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

The U.S.-Singapore Free Trade Agreement:
Effects After Three Years
January 7, 2008
Dick K. Nanto
Specialist in Industry and Trade
Foreign Affairs, Defense, and Trade Division



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



Contents
Trade in Goods....................................................2
Trade and Market Access in Services..................................6
Financial Services.............................................8
Legal Services................................................8
Electronic Commerce...............................................9
Intellectual Property Rights (IPR) Protection............................9
Investments ......................................................9
U.S. Imports from Singapore........................................10
Balance of Trade by Sectors........................................13
Labor Issues.....................................................14
Environmental Issues..............................................15
Cargo Security...................................................15
Other Effects....................................................16
List of Figures
Figure 1. U.S. Merchandise Exports to, Imports from, and Trade
Balance with Singapore.........................................3
Figure 2. Leading U.S. Exports to Singapore by Category..................4
Figure 3. Singapore’s Imports by Major Country Shares...................5
Figure 4. U.S. Balance of Trade with Singapore in Services and
Its Components...............................................7
Figure 5. Growth in U.S. Imports from Singapore by 2-Digit
Harmonized System Sectors....................................11
Figure 6. Singapore’s Exports of Pharmaceutical Products by Origin........13
Figure 7. U.S.-Singapore Balance of Trade by Sectors, 2006...............14
List of Tables
Table 1. Singapore’s Import Market Shares.............................5
Table 2. Major U.S. Imports from Singapore, Customs Value by
Two-Digit Harmonized System Commodity Codes..................17
Table 3. Major U.S. Exports to Singapore, Customs Value by
Two-digit Harmonized System Commodity Codes...................19



The U.S.-Singapore Free Trade Agreement:
Effects After Three Years
The U.S.-Singapore Free Trade Agreement (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 essentially eliminated tariffs on all goods traded
between the two countries. It also included market access measures and other
provisions related to trade in services, investment, rules of origin, intellectual
property rights, government procurement, licensing of professionals,
telecommunications, worker rights, the environment, capital controls, and dispute
settlement.
The 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 at a time when many in the region perceive that the United
States has been focused on the Middle East and has been “neglecting” Asia. This
seems to have benefitted overall bilateral relations. The FTA has provided certain
advantages exclusively to American businesses, but many of those advantages are
being extended to other nations as well. The country is aggressively concluding
FTAs with other countries and regions. As a city-state, Singapore operates as an
entrepot and shipping center and basically has free trade. It imposes import
restrictions on only a handful of goods. Under the FTA, Singapore’s concessions
dealt mainly with providing greater access for American service providers
(particularly financial services) 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 balance of
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. Major U.S. exports to Singapore include machinery, electrical machinery,


aircraft, optical and medical instruments, plastic, and mineral fuel oil. (For details
of U.S. exports and imports by sector, see Table 2 and Table 3). U.S. trade with
Singapore has increased faster than anticipated before the FTA. However, even with
this rapid increase in U.S. exports, the U.S. share of Singapore’s imports has declined1
from 16% in 2003 to 13% in 2006. The main reason for this is that Singapore’s
overall trade is booming.


1 Data sources for this introductory overview are provided in later sections of this report.

The U.S. balance of trade in services with Singapore has declined from $4.0
billion in 2001 to $3.8 billion in 2003 and further to $2.6 billion in 2006. While U.S.
receipts of royalties and license fees have risen ($3 billion in 2006), U.S. payments
for other private services as well as for travel and transportation also have risen. U.S.
access to the Singaporean market through direct investments, however, seems to have
been enhanced considerably under the FTA. U.S. income from assets in Singapore
rose from $6.7 billion in 2003 to $14.3 billion by 2006. This more than offset the
$1.2 billion decline in the U.S. surplus in services trade with Singapore over the same
period. As an example of U.S. service providers in Singapore under the FTA,
Citibank has been able to expand its operations there (it has 50% of the credit card
market), offer innovative products (such as biometric identification for bill paying),
and partner with the subway system to issue credit cards that double as subway fare
cards and to locate branches and ATM terminals in and around subway stations.
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. Singapore is now the second largest exporter of
cardiovascular medicaments to the United States. The FTA did not lower the U.S.
tariff rate for pharmaceuticals, since such products 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. This apparently was
partly triggered by provisions in the FTA that required Singapore to strengthen its
intellectual property protection. The Singaporean government also has provided
incentives for multinational biomedical companies to locate research and production
in the country. Most of the major pharmaceutical companies of the world have
established subsidiaries in Singapore and are exporting part of their production.
Singapore has relatively high labor standards. It ratified the International Labor
Organization’s Minimum Age Convention in 2005. This brought the number of ILO
Conventions the country has ratified to more than 20, including Core Conventions
that cover child labor, forced labor, collective bargaining, and equal remuneration.
As a city state with 3.4 million people and an area roughly the size of the
Washington, DC, area inside the Beltway, Singapore’s environmental challenges
relate primarily to industrial pollution (strictly regulated), urbanization, and
preservation of natural areas. The country touts itself as a garden city. It recycles all
waste water, appears clean, and uses variable tolls to alleviate traffic congestion. The
United States has not formally raised environmental or labor issues with Singapore
under the FTA.
For background information, see CRS Report RL31789, The U.S.-Singapore
Free Trade Agreement, by Dick K. Nanto.
Trade in Goods
Since the U.S.-Singapore FTA came into effect in January 2004, U.S. trade with
Singapore has boomed. As shown in Figure 1, U.S. exports of merchandise to
Singapore rose by 49% from $16.6 billion in 2003 to $24.7 billion in 2006. U.S.



