019, is expected to facilitate the same and to increase the benefits accrued by the economy of Singapore, in the coming years. The main aims of the concerned Free Trade Agreement between Singapore and the EU are as follows:
The electronic industries of Singapore, in the recent periods, have already been experiencing a boom and economies of scale, thereby acquiring cost and productive efficiencies. In such scenario, the emphasis of the concerned FTA on the electronic industries is expected to facilitate the growth of all these industries in Singapore even more. The country can experience comparative advantages in the same, thereby experiencing a bigger market and clientele for the products. On the other hand, another aim of the concerned FTA, of that of increasing the bilateral productive activities, industrial production and economic growth of Singapore even more in the coming years.
Conclusion
The above discussion shows that in the contemporary dynamic, integrated and inclusive global economic and business scenario, more and more economies have been indulging in setting up productive trade and commercial relationships with one another, which in turn can be seen to be having implications on both the demand and supply dynamics of the countries and on the overall growth pattern of the economies. The European Union and Singapore in this aspect, can already be seen to have robust trade relationships and investment inflow and outflow among the economic entities. The same is expected to enhance even more with the implementation of the EUSFTA in 2019, which is in turn expected to increase the productive, industrial and economic prosperity of both the member countries of the EU as well as the economy of Singapore, much of the prosperity of which can already be seen to be attributed to the robust import export and investment relationships as well as the economic environment of European Union.
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