Why breakup? Looking into unsuccessful free trade agreement negotiations

Abstract

In this first attempt to systematically analyze why countries (not) sign FTAs, we differentiate between country pairs that initiated negotiations but did not reach conclusion from pairs that did not initiate negotiations. By comparing successful and unsuccessful negotiations, we can have a better understanding why countries decided (not) to pursue FTAs. In explaining the outcome of FTA negotiations, the paper sheds light onto negotiation resources from three perspectives: resource allocation, resource diversion and resource requirement. By conducting a systematic comparison of 25 FTA negotiations conducted by Singapore, the study finds that FTA negotiation tends to be unsuccessful when (1) negotiating parties do not have diplomatic missions in the partner country (resource allocation); (2) negotiating parties conduct multiple FTA negotiations in parallel (resource diversion); and (3) negotiation becomes complicated due to the significant difference in MFN tariff between the two parties (resource requirement).

Appendices¹⁹ 

Appendix 1: List of unsuccessful negotiations of Singapore ¹⁹

The US unofficially floated the idea of a “Pacific 5 FTA” or “P5” in November 1997 (Munakata 2001, 13). At the margin of the APEC Summit in November 1998, the P5 FTA was discussed among the five countries present. However, the likelihood of successfully concluding P5 had diminished by the middle of 1998.²⁰ In June 1999, New Zealand proposed an FTA with Singapore.²¹ New Zealand was an APEC chair in 1999, and intended to promote the new WTO negotiations and APEC Bogor goal (Munakata 2001, 18). After being approached by New Zealand in June 1999, Singapore decided to actively pursue FTAs with various partners, which led to its involvement in a large number of both successful and unsuccessful FTA negotiations.

Singapore–Mexico (unsuccessful)

At the APEC Summit in September 1999, Singapore proposed FTA negotiations to Mexico, Chile and Korea²² (Munakata 2001, 18); Mexico agreed. The first round of negotiations between Singapore and Mexico started in July 2000 (Dent 2006, 265). After four rounds, the two countries adopted the Joint Declaration on November 13, 2000. In the following month, Vicente Fox assumed Mexico’s presidency, which may have had some impact on Mexico’s FTA policy. However, it should be noted that bilateral negotiations continued even under this new administration. After the adoption of the Joint Declaration, six more rounds of negotiations were held by the end of 2003 (Low 2003). However, no negotiations have been held since then. By 2005, the Singaporean government was of the view that negotiations were no longer active (Spring Singapore 2005).

In the following month, a new president, Vicente Fox assumed presidential office, which may have some impact on Mexico’s FTA policy. The fifth and sixth rounds of negotiations were held in July and September 2003, respectively. However, no negotiations held since the sixth rounds in late 2003. At least by 2005, the Singapore government was of the view that the negotiating was no longer active (Spring Singapore 2005).

Singapore–Canada (unsuccessful)

Singapore also approached Canada and proposed an FTA.²³ On June 5, 2000, the two parties released an announcement stating that the two countries would begin exploring the possibility of negotiating an FTA.²⁴ On October 21, 2001, on the margins of the meeting of the Asia–Pacific Economic Cooperation (APEC) economic leaders in China, Singapore and Canada announced the official launch of negotiations toward a bilateral free trade agreement. Formal negotiations commenced in January 2002. Six rounds of negotiations were held by October 2003, but the negotiations stagnated thereafter. At the APEC ministerial in 2006, the two parties agreed to resume negotiations, and a seventh round was held in late February 2007.²⁵ After this meeting, Canada issued a press release stating that it was not yet prepared to conclude this FTA. Another round of negotiations was held in 2007, but no further progress has been made since.²⁶ Negotiations have been on hold by mutual agreement since November 2009.²⁷

Singapore–Bahrain (unsuccessful)

The Prime Minister of Bahrain visited Singapore in October 2003, and the leaders of the two countries agreed to pursue an FTA (Feng 2004, 211). Primary discussion on this FTA was held when Singaporean Prime Minister Goh visited Bahrain on February 17, 2004.

