Saturday, January 12, 2013

In the Singapore Property Market, Not All FTAs Are Equal (Part II)

Yesterday the Singapore government announced further measures to cool the city-state’s property market.  Among the measures are a 5 percent stamp duty for permanent residents on their first purchase of property (up from 0 percent), and a 10 percent stamp duty for their second or subsequent purchases of property (up from 3 percent).  Stamp duty on foreigners was increased from 10 percent to 15 percent.  Singapore nationals are not subject to these measures (but they are subject to other property market cooling measures). 

However, as I wrote in 2011, the US-Singapore FTA and EFTA-Singapore FTA should give American, Swiss, Lichtenstein, Norwegian and Icelandic nationals the same treatment as Singapore nationals.  This is because of the national treatment and most-favored nation clauses in those FTAs, even if the nationals are permanent residents. 

The continuing adjustments to the property stamp duty once again demonstrate that FTAs function both to expand market access and to protect market access.  In this case, the US and EFTA FTAs with Singapore insure against potential government policy changes adverse to these countries' interests (which is a major rationale for the US to negotiate a double taxation treaty with Singapore, something I’ve heard about since I moved here in 1997).  I will be very interested to see whether the EU managed to secure similar national treatment and most-favored nation obligations in its FTA with Singapore. That is something that China, Korea, Japan, India, Australia-New Zealand and other countries did not manage to get from Singapore in their FTAs, but the US and EFTA countries did.

This development is another reminder that FTAs are about more than just trade, but also encompass all forms of economic regulation, including investment.   The initial benefits may come from increased trade, but the continuing benefits (and corresponding obligations) in other parts of the economy will apply for years to come.