SINGAPOREFREE TRADE

AGREEMENTS

Team 5:Ryan KarasackBarrett SeitzLauren McKenna

Background of Singapore

• Singapore was founded as a British trading colony in 1819

• Population: 4,608,595 (July 2003 est.)

• Ethnic Groups:• Chinese 76.7%, Malay 14%, Indian 7.9%, other

1.4%

Suffrage: • 21 years of age; universal and compulsory

Key Issues• Company Formation of Free Trade Agreements

• Japan• United States

• Multinationals in Singapore

Singapore & Japan• Dec 1999 – Negotiations Began

• Early 2001 – Consensus on FTA was reached

• Reduction of tariff and not tariff barriers.• A mutual recognition of national standards

• Viewed by many as a possible template for future FTA’s in the region

Singapore & Japan• Bulk of Japanese Exports to Singapore

Include• Machinery & Equipment• Business & Financial Services• Chemical & Mineral Products

• Singapore exports to Japan are concentrated in the service sector

Areas of Trade• Customs Automation

• Reduction of customs cost on bilateral trade

• Electronic Commerce• To improve security and harmonize standards

governing e-commerce• Decrease of 1.39% of the average price for e-

commerce transactions

• Service Trade

Areas Of Trade• Service Trade

• Liberalization of Service Trade• Elimination of service trade barriers• Lowered the effective price of business and financial

services exported from Singapore to Japan by 20.6%, and for construction services the price drop is 29.9%

Impacts On Free TradeSingapore:• Higher rates of return

on investments• Boost demand for

Singapore products• Cost of Investing in

Singapore has fallen

Japan:• Minor impact on

aggregate output, trade, investment, and GDP

• Advantages driven largely by the customs atomization process, which affects cost of trading with all partners

Other Impacts• All Asian economies gain in terms of GDP

• Largest impact felt in Malaysia & Thailand– Two countries that do a great deal of trading with Singapore &

Japan

• Increase in foreign ownership in Singapore is financed by a modest increase in outward foreign direct investment by U.S. and Canada

• Many other Asian countries reduce their foreign investment to increase investment in domestic countries.

The U.S. Free Trade Agreement

• Signed on May 6, 2003

• Focuses mainly on:– services firms

• But also touches on:– trading of goods– protection of

intellectual property rights, and

– Protections for investors

Overview

The U.S. Free Trade Agreement

• Singapore and The U.S. services firms will enjoy fair and non-discriminatory treatment in trade, through both:– Travel of service professionals across borders, and– Establishing a local services presence

• Market access commitments apply across a range of sectors, including:– Financial services– Telecommunications services– Tourism– Advertising– Professional services

Trading of Services

The U.S. Free Trade Agreement

• Most U.S. tariffs on Singaporean goods will be eliminated immediately upon entry into the agreement

• Singapore guarantees zero tariffs immediately on all U.S. products

Trading of Goods

The U.S. Free Trade Agreement

• Protection of copyrights, patents, trademarks, and trade secrets

• IPR Enforcement– Tough penalties for piracy and counterfeiting– Singaporean government guarantees that it has

authority to seize, forfeit and destroy counterfeit and pirated goods and the equipment used to produce them

Protection of Intellectual Property Rights

“The U.S.-Singapore FTA contains ground-breaking protection for U.S. intellectual property such as software, movies, music and books. These protections are vitally important in the digital age.”

~Robert B. Zoellick, U.S. Trade Representative

The U.S. Free Trade Agreement

• The agreement provided U.S. investors operating in Singapore with a secure and predictable legal framework

Protections for Investors

Objections to Free Trade

• Less U.S. jobs for U.S. citizens– Agreement provides laws that would create what is effectively a

permanent visa worker program for Singapore

• An increase in the U.S. trade deficit

“The U.S. trade deficit has increased in ever case where the U.S. has entered a free trade agreement with another country.”

~Marcy Kaptur, Congresswoman

– FTA with China in 2000: increased 25% to $103 billion– NAFTA increased the trade deficit by almost 10 times what it

was before it went into effect, from $9 billion to $87 billion– NAFTA also put over a million workers out of jobs due to free

trade– The U.S. trade deficit was the largest ever reaching $435.2

billion in 2002

Other Free Trade Agreements

• New Zealand

• Australia – October 2002

• In the works:• Canada• India• Chile• Jordan• South Korea

Multinationals in Singapore• Singapore is regarded as top

Regional HUB

• In 2002 Forbes ranked Singapore the second best place in the world to start a business.

Top Regional HUB for Multinational Companies

Over 6000 multinational corporations have offices in Singapore– 3,600 use Singapore as their regional headquarters– 1,400 of these are U.S.-based companies

• 300 of these use Singapore as their regional headquarters

• The U.S. is the largest Foreign Direct Investor in Singapore: US$27.3 billion

• Intra-MNC trade accounts for over 60% of US-Singapore trade

Singapore as a Multinational in the U.S.

• Singapore is the U.S.’s third largest investment

• Second largest Asian Investor after Japan• Foreign direct investments are twice that of South

Korea, Hong Kong, and Chinese Taipei• Investments amounted to US$6.5 billion at the end

of 2001 in:» Manufacturing» Real Estate» Depository Institutions

Why Multinationals Choose Singapore as their Asia-Pacific

headquarters:• A well-developed, free-market economy• A well-educated, English-speaking workforce• Favorable incentives and tax breaks

– no capital gains tax

• A pro-business environment with the absence of labor-management disputes

• One of the best connected countries in the world – Air– Busiest seaport– telecommunications

The Effects of the USSFTA on

Multinationals• The USSFTA will be felt most in two of

Singapore’s key sectors– Retail Banking– Information and Communication Technology

(ICT) industries

• Impact on the Real Estate Industry

The USSFTA Effect on the

Banking Industry• U.S. companies will have access to

Singapore’s country-wide ATM network

• It will open the ranks of full-service U.S. banks eligible to undertake retail business

• It will increase the number of branches that licensed U.S. banks can operate

The USSFTA Effect on the Information and

Communication Technology Industries

• Will initiate intellectual property rights laws

• Will create significant enhancements to• Trademarks• Copyrights• Patents and trade secrets

• Singapore government is determined to position Singapore as the regional ICT hub and is encouraging joint ventures and overseas investments

Impact on the Singapore Real Estate Market

• With the liberalization in bilateral trade and investment brought by the USSFTA, it is estimated that GDP will grow another 0.5%

• MNC’s have begun re-appraising various investment destinations which will make it more attractive to foreign investors worldwide

• As a result, this should raise demand for real estate in Singapore

The USSFTA Effect• Will save Singapore up to US$170 million

annually in tariffs

• Currently electronics account for 42% of Singapore’s total industrial output

• The majority of the output is exported to the U.S. • Singapore-based U.S. MNC’s therefore will benefit

the most from this new agreement

Videos• http://www.uncommonknowledge.org/

700/712.html

• http://www.us-asean.org/Singapore/fta_interview.asp

Notes• CIA - The World Factbook• International Economics - Regional Trading Agreements• Economic Intelligence Unit• ISI Emerging Markets • CNN• Asia Pacific Connections • Asian News• U.S. House of Representatives• United States Trade Representative• U.S. Dept of Commerce