Singapore–India (successful)

Singapore also approached India in 2000. When Prime Minister Goh visited Delhi in January 2000, the two parties agreed to set up a task force on bilateral economic cooperation, including a study on a possible FTA. The progress of the study was slow, but Indian officials appreciated that an economic partnership agreement that covers not only goods but also services would be more beneficial. At an April 2002 meeting between the two countries’ leaders, India accepted Singapore’s position that a Singapore–India FTA would be useful, although India proposed a Comprehensive Economic Cooperation Agreement (CECA) covering services to be studied by the task force. India seemingly valued the tie with Singapore as a stepping stone toward India–ASEAN cooperation. The launch of the Singapore–India FTA negotiations followed the signing of the Declaration of Intent on April 8, 2003, witnessed by Goh Chok Tong (Singapore Prime Minister) and Shri Atal Bihari Vajpayee (Indian Prime Minister) in which a joint study group report on economic cooperation was presented.²⁸ The Singapore–India CECA was signed on June 29, 2005, after 13 rounds of negotiations.

Singapore–Sri Lanka (unsuccessful)

Singapore and Sri Lanka agreed to launch FTA negotiations on August 29, 2003, soon after the signing of the Declaration of Interest between India and Singapore. The inaugural discussions, concerning the Comprehensive Economic Partnership Agreement, were held on October 20, 2003, in Colombo; this negotiation has not yet been concluded.

Singapore–Pakistan (unsuccessful)

The first meeting of the joint study group between Singapore and Pakistan was held at Islamabad in February 2005.²⁹ At this stage, the parties had already agreed to negotiate an FTA at their next meeting. The first round of negotiations between Singapore and Pakistan was actually held from August 24 through 26, 2005. By June 2006, four rounds of negotiations had been held. However, since then, no further negotiations have occurred, despite Pakistan’s efforts in June 2011 to resume them.

Singapore–Egypt (unsuccessful)

The Singaporean Prime Minister visited Egypt on February 11, 2004, and he and Egyptian leaders agreed to launch FTA negotiations at this time (Low 2008, 51; Feng 2004, 211). The two countries signed a Declaration of Intent regarding this FTA on November 14, 2006. In March 2010, two Egyptian ministers visited Singapore and reviewed the progress of negotiation with the Senior Minister of Singapore. The Singaporean government secured the budget to negotiate this FTA for FY 2010 (April 2010–March 2011)³⁰; in contrast, Singapore’s FY 2011 budget does not include costs associated with negotiating an FTA with Egypt.³¹

Singapore–Morocco (unsuccessful)

Moroccan King Mohammed VI was in Singapore on April 29, 2005. The statement issued during his visit mentions the commencement of FTA negotiations. Negotiations were launched in 2007 (Low 2008, 57); however, it appears that negotiations encountered problems soon after this.³²

Singapore–Ukraine (unsuccessful)

On May 8, 2008, Singapore and Ukraine launched FTA negotiations. Material from Singapore’s Trade Policy Review prepared by the WTO Secretariat in 2008 mentions that Singapore was negotiating an FTA with Ukraine (WT/TPR/S/202). Singapore’s budget for FY 2008 (April 2008–March 2009) and FY 2009 (April 2009–March 2010) includes the Singapore–Ukraine FTA, but the FY 2010 budget does not.

Appendix 2: Table of diplomatic missions of/in Singapore

	Of Singapore	In Singapore
Singapore–NZ	High Commission	High Commission
Singapore–Japan	Embassy	Embassy
Singapore–Australia	High Commission	High Commission
Singapore–US	Embassy	Embassy
Singapore–Mexico	No	Embassy
Singapore–EFTA	Permanent Mission (Geneva)	Several Embassies
Singapore–Canada	No	High Commission
Singapore–Jordan	No	No
Singapore–India	High Commission	High Commission
Singapore–Chile (TPSEP)	No	Embassy
Singapore–Korea	Embassy	Embassy
Singapore–Bahrain	No	No
Singapore–Sri Lanka	No	High Commission
Singapore–Panama	No	Embassy
Singapore–Peru	No	Embassy
Singapore–Pakistan	No	High Commission
Singapore–GCC	Embassy (Riyadh)	Several Embassies
Singapore–China	Embassy	Embassy
Singapore–Egypt	Embassy	Embassy
Singapore–Morocco	No	No
Singapore–Ukraine	No	Embassy
Singapore–Costa Rica	No	Embassy
Singapore–Taipei	Trade Office	Representative Office
Singapore–EU	Permanent Mission (Brussels)	Permanent Delegation
Singapore–Turkey	Embassy	Embassy