U.S. Chamber Views on the Impact of the United States-Singapore Free Trade Agreement

Statement by U.S. Chamber Vice President for Asia Myron Brilliant before the International Trade Commission on the Impact of the United States-Singapore Free Trade Agreement
 

April 24, 2003

Introduction

Madam Chairwoman and Commissioners, thank you for this opportunity to testify in front of the International Trade Commission on the economic impact of the United States-Singapore Free Trade Agreement. I am Myron Brilliant, Vice President, Asia, of the U.S. Chamber of Commerce. The U.S. Chamber is the world's largest business federation representing three million businesses of every size, sector and region. Our members have considerable interest in the development of U.S.-Singapore commercial ties and efforts to further open markets in Southeast Asia.

The U.S. Chamber of Commerce strongly supports the U.S.-Singapore Free Trade Agreement (FTA). We are a steering committee member of the U.S.-Singapore FTA Business Coalition, and see this agreement as a significant step toward advancing trade and economic prosperity with one of America's most important allies in Asia. Singapore is the United States' eleventh largest trading partner, with two-way U.S.-Singapore trade valued at US$33 billion annually. As a key gateway to the larger Association of Southeast Asian Nations (ASEAN) market, Singapore offers one of the most open, well-regulated, safe and secure investment climates in the world. Over 1500 American companies are operating in Singapore today, with over 300 of these having made Singapore their regional Asia-Pacific headquarters.

The U.S.-Singapore FTA will contribute to our global and regional trade liberalization objectives. The agreement should help foster cooperation on Asia-Pacific Economic Cooperation (APEC) and serve as a barometer for other countries in Asia that are interested in completing an FTA with the United States. The FTA with Singapore is one of the most comprehensive agreements ever negotiated. The agreement calls for Singapore to immediately eliminate all remaining tariffs, remove trade and investment barriers, increase protection of Intellectual Property Rights and provide added market access to its services markets, such as financial services, information technology and professional services (legal, architecture and engineering).

In short, once implemented, the FTA with Singapore will bring tangible commercial benefits to American companies, workers and consumers. It will offer American companies greater access to Singapore's market and increase our competitive position in the region. Let me now describe with some details the specific benefits for U.S. companies as a result of the FTA.

Key Benefits of the FTA for U.S. Companies

Throughout the negotiation process, the Chamber worked consistently with the Administration and we are pleased that many of our priorities have been addressed in the final FTA package. In our testimony today, I will offer comments on how the final FTA package compared with the Chamber's negotiating objectives.

I. General Provisions

• Trade in Goods. The FTA will immediately eliminate all remaining Singaporean customs duties on all U.S. products upon entry-into-force, unequivocally meeting one of the principal negotiating objectives set forth in the Trade Act of 2002. The FTA will also reduce or remove certain significant non-tariff barriers, such as the way Singapore calculates excise taxes on imported automotive vehicles. The U.S. Chamber is pleased that, consistent with our objectives, the agreement will eliminate Singaporean duties on all U.S. products. Once the agreement goes into effect, tariff elimination will bring tangible benefits to U.S. exporters.
• Investment. Once implemented, Singapore will be required under the Investment Chapter to provide increased protection for all forms of investment under the "negative list" approach (full market access for all service providers unless specified in the negative list). In addition, U.S. investors will be permitted to establish, acquire and operate investments in Singapore in most sectors. They will also be accorded equal treatment with local investors and not subjected to discriminatory requirements, such as using local inputs or exporting obligations. Moreover, in an important compromise between the U.S. and Singapore, the FTA will offer unrestricted free transfer of capital. In the unlikely event that Singapore imposes capital controls that "substantially impede the transfer" of capital, however, U.S. investors can claim compensation for damages. In the view of the Chamber, the Investment Chapter should provide enhanced equitable treatment of foreign investors and increased protections consistent with U.S. Bilateral Investment Treaties (BIT). The investment provisions are important to our members and we would hope that future FTAs would have even stronger benefits for U.S. investors.
• Competition Policy and Government Procurement. Under the agreement, Singapore has agreed to take a number of measures to ensure greater transparency in the procurement practices of its government-linked corporations (GLCs) and to improve its domestic competitive environment. Regarding government procurement, Singapore agreed to: 1) establish non-discrimination procurement procedures based on a "negative list" approach (full market access for all service providers unless specified in the negative list); 2) provide advance notice of purchases; and 3) establish timely and effective bid review procedures. Singapore also committed to create a Competition Commission by January 2005 and to enact domestic competition laws. We look upon these steps as favorable as they should lead to a more transparent and improved corporate environment for U.S. companies.
• Movement of Personnel. Under the FTA, U.S. professionals will be granted special temporary entry visas into Singapore for a period of 90 days. The special visa would be based on proof of nationality, purpose of the entry and evidence of professional credentials. The visas would be multiple entry and renewable. The Chamber welcomes this provision in the FTA as it will make it easier for U.S. companies to deploy personnel for short assignments and/or transfers to company facilities or projects in Singapore.
• Customs Procedures and Rules of Origin. The FTA contains specific obligations on transparent and fair procedures in customs administration, and sets forth commitments for Singapore to improve its customs clearance process for express delivery shipments. The Chamber sought these commitments as a negotiating objective and endorses these provisions as they will help eliminate cumbersome customs procedures and expedite the entry of U.S. products into Singapore. The provisions regarding rules of origin will ensure that only U.S. and Singaporean goods would benefit from the FTA. For example, only "Singapore origin" products with substantial transformation and value added in Singapore can qualify for preferential tariffs.
• Intellectual Property Rights (IPR). The IPR chapter in the FTA represents a major improvement in intellectual protection and a useful benchmark for future agreements with other countries in the Asia-Pacific region. Once put into practice, the FTA will require a higher degree of IPR protection. In particular, in the trademark area, the FTA calls for stronger protection for well-known trademarks, such as the prohibition of using identical or similar signs that would result in a likelihood of confusion. In the copyrights section, the agreement prohibits the use of internet tampering technology, criminalizes unauthorized reception and redistribution of satellite signals, and permits Internet Service Providers (ISPs) to take down copyrighted materials. On patents, the FTA provides increased protection for bio-inventions and limits compulsory licenses. The agreement marks a significant step forward, if fully implemented, in protecting U.S. IPR rights in Singapore.

