What are the factors?

• 1. Singapore’s trade structure, which comprises few sectors that need protection at home, allowing 99.9 per cent of its imports to be tariff-free

• 2. Singapore’s interest in bilateral FTAs eventually emerged as a fallback tool, since FTAs were believed to be more effective in promoting trade liberalisation. Singapore hoped such a trading arrangement could be useful in securing larger markets on a preferential basis, by attracting more Foreign Direct Investment (FDI), strengthening its position as a transportation hub, and circumventing future protectionist and discriminatory tendencies

• 3. Japan's change in perception: Japan should consider a trade policy that involved bilateral and regional arrangements despite these arrangements being discriminatory and even though this was an approach that Japan itself had long criticised.

Economics

• 1. Since the 1980s, Japan has consistently been one of Singapore’s top three trading partners. In 1999, when the idea of a JSEPA was still muted, Japan was Singapore’s third largest trading partner, contributing to 12 per cent of Singapore’s total merchandise trade. On average, it constituted about 20 per cent of Singapore’s total imports (MOFA 2000b).

• 2. Singapore was the sixth largest export market for Japanese goods and Japan’s thirteenth largest import source in 1999 (IMF, 2000)

• Econometric Impact: Endogeneity and Simultaneity. Countries choose their FTA partners. Prior linkages between Japan and Singapore perhaps spurred creation of the FTA