Singapore's Role

When the negotiations for trade liberalization in global and regional levels bogged down, Singapore swiftly engaged in planning for and forging a vast array of Free Trade Agreements (FTAs), culminating in the creation of an FTA grounds well in East Asia and beyond. On the role played by Singapore, Prime Minister Lee Hsien Loong, confidently stated that ‘to say it is because of us may be too strong, but we set an example and we set people thinking. And I think that’s also the reason why ASEAN [Association of Southeast Asian Nations] itself is discussing FTAs. There is a demonstration effect’ (cited in Straits Times, 1 December 2004). Singapore’s interest in signing bilateral FTAs consecutively was partly born out of a fear of its survival as a nation that heavily relies on trade for its growth, and FTAs are expected to help Singapore overcome its innate inability to call effectively for diplomatic and economic changes in Southeast Asia to promote trade liberalization in the region and beyond. 　

There are two layers of FTA movements in Southeast Asia: 1) bilateral FTAs between ASEAN members and extra regional countries, and 2) FTAs between ASEAN as a single unit and extra regional countries. This chapter initially focuses on the first layer of bilateral FTA diffusion by exploring the impetus behind Singapore’s active engagement in FTA negotiations by examining three pressures (economic, security and legal), set out by Solis and Katada, to establish whether Singapore has contributed to the growth of FTAs involving both Southeast and Northeast Asian countries, and if so, how. The paper also examines the nature of trade policy-making system in Singapore to analyze the alleged little involvement of the business sector in trade policymaking as a common feature in Southeast Asia, demonstrating the predominant role of the state in the FTA making process. The chapter finally analyses another level of FTA proliferation as ASEAN has served as a hub in the ASEAN+1 FTA networks with five major powers. The origins of this approach can be traced back to China’s FTA proposal to ASEAN in 2000, as a result of its concern to be isolated after the bilateral FTA initiative started by Japan and South Korea in 1998. Given the subsequent reaction taken by Japan, Korea and India, China’s aggressive diplomacy in Southeast Asia including the FTA proposal can be seen as an independent variable against FTA diffusion in this layer, and, symbolically, the ASEAN+1 FTA movement has been a site for the competitions where two types of FTAs – China-led traditional FTA with gradual implementation and Japan-led new-age FTA with single undertaking approach – have prevailed, creating further complicated situations for multilateral companies’ possible use of the FTAs.

This paper argues that the impact of bilateral FTAs on Southeast Asia is limited, as only Singapore and Thailand have virtually signed multiple bilateral FTAs and, moreover, those FTA and ASEAN’s integration schemes such as ASEAN Free Trade Area (AFTA) are not well utilized by ASEAN’s and multinational companies either, representing the perception gap between keener FTA creator in the governments and indifferent users in the business sectors. FTA diffusion certainly occurred in Southeast Asia, but it is Japan-centered as most of ASEAN members chose it as their first and, in some cases, only bilateral FTA partner, and thus the concern about trade diversion effect as a valid explanatory variable is mainly attributed to Japan’s larger economic presence as the largest trading partner and investment source to those countries. Singapore’s efforts to sign an FTA with Japan through diplomatic persuasion and political concession effectively functioned and the resultant involvement of Japan into the FTA politics in Southeast Asia is evaluated as an independent variable in the bilateral FTA proliferation in the region.