Order Code RS20755
Updated July 22, 2002
CRS Report for Congress
Received through the CRS Web
Singapore-U.S. Free Trade Agreement
Dick K. Nanto
Specialist in Industry and Trade
Foreign Affairs, Defense, and Trade Division
Summary
The United States and Singapore are negotiating a free-trade agreement that would,
over some period of time, eliminate tariffs on all goods traded between them, cover trade
in services, and protect intellectual property rights. The agreement may include
provisions on labor and the environment. Congressional approval would be required for
implementation. This report will be updated as circumstances warrant.
In November 2000, the United States and Singapore announced the launch of
negotiations for a U.S.-Singapore Free Trade Agreement (FTA).1 The FTA would be the
fifth such agreement the United States has signed and the first with an Asian country. As
initiated by the Clinton Administration, it was to be modeled after the U.S.-Jordan FTA
and would eliminate tariffs on all goods over time, cover substantially all services sectors,
help to develop electronic commerce, protect intellectual property rights, include
safeguards and dispute settlement mechanisms, and could include provisions on labor and
the environment. Negotiations over the FTA began in December 2000 with an initial goal
of completion before year end. Under the Bush Administration, a target completion date
of June 2002 (as Singapore had hoped for) has been dropped.
The U.S.-Singapore FTA is of interest to the Congress because: (1) it would require
Congressional approval; (2) if implemented, it would continue the trend toward greater
trade liberalization and globalization; (3) it may contain controversial environmental
and/or labor conditions; and (4) it may affect certain trade flows that would, in turn, affect
U.S. businesses, particularly import-competing industries such as textiles and apparel.
The U.S. Trade Representative has indicated that negotiation of a comprehensive
U.S.-Singapore FTA would complement both U.S. regional and multilateral work by
serving as a significant step toward realization of the Asia Pacific Economic Cooperation
(APEC) forum’s “Bogor Vision,”under which the United States and APEC’s other 21
1 For information on U.S.-Singaporean relations, see CRS Report RS20490, Singapore:
Background and U.S. Relations.
Congressional Research Service ˜ The Library of Congress

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members are working toward “free and open trade in the Pacific” and by underscoring the
benefits of further trade liberalization.2
In July 2002, U.S. trade officials reportedly told business representatives that the
negotiations with Singapore on the FTA may continue until 2003 if Congress does not
conclude work on bills providing trade promotion authority (TPA) to the President by the
August recess. TPA was deemed necessary to give negotiators guidance on how to handle
labor and environmental issues.3
In June 2002, the United States and Singapore conducted the ninth round of
negotiations on the FTA with a focus on financial and professional services. The tenth
round is scheduled for July. On April 15 and 22, the seventh and eighth rounds were
conducted. Except for labor and the environment, most subjects were discussed.
In March 2002, the U.S.-ASEAN Business Council and the U.S. Chamber of
Commerce announced the formation of a new business coalition, chaired by Boeing,
ExxonMobil, and UPS to support the FTA once negotiations are complete.4 On February
19, 2002, the U.S. International Trade Commission (ITC) began investigating the
probable economic effect of a U.S.-Singapore FTA (No. 332-439). On July 2, the ITC
began investigation No. 332-443 into the effects of eliminating tariffs on certain
agricultural goods under a U.S.-Singapore FTA.
On February 1, 2002, the United States and Singapore completed their sixth round
of negotiations on the FTA. During the round, significant progress was reported to have
been made on rules of origin, trade in goods and general services, financial and
telecommunication services, e-commerce, government procurement, investment, and
intellectual property rights. The fifth round was competed on October 26, 2001, during
which the two countries indicated that they had made progress on a variety of fronts. The
fourth round of talks on July 20, 2001, were based on a consolidated draft text that did not
include investment, labor, and environmental guidelines, and electronic commerce. The
third round of negotiations (the first under the Bush Administration) was held on May 25.
Background
Singapore is a city state located in Southeast Asia at the southern tip of Malaysia and
across the Strait of Malacca from Indonesia. It has a population of 3.5 million, an area
roughly 3.5 times the size of the District of Columbia, gross domestic product of about
$100 billion, and per capita income of about $30,500. Singapore has been a major
proponent of trade liberalization and supports the U.S. security role in Asia.
2 U.S. Trade Representative. 2001 Trade Policy Agenda and 2000 Annual Report of the
President of the United States on the Trade Agreements Program. March 2001. On Internet at
[http://www.ustr.gov/reports/2001.html].
3 U.S. Negotiators Link Singapore FTA Conclusion to Fast Track, Inside US Trade, July 19,
2002 .
4 Business Launches New Coalition to Pass U.S.-Singapore FTA. Inside U.S. Trade, March 15,
2002.