imports from Singapore increased by a lesser 18% to go from $15.1 billion in 2003
to $17.8 billion in 2006. This increased the U.S. trade surplus with Singapore from
$1.4 billion in 2003 to $6.9 billion in 2006.
Figure 1. U.S. Merchandise Exports to, Imports from, and Trade
Balance with Singapore


$ B illio n
30
24.725
Ex ports
20.6
19.620
17.817.7
16.2 16.6
15 14.8 15.1 15.4 15.115
I m ports
10
6.9Trade Balance
5.5
4.35
2.7
1.4 1 .4
0
2001 2002 2003 2004 2005 2006
Year
Source: Data from Global Trade Atlas
Major U.S. exports to Singapore include machinery, electrical machinery,
aircraft/spacecraft, optical and medical instruments, organic chemicals, and plastic.
As shown in Figure 2, U.S. exports of each of these products have risen since the
U.S.-Singapore FTA took effect in January 2004. The highly developed nature of the
city-state’s economy can be seen in the major U.S. exports there. They consist
primarily of machinery, electrical machinery, aircraft, optical and medical
instruments, as well as industrial raw materials.

Figure 2. Leading U.S. Exports to Singapore by Category


30 $billion
Pre-FTA Post-FTA
24. 725
Others $3.7
20.6Organic Chem. $1.1
19. 620
17.616.6Plastic $0.8 Mineral Fuel Oil $1.1
16.2Optics, Medical Instr.
15Aircraft, Spacecraft $3.6$1.8
10Electrical Machinery
$6.2
5
Machinery $6.4
0
2001 2002 2003 2004 2005 2006
Source: Data from U.S. Department of Commerce on f.a.s. Basis.
The rising surplus in merchandise trade with Singapore, however, masks other
underlying trends that do not bode as well for the United States. Although
Singapore’s share of U.S. exports to the world has remained at about 2.3% to 2.4%,
Singapore’s imports from the United States have been declining relative to those
from many other countries of the world. As shown in Table 1 and Figure 3, in 2001,
the United States accounted for 16.4% of Singapore’s imports. By 2006, that share
had fallen to 12.5%, despite the rapid growth in U.S. exports there. The share of
Singapore’s imports accounted for by Malaysia and Japan also have fallen, while the
shares of China, Taiwan, South Korea, and the rest of the world have risen. This
implies that Singapore is diversifying its imports away from its traditional sources
of the United States, Malaysia, and Japan, and buying relatively more from China,
Taiwan, and other countries of the world. The United States and Malaysia still are
Singapore’s largest sources of imports, but China’s share is rising.

Table 1. Singapore’s Import Market Shares
(percent)
RankImport Source20012006
1 Malaysia 17.3 13.1
2United States16.412.5
3 China 6.2 11.4
4 J apan 13.9 8 .3
5Taiwn4.36.4
6Indonesia (Est.)7.16.2
7Korea, South3.34.4
8Saudi Arabia3.63.9
9 T ha i l a nd 4 . 4 3 . 7
Rest of world23.430.2
Source: Underlying data from Global Trade Atlas
Figure 3. Singapore’s Imports by Major Country Shares


Percent Share
100%
Rest of World Pre-FTAPost-FTA
80% 30.2%
Thailand 3.7%
60%S. Korea 4.4%Saudi Arabia 3.9%
Indonesia 6.2%
Taiwan 6.4%
40%Japan 8.3%
China 11.4%
20%United States
12.5%
Malaysia 13.1%
0%
2001 2002 2003 2004 2005 2006
Year
Source: Data from Singapore Customs accessed via Global Trade Atlas
During the FTA talks, negotiations were intense over Singapore’s import
restrictions on a few products. Even though Singapore is largely a free-trade nation,
it has restrictions on imports of specific controlled items (including chewing gum)
and has import duties on beer, stout, and a local beverage called samsu. Under the
FTA, Singapore allowed imports from the United States of chewing gum with

