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The U.S.-Singapore Free Trade Agreement: Effects After Three Years

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The U.S.-Singapore Free Trade Agreement (FTA) (P.L. 108-78) went into effect on January 1, 2004. This report provides an overview of the major trade and economic effects of the FTA over the three years ending in 2006. It also includes detailed information on key provisions of the agreement and legislative action. The U.S.-Singapore FTA has provided greater access for U.S. companies, has been instrumental in increasing bilateral trade, and has provided reassurance to Singaporeans of U.S. interest in the country. As a city-state, Singapore operates as an entrepot with essentially free trade. Under the FTA, concessions dealt mainly with providing greater access for American service providers and with strengthening the business environment in areas such as the protection of intellectual property rights and access to government procurement. In 2006, the United States ran a $6.9 billion surplus in its merchandise trade with Singapore, up from $1.4 billion in 2003. U.S. exports of goods to Singapore surged by 49% from $16.6 billion in 2003 to $24.7 billion in 2006. However, even with this rapid increase in U.S. exports, the U.S. share of Singapore’s imports declined from 16% in 2003 to 13% in 2006. This suggests that factors other than the FTA, particularly the overall growth in Singapore’s imports, contributed greatly to the increase. Major U.S. exports to Singapore include machinery, electrical machinery, aircraft, optical and medical instruments, plastic, and mineral fuel oil. On the U.S. import side, a noteworthy development is that imports of pharmaceuticals from Singapore have risen dramatically from $0.09 billion in 2003 to $2.4 billion in 2006. The FTA did not lower the U.S. tariff rate for pharmaceuticals, since they already enter the United States duty free. What appears to have occurred has been the development of Singapore as a regional center for multinational pharmaceutical companies that are stepping up exports. Negotiations for the U.S.-Singapore Free Trade Agreement were launched under the Clinton Administration in December 2000. The FTA became the fifth such agreement the United States has signed and the first with an Asian country. According to the U.S. Trade Representative, the FTA broke new ground in electronic commerce, competition policy, and government procurement. It also included what the U.S. Trade Representative considers to be major advances in intellectual property protection, environment, labor, transparency, and customs cooperation. The U.S.-Singapore FTA required congressional implementation under expedited Trade Promotion Authority legislative procedures. The debate over implementation of the FTA fell between business and free trade interests who would benefit from more liberalized trade, particularly in services, and labor or antiglobalization interests who opposed more FTAs because of the overall impact of imports on jobs and the general effects of globalization on income distribution, certain jobs, and the environment. Specific provisions of the agreement also generated debate. This report will be updated as circumstances warrant.

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United States; Singapore; Free Trade Agreement; FTA; trade; free trade; imports; exports; merchandise; surplus


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