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Singapore is America’s largest trading partner in Southeast Asia with two-way trade
of $32.6 billion and a U.S. bilateral merchandise trade surplus in 2001 of $2.7 billion, up
from a deficit of $1.4 billion in 2000. The United States generally runs a surplus in
services trade with Singapore. Singapore is the 11th largest export market for the United
States with $17.7 billion in merchandise exports in 2001. It is the 14th largest source for
goods imported into the United States with $15.0 billion in 2001. As shown in the
Appendix, in bilateral trade by sectors, the United States runs surpluses with Singapore
in aircraft, plastic, instruments, chemical products, and aluminum. The U.S. incurs
deficits with Singapore in electrical machinery, knit and woven apparel, special other
repaired products, organic chemicals, books and newspapers, fish and seafood, rubber,
and ships and boats.
Singapore already has 99% free trade. Only beer and certain alcoholic beverages are
subject to import tariffs. Singapore, however, does impose high excise taxes on distilled
spirits and wines, tobacco products, and motor vehicles (which are all imported). These
are aimed at discouraging consumption for environmental and health purposes. The
government also bans chewing gum (after it caused subway doors to jam).
Singapore has signed a free trade agreement with New Zealand (effective January
1, 2001), with European Free Trade Area (signed June 26, 2002, with Iceland, Norway,
Switzerland, and Liechtenstein), and in January 2002 concluded one with Japan that
excludes agricultural products. Singapore also is negotiating such arrangements with
Australia, Mexico, and Canada, and is seeking one with the European Union. In addition,
Singapore is a member of the Association of Southeast Asian Nations (ASEAN) which
has been phasing in a Free Trade Area (AFTA) for its members, although AFTA’s goal
is currently to lower tariffs overall by 2003 and eliminate them only on certain items
imported from other member countries. Asian nations also have been discussing an East
Asian free-trade zone which would include ASEAN plus Japan, China, and South Korea.
The United States also has low trade barriers. The U.S. already has or is
implementing free trade agreements with Canada, Mexico, Israel, and Jordan, is
considering free trade with Chile, Latin America, and also is a member of APEC. A free-
trade area with Singapore, therefore, is not likely to have a large effect on bilateral trade
flows except in U.S. industries that are relatively protected (such as textiles and apparel).
Singapore generally has an open investment regime. At the end of 2000, the stock
of U.S. foreign direct investment (FDI) in Singapore totaled $23.2 billion. In 2001,
investment commitments from the United States dropped 13% to about $1.8 billion. U.S.
FDI in Singapore is concentrated largely in manufacturing (notably industrial machinery
and equipment and electronics), finance, and petroleum.5 Singapore invested a net $6.1
billion in the United States in 2000 to bring its investment position here to $7.66 billion,
much of which has been in real estate, wholesale trade, machinery industries, and
depository institutions.
5 The American Chamber of Commerce in Singapore has about 1,200 members representing
nearly 700 U.S. and foreign-owned companies.

