Singapore's Trade Deal With UK Will Depend on the EU-UK Deal – Chief Economist

Singaporean Prime Minister Lee Hsien Loong said that his country and the United Kingdom can agree on a trade deal after Brexit.

Speaking to BBC Radio, he also noted that he would be prepared to extend the terms of Singapore's recently agreed deal with the European Union to the UK, adding that he had discussed the possibility of such an arrangement with British Prime Minister Theresa May. 

Sputnik discussed the relationship between the UK and Singapore with Rajiv Biswas, the Asia-Pacific chief economist at IHS Markit.

Sputnik: How important is the trade relationship between Singapore and the United Kingdom for both parties, given the current malaise?

Rajiv Biswas: The relationship has historically been important given the UK's historic ties with Singapore, which used to be a colony of the UK. But over recent years, with the rise of Asian giants, such as China and Japan, and also the increasing importance of Southeast Asia, Singapore's trade relationships have shifted more and more towards Asian trade partners.

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So the UK trade relationship has diminished in importance over the last 20 years. Nevertheless, the ties between Singapore and the UK are very, very strong, beyond just physical trade — particularly in services, because Singapore is such a large financial hub and a lot of UK financial services, companies, banks, insurance companies, asset managers are located in Singapore for their Asia Pacific business. The overall trade relationship, when we also include the services sector trade, is actually very important.

Sputnik: What's your forecast for the relationship? There are obviously very strong historical ties; you've mentioned that the potential for developing trade relationships specifically in the technology and the financial services sector is absolutely huge. You've alluded to the financial services, perhaps you could look at other areas of trade that could potentially reap rewards for both countries. You are looking at technology, but what about the agricultural side of things in terms of agribusiness; is there potential there?

Rajiv Biswas: I think it's difficult for the UK to compete in many areas of manufacturing, because Asia's become more and more competitive as many Asian countries have become big hubs for manufacturing and, you know, we could talk about China, Japan, and South Korea, but there are also many other emerging players like Vietnam. So, I think in niche areas Britain will still have a very good relationship with Singapore in physical trading goods.

One of the most important areas that I think in future will be flourishing is an aerospace. There is already Rolls Royce manufacturing of turbine blades in Singapore. [There is] a lot of maintenance for the large fleets of commercial aircraft that use Singapore as a maintenance hub, but I think because of Singapore Airlines, being a leading global airline, their orders for commercial aircraft will create a lot of potential future demand for British aerospace products, particularly for aircraft engines, but also other important aerospace components.

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I think that's a flourishing area for the future, financial services, no doubt, has huge potential to grow further as Asia continues to rise and Singapore continues to be a major hub for finance for the whole region. I think also in the area of tourism, more and more tourists find it attractive to visit the UK as Asian living standards are rising. I think in that area as well the UK has a lot of potential, but I think we do need to see it within the broader perspective that it is not that easy for the UK manufacturing sector to compete with rising industrial giants of Asia in many areas.

Sputnik: How beneficial would a trade deal between the two countries be? It's been reported earlier that the Trans-Pacific Partnership was willing to welcome the United Kingdom after it leaves the European Union. Is a bilateral trade deal between the UK and Singapore possible? If something does develop, I would have thought that it could create almost a domino effect to allow other countries to start trading proactively with the United Kingdom — they've got strong ties similarly to Malaysia and Thailand, perhaps?

Rajiv Biswas: It's certainly possible from the point of view of the Asian side of things; so from the Asian perspective, the TPP members have the option to include the UK if they wish, that's their decision, and Singapore also can, offer the possibility of a bilateral trade deal for the UK. However, the problem for the UK is: what will be the shape of its new trade arrangements with the EU? That's still very unclear.

There's been talk of continuing some sort of form of relationship with the European Union in terms of a customs union, which will allow UK-EU free trade, but that may involve some kind of commitment from the UK that they wouldn't enter into separate deals with other countries. All of this is up in the air and a lot will depend on what the EU-UK deal is. If in the end, we find that the UK agrees to some sort of a customs union extension with the EU as part of their Brexit deal, it could preclude them from doing any other kind of free trade agreements with other countries.

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Because the problem from the point of view of the EU is, if they are offering that arrangement to the UK, they don't want backdoors, where the UK then has created completely separate deals with other countries without the EU framework. So, I think, it's understandable from the EU perspective why they feel they need to restrict the UK, if they were to offer such a deal, but the whole Brexit situation is very much up in the air right now.

I think at the moment, Singapore is saying to the UK now "if and when you do a Brexit deal, we are very willing to come to you and offer an arrangement that would mirror the EU arrangement." But a lot will, of course, depend on how the UK talks go with the EU.

The views expressed in this article are solely those of Rajiv Biswas and do not necessarily reflect the official position of Sputnik.