Impact of the Free Trade Agreement on Strategic Decision-Making
The U.S and Singapore trade pact was ratified in January 1, 2004 to improve the bilateral two countries’ economic engagements. According to Cooper (2014), in the agreement, these two nations made a commitments to abolish all outstanding tariffs, including zero-rating the importation of particular product classes. Cooper (2014) claimed that for United States companies seeking to establish their operations in Singapore, this agreement favors their international expansion strategies since the country is a strategic frontier to the Asian markets. Since Singapore’s business environment is largely duty-free, there is an improved market access, especially into the manufacturing and service sectors (Cooper, 2014). The FTA incentivised the Singapore government to revise its legal framework and create one of the strongest Intellectual Property Rights (IPRs) regimes in the Asian continent. Given the level of protection established under the USSFTA, a U.S company operating in Singapore will have the capability to safeguard its operations as well as promote corporate sustainability.
Areas in the Trade Agreement That Threaten a Successful Strategic Partnership with an Offshore Outsourcing Possibility
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In the U.S.-Singapore FTA, labour requirements constitute a core component of the trade agreement. Cooper (2014) reported that however, this has presented significant threats for both parties since there is a potential of lack of transparency. Cooper (2014) asserted that Singapore and the United States are signatories to the International Labour Organization, who have a duty the ensure consistency of their domestic laws with internationally recognized labour principles. In this domain, strategic partnerships become difficult to manage due to complexities involved in hiring of expatriates (Cooper, 2014).
Value of Offshore Outsourcing
Although this approach has its benefits, internationalization of firms between the two countries significantly affects employment in domestic markets. Before the trade pact between the two countries, employees in the United States were protected against low wages being paid by foreign companies. Consequently, following this dynamic, there exists a loophole that can be used to exploit workers in the country, hence, it would not be a strategic move.
References
Cooper, W. H. (2014). Free trade agreements : Impact on US trade and implications for US trade policy.
