Third party FTA effects on Singapore's economy and trade relation with Thailand : a CGE model

In the recent years, the proliferation of Free Trade Agreements (FTA) has led to many studies analysing their direct impact on the countries involved. However, with an ever- expanding network of beneficial trade relations, little has been done to discern the indirect impact of FTAs formed in the perspective of a third party. As such, this report aims to find out the impact on Singapore’s economy and her trade relation with Thailand resulting from an FTA established between Thailand and a third party country, whereby all trade barriers between Thailand and the third party country are removed. Using a static GTAP model, which is derived from the CGE model, and together with a database from the year of 2001, counterfactual multi-sector and multi-regional simulations are made. The results suggest that even though negative effects are generally observed in terms of trade diversion, trade integration, intra-industry trade, welfare and employment, they are reassuringly small. At the same time, there are also sectors such as finance, services and maritime in which trade remains strong after a third party FTA is enforced.