“therapeutic value” (excluding nicotine gum) to be sold in pharmacies. The country
also dropped all duties on beer, stout, and samsu from the United States.
Under the FTA, U.S. exports of beer (made from malt, Harmonized System
code 2203) rose from $0.352 million in 2003 to $0.549 million in 2005 and to $0.915
million in 2006. As a share of Singapore’s total imports of beer, however, in 2006,
the United States accounted for about 0.5% of the total and ranked 18th among all
sources of beer imports. The top five sources were Malaysia, Mexico, Belgium, the
Netherlands, and South Korea.2 Among these countries, only South Korea has a free
trade agreement with Singapore.
With respect to chewing gum, the data on Singaporean imports do not show
appreciable imports from the United States. In 2006, out of a total of $1,089,000
chewing gum imports (HS 170410), none came from the United States. There was
$588,000 in chewing gum that came from Indonesia and $420,000 that came from
South Korea. In 2005, Singapore reported that it had imported $1,000 in chewing
gum from the United States.3
Trade and Market Access in Services
U.S. business interests point out that the greatest potential effect of the U.S.-
Singapore FTA is likely to be increased access by U.S. companies to Singapore’s
market in services. Services are provided in two ways: in cross-border transactions
and from subsidiaries in the trading partner’s economy. Services such as insurance,
shipping, provision of intellectual property, and travel often are sold across borders
and are counted as exports and imports. Other services, such as accounting, legal
services, and banking often are provided directly to the consumer through overseas
subsidiaries of U.S. companies. These transactions usually do not appear as exports
or imports, although the repatriation of profits from such activity is counted as an
income flow.
The United States has traditionally run a surplus in its balance of services trade
with Singapore. This is shown in Figure 4. Under the FTA, this balance has
declined from $4.0 billion in 2001 to $3.8 billion in 2003 and further to $2.6 billion
in 2006.


2 Data are from Global Trade Atlas.
3 Data are from Global Trade Atlas. CRS attempted to obtain export data from a major U.S.
chewing gum company, but it declined to cooperate. Likewise, the International Chewing
Gum association would not provide CRS with data on exports to Singapore.

Figure 4. U.S. Balance of Trade with Singapore in Services
and Its Components


5 $Billion
Total ServicesPost-FTA
4
3Royalties & License Fees
2
1Other Private Services
Government & MilitarySurplus
0
Deficit
-1
Travel & Transportation
-2
2001 2002 2003 2004 2005 2006
Y ear
Source: Data from U.S. Bureau of Economic Analysis
Among the four components of trade in services, the United States ran surpluses
in two and deficits in two. In royalties and license fees, the U.S. surplus increased
from $2.5 billion in 2001 to $2.9 billion in 2006. Some of this rise in fees for
intellectual property likely can be attributed to strengthened intellectual property
protection in Singapore resulting from the FTA. In other private services, the U.S.
surplus has fallen from $1.9 billion in 2001 to $0.7 billion in 2006. In military and
government transactions, the trade balance is small and varies from year to year. It
was -$0.04 billion in 2001, $0.2 billion in 2002, and -$0.2 billion in 2006. In travel
and transportation, the balance trends toward an increasingly large U.S. deficit. Most
of this is in transportation, particularly shipping, as well as in passenger fares and
travel. This negative balance grew from -$0.3 billion in 2001 to -$0.9 billion in

2006.


Increased market access in services under an FTA, therefore, may or may not
result in an improvement in the U.S. bilateral trade balance in services. It depends
on what kind of service is being traded and the relative comparative advantage of
each country. U.S. service providers, moreover, may find it more advantageous
under the increased access and strengthened intellectual property regime engendered
by an FTA to locate a subsidiary in the FTA partner country. This may reduce U.S.
exports of private services but also may increase royalties and payments from use of
intellectual property and earnings from operations in the host country. In the
Singapore case, U.S. income from assets owned in Singapore increased from $3.9
billion in 2001 to $6.7 billion in 2003, and after the FTA jumped to $14.3 billion by

2006.4 This more than offsets the $1.2 billion decline in the U.S. surplus in services
trade with Singapore.
Financial Services
In financial services, Singapore made several key concessions under the FTA.
In 2007, the government lifted the ban on new licenses for full-service and wholesale
American banks. Licensed full-service banks from the United States (two as of

2007) are now able to offer all their services at an unlimited number of locations.