II. Services

The U.S. service industry accounts for over 80% of the Gross Domestic Product (GDP) and employment in the United States, and contributes to the U.S. economy through creating jobs, improving R&D and strengthening our global competitiveness. The U.S. Chamber is generally satisfied with the negotiated agreement as it should improve market access for U.S. firms across different service sectors.

• Financial Services. When fully implemented, the FTA would require Singapore to remove its quota on Qualified Foreign Banks (QFB) and Wholesale Bank licenses. It would further allow U.S. banks and firms access to Singapore's Automated Teller Machine (ATM) network. In addition, Singapore will be required to reduce restrictions on the number of branches that licensed U.S. banks may operate in Singapore. The FTA also obligates Singapore to ease the eligibility criteria for U.S. asset managers to provide approved products under the Central Provident Fund, Singapore's multi-billion dollar retirement savings/investment program. The Chamber applauds the reduction and/or elimination of restrictions to Singapore's financial services and security markets. Once Singapore complies with the FTA, U.S. firms should gain additional market access.
• Professional Services. Under the FTA, Singapore agreed to reduce restrictions and provide enhanced market access for U.S. professional service firms (e.g., the agreement covers architectural and engineering and legal services sectors.) Of note, local ownership restrictions will be relaxed for U.S. architectural and engineering firms. For U.S. law firms, Singapore will loosen the requirements that firms must meet to participate in joint law ventures with local firms. Furthermore, Singapore also agreed to recognize law degrees granted by a limited number of American law schools for purposes of qualifying for the Singapore bar. The Chamber acknowledges that the agreement, when fully implemented, will provide improved market access for U.S. professional services firms and individuals in Singapore.
• Telecommunications. Under the FTA, Singapore will be obligated to open its telecom service market and allow for non-discriminatory access to its telecom network. U.S. firms will be given the rights to interconnect with Singapore's telecom networks, access telecom facilities, lease components and resell services. Also, the Singapore telecom regulatory authority will be required to make its rule-making transparent. For instance, it will be required to publish its interconnection agreements and service rates. The FTA also calls for the U.S. and Singapore to work on an arrangement that would mutually recognize each other's telecom equipment standards. The Chamber is satisfied with the telecom chapter, as it should lead to increased market access and help strengthen U.S. competitiveness in Singapore's telecom market.
• Express Delivery. The FTA's services chapter introduces the definition of Express Delivery Services (EDS), a goal of the U.S. EDS service providers. It is also the first time these services have been defined in a trade agreement. The FTA also contains important commitments by Singapore to prohibit cross-subsidization by postal authorities. The Chamber sought the inclusion of Express Delivery provisions in the FTA and we are generally satisfied with the FTA language.
• Electronic Commerce. The landmark Electronic Commerce chapter in the FTA introduces the concept of "digital products" in trade agreements. Provisions in this chapter guarantee non-discrimination against products delivered electronically (software, video and text) and preclude customs duties from being applied on digital products delivered electronically (video and software downloads). For hard media products (DVD and CD), custom duties will be based on the value of the carrier medium (e.g., the disc) rather than on the projected revenues from the sale of content-based products. The Chamber applauds the inclusion of the E-Commerce chapter, as it will offer expanded opportunities for U.S. companies in Singapore. The agreement's provisions will also serve as an excellent model for future FTAs in the Asia-Pacific region.
• Insurance. Under the FTA, U.S. insurance firms now will have the right to: 1) establish subsidiaries, branches or joint ventures; 2) provide insurance services from the U.S. (e.g., marine, aviation and transport products); 3) provide cross-border rights for intermediaries; and 4) offer financial services to those who participate in Singapore's social security system. The FTA also provides these firms additional rights such as expedited approval of new insurance products, which eliminates unnecessary regulatory product reviews. The Chamber endorses the insurance chapter in the FTA, as it offers substantial gains for U.S. insurance service providers.
• Dispute Settlement Procedures: Labor and Environment Provisions. The longstanding policy of the U.S. Chamber is that trade agreements should not hold out trade sanctions as a remedy in response to labor and environmental disputes. Our interpretation of the enforcement mechanism of the labor and environmental provisions of the agreement is that monetary compensation is the remedy of first choice and that trade sanctions would be employed only as a last resort.

Summary

The U.S. Chamber strongly supports the negotiated U.S.-Singapore FTA. Members of the U.S. Chamber of Commerce have enjoyed significant success doing business in Singapore, and an FTA with Singapore would generate increased commercial and investment opportunities in that market. Moreover, the FTA between two of the most dynamic and open economies in the Pacific is not only in the economic interests of both nations, but should serve to strengthen regional and multilateral trade liberalization initiatives.

This concludes my testimony. Thank you, Madam Chairwoman and Commissioners. I will be pleased to respond to any questions.