More than a Decade of the Pacific Alliance: Implications for Singapore and the Region

More than a Decade of the Pacific Alliance: Implications for Singapore and the Region

On Jan 26, 2022 Singapore signed a Free Trade Agreement (FTA) with the Pacific Alliance (PA), a regional economic bloc made up of Chile, Colombia, Mexico and Peru representing more than USD 2 trillion in GDP. The Pacific Alliance Singapore FTA (PASFTA), has been touted as a “landmark moment” for Singapore’s partnership with Latin America with the potential to strengthen investment and market access opportunities for Singapore and PA countries. Despite the agreement’s potential, there remain economic, institutional and political factors that could affect the PA’s potential impact on Singapore and the region’s trade and investment opportunities. The PA has done a remarkable job in establishing itself as a platform with the potential to increase trade an investment between Latin American and the Asia-Pacific region. However, structural obstacles to intra-alliance trade, overlapping regional economic integration efforts and risks to institutional continuity will shape the size of the PA’s impact and influence in the region.

Latin America: A Key Stakeholder in Asia Pacific Trade?

Latin America: A Key Stakeholder in Asia Pacific Trade?

The participation and engagement of Latin American countries in multiple economic integration efforts within the Asia-Pacific means that they will become key partners and stakeholders in the development of a regional trade infrastructure that has the potential to create more open, resilient and inclusive trade outcomes in a post-Covid environment. However, increased political uncertainty and structural obstacles will determine the depth and impact of that role.

Managing Supply Chain Disruption in 2022

Managing Supply Chain Disruption in 2022

Firms started developing wide-ranging plans to more effectively become resilient. Locations that had been seen as highly desirable in a pre-pandemic situation started looking more fragile under heavy disruption. Having many just-in-time operations became more of a liability when logistics delays lengthened to weeks or even months. In response, some firms started developing action plans to near-shore or even re-shore some production. In some instances, these activities were already underway as the pandemic followed several years of highly disrupted trade, particularly during the height of the US-China trade war from 2018 onward. For most companies, however, heading in 2022, the actual changes made by firms to adjust to the pandemic has been considerably more modest than might have been assumed. Why? At least four reasons seem important. First, adjustments to supply chains can be quite expensive. At a time of widely fluctuating supply and demand projections, most companies did not want to deploy capital to actually change production or distribution locations. Many of the “resilient” suggestions can also involve substantial costs. Holding additional inventory can be expensive. Creating duplicate chains or even duplicate suppliers for critical parts can involve substantial additional costs. There are often sensible reasons for how a firm organized its supply chain in the first place.

The Launch of RCEP

The Launch of RCEP

Apart from tariff benefits, RCEP members (and even non-members) can benefit from more streamlined customs procedures to facilitate trade. Building on existing ASEAN+1 agreements, RCEP introduces additional guidelines on the issue of advance rulings and on the release of goods at customs that improves certainty and reduces likelihood of shipment delays at the customs. The Chapter on Customs Procedures and Trade Facilitation also includes a scheme for authorised operators to benefit from reduced paperwork requirements, faster clearance of goods, and deferred payments or clearance at the premises of the authorized provider. While the assessment of benefits of FTAs are often fixated on tariff reductions for goods, it is equally important to recognize services and investment opportunities that RCEP offers to services providers and investors in Asia. RCEP provides further liberalization to services sectors such as legal services, accounting, architecture, computer services, wholesale trade and insurance, that can go well beyond existing ASEAN+1 agreements. This includes better market access, reduced limitations, and terms and conditions for the provision of services or the establishment of commercial presence in RCEP markets. For most service sectors, RCEP allows foreign service providers to deliver services across the border without requiring a local presence in the domestic market.

Competition in the Digital Sphere

Competition in the Digital Sphere

In the tech industry, first-movers often come to occupy large market shares, potentially leading to a natural monopoly in the given market. Firms might also vertically and horizontally integrate, acquiring other businesses in pursuit of efficiency gains or a competitive edge. Though maybe a red flag for competition regulators, whether such efforts by digital platforms cause measureable harms to consumers is not always easy to determine. At its heart, competition regulation seeks to limit the harms of monopoly – limited choice, high prices, and lack of innovation. This is done with the aim of maximizing consumer welfare. Regulators, in pursuing digital platforms, believe that they are doing just that. But platforms, even those that are very large, rarely fit neatly into the monopoly box. Platforms might offer unpriced services to users, and competitors are just a click away. Further, the pace of innovation is often break-neck. Firms that do not change with the times quickly lose market share – evidenced by the fact that the tech landscape of today is vastly different from even five years ago. Despite the unique nature of tech markets, competition regulation is generally pursued with traditional regulatory tools. But this leads to insufficiently dissuasive enforcement actions, with litigation processes that move slowly compared to the pace of change in the digital economy. Whether these efforts to rein in digital platforms actually boost consumer welfare – which should be a guiding question for regulators – is unclear. This is especially true where digital platforms ‘disrupt’ traditional markets with low prices, efficiency gains, and innovation.