- The Washington Times - Tuesday, February 25, 2003

SINGAPORE, Feb. 25 (UPI) — U.S. firms stand to benefit from the opening of the services sector in Singapore under the proposed free trade agreement between the countries, U.S. Ambassador to Singapore Franklin Lavin said Tuesday.

Lavin highlighted specific benefits in the financial service industry, as well as legal services and intellectual property right sectors.

Speaking at a luncheon, Lavin said U.S. banks would be able to open local branches, take advantage of the local ATM network and enter the asset management sector.

Intellectual property rights on products such as software development, pharmaceutical, cultural products — such as music and movies — will be significantly protected, including internet related and digital products.

The FTA provides for greater transparency in the matter of government procurements, which will help level the field between U.S. firms and Singaporean government-linked companies.

Singapore has committed itself under the FTA to enact a competition law within three years, to which GLCs will be subject. "The Singaporean government has also undertaken an obligation to the U.S. that GLCs will operate purely on a commercial terms," ambassador at large and Singapore chief negotiator for the U.S. trade deal Tommy Koh said.

Though he refused to give details on the competition law, which was still being prepared by the government, he did said there were provisions in the FTA that will lead to greater transparency in GLCs, pointing to directorship as well as ownership disclosures.

In January, Singapore and the United States concluded two years of negotiations on a free trade agreement. The "legal scrubbing" of the deal is expected to be completed in the first half of March and both sides are hoping to be able to signed the deal in May in Washington. After this, the administration will have 60 days to submit a report to Congress on the necessary changes which will have to be made to the U.S. laws in order to implement the deal. "It is hoped that the two houses of the U.S. Congress will pass the implementing legislation before it adjourns for its summer vacation in August," Koh said. If the two houses pass the implementing legislation in 2003, the FTA, the first for the United States in Asia, will go into force on Jan. 1.

Lavin said the deal was an important signal to the market. "This tell American businesses that Singapore has become in a sense a strategic market, not in terms of the size necessarily, but in term of its ease of entry. That it is the easiest market in Asia to enter," he said.

Singapore is the 11th-largest U.S. export market and the largest in Southeast Asia, with two-way U.S.-Singapore trade last year totaling $33 billion. It hosts $27 billion in U.S. direct investment, and more than 1,300 U.S. companies have a presence in Singapore.

Meanwhile, Koh also highlighted the benefits for Singapore. The country estimates the tariff saving under the FTA will amount to $172 million, including $102 million in the chemical industry, $31 million in the minerals industry (which includes oil and petroleum products); $27.5 million in the electrical and electronic industries; $2.3 million in the instrumentation equipment industry and $9.1 million in several other sectors. He acknowledged this estimate was slightly more optimistic than the American one, which put the savings at $100 million a year.

Beyond the tariff savings, Singapore will enjoy several other financial advantages. The merchandise-processing fee of 0.21 percent (ad valorem) imposed on all imports entering the U.S. will be waived for goods originating from Singapore. This waiver will be worth $29 million annually, Koh said.

Singapore-based companies will be able to take advantage of the integrated sourcing initiative to source with no geographical limit for components in the ICT and the medical equipment industry. Singaporean exports of ICT products and medical equipment to the United States were worth $1.15 billion and $460 million, respectively, last year. This means foreign components will be treated as local in calculating whether a product satisfies the rule of origin and should encourage manufacturers to invest in the region, especially in the two Indonesian islands of Batam and Bintan, in order to capture the comparative advantages of different locations in the region.

The vessel repair duty will also be waived for Singapore. This duty is assessed on the basis of 50 percent of the value of repair work done on U.S. ships outside the United States and is worth $4.4 million per year.

But to take full advantages of the FTA, some Singaporean industries will have to restructure. Koh pointed to the textile and apparel industry, which could enjoy a competitive price advantage of 5 to 15 percent for goods originating from Singapore, provided the manufacturers use Singapore-made or U.S.-made yarn or fabric.

(All figures in U.S. dollars.)

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