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Issues
Since Singapore’s merchandise trade already is virtually free, U.S. negotiators are
focusing on removing Singaporean restrictions on a wide range of services. These include
high-technology sectors such as engineering, medical, information technology,
environmental, legal, financial, education, and distribution.6
The sticking points in the negotiations include textile trade (including rules of origin,
customs, and transshipments), banking, and investment issues. Investment was not
included in the U.S.-Jordan FTA that initially was being used as a model.7 One
investment issue is how to approach investor-to-state dispute settlements and the
standards for what constitutes a regulatory taking in the FTA. Investor-to-state
mechanisms allow companies and individuals to sue the government over regulations that
deprive investors of rights to their property.8 Access by U.S. banks to Singapore’s retail
banking sector and limits on the operations of professionals (lawyers, architects, etc.) also
are being negotiated.
In June 2002, the U.S. Ambassador to Singapore stated that the two sides had moved
very far along on rules issues, such as intellectual property protections, investor-to-state
rules, export controls, and the container security initiative that had become more
important after the September 11 terrorist attacks.
The textile issue includes concerns that Singapore’s increased access to U.S. textile
markets could encourage the transshipment of apparel from neighboring countries through
Singapore or other claims of Singapore as the country of origin to circumvent U.S. import
tariffs and/or quotas. This problem may be more acute in the case of Singapore because
it is a city state with limited land area, moderately high wages,9 and a booming entrepot
trade. Singaporean businesses have invested extensively in manufacturing facilities in
neighboring Indonesia, Malaysia, and other lower-wage countries. For example, Batam
in Indonesia (located about 40 minutes from Singapore by boat) has 13 industrial parks
with about 400,000 migrant factory workers – many of them employed by companies
from Singapore.10 China also is close to Singapore.
On April 2, 2002, the National Retail Federation (NRF) threatened to oppose the
FTA if proposed provisions dealing with textiles and apparel were retained. These would
keep quotas in place until 2005 and maintain high U.S. tariffs on the “vast majority of
6 For details on Singapore’s trade and investment barriers, see: U.S. Trade Representative. 2001
National Trade Estimate Report on Foreign Trade Barriers. On Internet at
[http://www.ustr.gov/html/2001_contents.html].
7 Washington Trade Daily, December 14, 2000. P. 2.
8 Administration Works on Investment Position for Singapore FTA. Inside U.S. Trade, December
15, 2000.
9 According to the U.S. Bureau of Labor Statistics, for production workers in 1999, hourly
compensation costs were $7.18 for Singapore, $5.44 for Hong Kong, $6.71 for Korea, $5.62 for
Taiwan, and $20.89 for Japan.
10 Choudry, Aziz. Human Reality Hidden in New Free Trade Deal. New Zealand Herald,
September 6, 2000. Internet edition.

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textile and apparel products from Singapore for 10 years after the agreement enters into
force.”11 As for rules of origin, the U.S. side reportedly is pushing for the same rules that
are in the North American Free Trade Agreement (NAFTA) and which are generally
favored by the American Textile Manufacturers Institute. A point of contention is the
NAFTA-like “yarn forward” rule of origin which would require that yarn production and
subsequent stages of production be conducted in the United States or Singapore in order
for apparel or textiles to qualify for duty free treatment. This is being opposed by the
NRF and the U.S. Association of Importers of Textiles and Apparel who prefer rules of
origin similar to those in the 1985 U.S.-Israel FTA or those in the WTO referred to as the
Breaux-Cardin rules of origin. Under Breaux-Cardin, origin is determined by the country
where a textile or apparel product is assembled, not cut, or where the base fabric is made,
not printed or dyed. The U.S.-Israel FTA required 35% of the value added be in Israel.12
With respect to intellectual property rights, Singapore has been on the Special 301
Watch List since 1995.13 This stems from U.S. concerns regarding the consistency of
Singapore’s intellectual property rights (IPR) regime with provisions of the WTO
Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the inadequacy of
police enforcement against IPR piracy. According to the U.S. Trade Representative, a
significant problem has been the open availability of pirated computer software, music,
and cinematographic works and the high rate of use of unlicensed software, despite the
recent changes Singapore has made in its regulations and enforcement activities.14

