U.S.-Singapore Free Trade Agreement: The First U.S. FTA in Asia

by Georgia Creech
Office of Asia and the Pacific, Market Access and Compliance

“It was a dark and stormy night” is not only the slogan for an annual contest celebrating bad writing. It also aptly describes the surroundings when the leaders of Singapore and the United States agreed to negotiate a bilateral free trade agreement (FTA). In the very early hours of November 16, 2000, they were playing golf on a well-lighted course in Brunei. Thunderstorms rumbled in the distance, and at some point during the round the two agreed that their nations should negotiate an FTA. Almost exactly two years later, negotiating teams in Singapore announced the near-completion of the agreement.

Singapore as a Trading Partner
Singapore was the United States’ 11th-largest trading partner in 2001, purchasing U.S. goods and services almost equal to that of China, three times more than India, and more than many European countries, including Italy and Spain. Singaporeans enjoy a high standard of living, which gives them purchasing power to buy U.S. goods and services. Singapore is also a business friendly and highly competitive environment. The World Economic Forum (an independent, international organization based in Switzerland) publishes an annual Global Competitiveness Report. Part of this report is an index that ranks a country’s competitiveness in three broad categories: technology, public institutions, and macroeconomic environment. This year, Singapore ranked fourth in the world, as it did last year. In comparison, the United States ranked first this year, up from second place last year.

Key Provisions of the FTA
Services
Services were a priority for U.S. negotiators, as the vast majority of goods already enter Singapore duty-free. With a few exceptions, Singapore will improve market access to U.S. providers of professional services. Singapore will treat U.S. service providers in a broad range of sectors the same as it does its own providers. U.S. companies will find opportunities in a number of areas, such as legal, architectural, engineering, and surveying services. Express delivery services are differentiated from Singapore’s postal monopoly, and these services will experience increased competition. The agreement also includes wording on regulatory transparency and expedited authorization procedures.

Similarly, in financial services, Singapore will now treat U.S. firms the same as local firms for the cross-border supply of financial information, advisory, and data-processing services. The current ban on new licenses for full-service banks will be lifted within 18 months, and within three years for wholesale banks. Singapore will provide U.S. banks access to the local ATM network within two and a half years, if they are locally incorporated, and within four years for all other banks. Qualified banks also can open 30 (up from 15) branches and service locations. Singapore will allow U.S. firms to provide asset and portfolio management and securities services in the country through the establishment of local offices, or through acquisition of local firms. U.S. firms may supply pension services under Singapore’s privatized social security system, with more liberal requirements regarding the number of portfolio managers who must be located in Singapore.

Goods
The U.S.-Singapore Free Trade Agreement will lock in Singapore’s current duty-free treatment on almost all U.S. products. The agreement also includes strong provisions to ensure that businesses do not falsely claim Singaporean origin for goods. Singapore is required to penalize companies engaged in such circumvention, as well as to report such actions to the United States.

Investment
The FTA includes solid protection of U.S. investors and investments in Singapore by establishing a secure, predictable legal framework for U.S. investors operating there. U.S. investors will be provided treatment as favorable as Singaporean and third-country investors. Among the rights afforded are due process protection and the right to utilize a neutral forum to resolve disputes involving the agreement’s investment protection or breaches of investment agreements. The FTA also prohibits certain performance-related restrictions on U.S. investors (for instance, the requirement to use local content in manufacturing operations).

E-Commerce
The two sides recognized at the beginning of negotiations that special provisions on electronic commerce would be needed. Consequently, this is one of the areas in which the agreement breaks new ground. A number of voluntary or temporary WTO commitments, including duty-free status for products delivered electronically, are binding and permanent in the U.S.-Singapore FTA. The commitments about services in this agreement also extend to the electronic delivery of these services.

Intellectual Property
Globally, U.S. firms lose billions of dollars every year to intellectual property piracy, and this agreement goes further than any previous FTA to protect intellectual property. The agreement provides protection of copyrights, patents, trademarks, and trade secrets. It contains breakthrough protection of digital products, such as software, music, text, and videos. Composers and copyright owners are the only parties with the right to make their works available on-line. Enforcement mechanisms are also stronger. For example, there are provisions to prohibit tampering with technologies designed to prevent piracy.

The aforementioned provisions, along with important stipulations regarding telecommunications, competition policy, government procurement, labor and the environment, capital controls, and other areas, are part of one of the most comprehensive trade agreements ever negotiated. The U.S.-Singapore FTA lays the groundwork for an expanded, mutually beneficial commercial relationship.