The India-Singapore Comprehensive Economic Co-operation Agreement (CECA): A Good Beginning Towards an Enduring Economic Relationship

ASEAN Economic Bulletin Vol. 20, No. 2 (2003), pp. 179-83 The India-Singapore Comprehensive Economic Co-operation Agreement (CECA): A Good Beginning Towards an Enduring Economic Relationship Rahul Sen Introduction The past decade has witnessed a significant expansion in bilateral economic relations between Singapore and India. Thus, while the total bilateral merchandise trade between the two countries trebled during 1991-2002, reaching US$4.20 billion, the bilateral services trade increased by 40 per cent from 1998 to US$0.74 billion in 2000. These trade flows have also been accompanied by increasing volume of foreign investments, with Singapore emerging as the eighth largest foreign investor in India as of 2002 (Joint Study Group [JSG] 2003). These investments have covered a wide range of sectors from telecommunications, electrical equipments, electronics, health care, and real estate, to port development, trade logistics, tourism, and transportation. These economic linkages have been further strengthened by the development of institutional links particularly between the trade, investment, and tourism promotion agencies of the two countries.1 With increasing economic and institutional linkages between Singapore and India, it has been recognized by the policy-makers from both sides that there needs to be a sustained effort to concretize this relationship. Thus, during the visit of the Indian Prime Minister Shri Atal Bihari Vajpayee to Singapore in April 2002, it was proposed that a JSG be set up to explore the areas of mutual economic co-operation. This was believed to be the first step for both countries to seriously consider a closer economic partnership through a Regional Trade Agreement (RTA). The JSG has since completed its report and during the recent visit of the Singapore Prime Minister Goh Chok Tong to India in April 2003, a declaration of intent to conclude a Comprehensive Economic Co-operation Agreement (CECA) between India and Singapore within a time span of twelve to eighteen months has been signed. It is important to note that this visit took place under the shadow of an outbreak of the Severe Acute Respiratory Syndrome (SARS) in several countries across ASEAN Economic Bulletin 179 Vol.20, No. 2, August 2003 Asia, signifying willingness of both countries to forge an enduring long-term relationship. It has been agreed that the recommendations of the JSG report on the India-Singapore CECA, released during PM Goh's visit to India, could serve as a basis for detailed negotiations. This declaration thus represents another step forward in operationalizing India's "Look East" Policy. Upon signing, the CECA with India would represent the first such bilateral arrangement that Singapore has entered into with a developing country, and India's first such agreement with a high-income, affluent country, and thus assumes significance. It is important to note that India already has a functional Free Trade Agreement (FTA) with Sri Lanka and is in the process of negotiating such arrangements with Thailand, Brazil, and Chile. Thus, India's experience with such agreements with two members of ASEAN — Singapore and Thailand — can be expected to ease negotiations for a prospective ASEAN-India Free Trade Agreement. This article analyses the recommendations of the JSG report in the context of the proposed India-Singapore CECA and its implications for India-Singapore economic relations. It analyses some key recommendations of the JSG report and implications of the proposed CECA for regionalism in Asia. The article concludes with some cautionary notes on the CECA. Key Recommendations of the JSG Report on India-Singapore CECA and Its Implications2 The JSG Report on India-Singapore CECA has recommended that the CECA be an FTA-plus arrangement. This implies that negotiations would go beyond tariff reduction on merchandise trade into other areas of trade negotiations, viz., services, investments, standards, and movement of natural persons. Specifically, the JSG has recommended that the CECA should be an integrated package of agreements comprising of the following major components, each of whom is individually discussed below: FTA on Merchandise and Services Trade The JSG report has recommended that the FTA, being part of the CECA, would be comprehensive and would not be limited to tariff reductions in merchandise trade. It would include services trade liberalization as well and cover almost all sectors of...