The Bush Administration is taking a different approach from that of the Clinton trade
team with respect to including labor and environmental provisions. Such provisions in
trade agreements (and in proposals to grant the President fast-track trade negotiating
authority) have become a source of considerable dispute between Democrats and
Republicans, business and labor, and among other interest groups in the United States.
Some have suggested that the language in the U.S.-Jordan FTA provides a possible model
for a middle ground. The Jordan-U.S. agreement attempts to address both labor rights and
environmental protection without impinging on the other’s sovereignty. It mainly
commits each country to enforce the laws they already have in place. However, the
agreement also contains a mechanism for enforcement that states that, if the dispute
cannot be resolved, the “affected party shall be entitled to take any appropriate and
commensurate measures.” Apprehension about possible trade sanctions resulting from
the agreement was allayed somewhat by side letters between the United States and Jordan
in which the U.S. Trade Representative stated that “appropriate measures for resolving
any differences that may arise regarding the Agreement would be bilateral consultations
11 National Retailers Federation. Comments Concerning Negotiation of a U.S.-Singapore Free
Trade Agreement. Letter to Trade Policy Staff, U.S. Trade Representative, April 2, 2002.
12 Nafta Rules Called ‘Inappropriate’ for U.S.-Singapore Free Trade Agreement. International
Trade Reporter, April 4, 2002. P. 607.
13 Under the Special 301 provisions in U.S. trade law, the U.S. Trade Representative identifies
countries with particular problems of protection or enforcement of intellectual property rights,
places them on a “watch list” or “priority watch list,” and monitors them closely for progress.
14 Singapore is a member of the World Intellectual Property Organization, has ratified the WTO
Agreement on Trade-related Aspects of Intellectual Property Rights, is a member of the Berne
Convention, and is a signatory to the Paris Convention, the Patent Cooperation Treaty, and the
Budapest Treaty. It is not a party to the Universal Copyright Convention.

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and other procedures, particularly alternative mechanisms, that will help to secure
compliance without recourse to traditional trade sanctions.”15
Appendix: U.S. Merchandise Trade Balances With Singapore, 1998-
2001, by Major Two-Digit Harmonized System Commodity Codes
(Million dollars)
1998
1999
2000
2001
Harmonized System Code/Year
Balance
Balance
Balance
Balance
Total Bilateral Trade Balance
-2,662
-1,944
-1,372
2,652
Machinery
-8,182
-6,966
-5,020
-3,611
Special Other
-183
-423
-602
-463
Organic Chemicals
4
-199
-231
-463
Knit Apparel
-245
-252
-260
-228
Special Import Provisions
-94
-110
-116
-94
Woven Apparel
-51
-64
-82
-58
Fish and Seafood
-57
-50
-56
-49
Books/newspaper/manuscripts
-67
-54
-35
-46
Rubber
1
-39
24
21
Aluminum
137
141
67
25
Tanning, Dye, Paint, Putty
69
99
82
68
Inorgan.Chemicals/Rare Earths
46
58
71
73
Ships and Boats
18
-33
0
86
Iron and Steel Products
103
97
95
91
Photographic/Cinematographic
74
93
104
83
Misc. Chemical Products
249
278
341
259
Mineral Fuel Oil
-63
94
-47
264
Optical, Photo, Medical, Surgical
324
387
655
299
Instruments
Plastic
445
498
602
504
Machinery Electrical
2182
2070
1,174
1,429
Aircraft, Spacecraft
1765
1490
782
3,475
Source: Data from U.S. Department of Commerce.
15 Side Letter on Labor and Environment. U.S. Trade Representative Zoellick to the Ambassador
of Jordan. July 23, 2001. On Internet at:
[http://www.tcc.mac.doc.gov/cgi-bin/doit.cgi?204:67:108047905:313]

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