Under the first two years of the FTA, U.S.-licensed full-service banks were able to
operate at up to 30 customer service locations (branches or off-premise ATMs).
Non-U.S. full-service foreign banks have been allowed to operate at a combined 25
locations. Locally incorporated subsidiaries of U.S. banks are able to apply for
access to the local automated teller machine (ATM) network on commercial terms,
and branches of U.S. banks are to obtain access to the ATM network by 2008.5
Citibank, in particular, has been expanding its presence in Singapore. From four
branches in 2004, it now has eleven full-service branches and more planned.6 It was
the first in Singapore to introduce a biometric payment system that allows payments
without credit cards based on fingerprint identification. It also has joined with the
Singapore MRT subway system to provide credit cards that double as subway tickets
and to locate ATMs and branches in and around subway stations.7 Citibank has a
50% share of the Singapore credit card market.8 As of mid-2006, Citibank along
with the other major foreign banks had created their own ATM network9 rather than
join that of the local banks. American banks are allowed under the FTA to enter the
domestic ATM network if financial considerations warrant such a move.
Legal Services
In general, foreigners in Singapore cannot practice Singapore law (without local
credentials), employ Singapore lawyers to practice Singapore law, or litigate in local
courts. Since June 2004, however, U.S. and other foreign lawyers have been allowed
to represent parties in arbitration in Singapore without the need for a Singapore
attorney to be present. U.S. law firms can provide legal services with respect to
Singapore law only through a joint venture or formal alliance with a Singapore law


4 U.S. Bureau of Economic Analysis. Balance of payments data by country. Some of these
assets may be in securities.
5 U.S. Trade Representative. 2007 National Trade Estimate Report on Foreign Trade
Barriers. Online version at [http://www.ustr.gov/Document_Library/Reports_Publications/

2007/2007_NT E_Report/Section_Index.html ].


6 See Citibank Singapore website at [http://www.citibank.com.sg].
7 Citigroup Inc. Citibank Singapore Expands its Customer Touchpoint Network by 60% with
SMRT Partnership. Press Release, July 16, 2007.
8 Citibank Offers First Travel Card in Region. The Straits Times, August 18, 2007, p. S31.
9 ATM5 is the shared ATM network of ABN AMRO, Citibank, HSBC, Maybank and
Standard Chartered. Banks.

firm.10 Under the FTA, Singapore has recognized law degrees from Harvard
University, Columbia University, New York University, and the University of
Michigan for the purpose of admission to practice law in Singapore. Also, since
October 2006, graduates of these universities who are ranked among the top 70% of
their graduating class may be admitted to the Singapore bar.11
Electronic Commerce
The FTA contains state-of-the-art provisions on electronic commerce, including
national treatment and most-favored-nation obligations for products delivered
electronically, affirmation that services disciplines cover all services delivered
electronically, and permanent duty-free status of products delivered electronically.
Intellectual Property Rights (IPR) Protection
The FTA provided the impetus for the Singapore government to amend its laws
to create one of the strongest IPR regimes in Asia.12 In July 2004, amendments to the
Trademarks Act, the Patents Act, the Layout Designs of Integrated Circuits Act,
Registered Designs Act, a new Plant Varieties Protection Act, and a new
Manufacture of Optical Discs Act came into effect. This was followed in 2005 by
an amended Copyright Act and Broadcasting Act. Singapore also has implemented
or ratified various international conventions or treaties dealing with IPRs.
Singaporean officials have indicated that the provisions in the FTA that
strengthened IPR protection in Singapore have attracted foreign business
investments. Recently, Microsoft, Pfizer, ISIS Pharmaceuticals, Motorola,
Genentech, and Lucas Films have made new investments in operations in
Singapore. 13
Investments
The U.S.-Singapore FTA provides for national and most-favored nation
treatment for foreign investors. Investors have the right to make financial transfers
freely and without delay. The FTA also provides for disciplines on performance
requirements, for international law standards in the case of expropriation, and for
access to binding international arbitration. In 2006, Singapore was the third largest
destination for U.S. foreign direct investment in the Asia Pacific. U.S. direct


10 As of October 2005, 16 of the 64 foreign law firms in Singapore were from the United
States.
11 U.S. Trade Representative, 2007 National Trade Estimate Report.
12 For details, see Economist Intelligence Unit. Singapore: Licensing and Intellectual
Property. EIU ViewsWire, New York, July 6, 2007.
13 Meetings with government officials in Singapore, August 2007.

investment (cumulative position) in Singapore was $40.8 billion in 2001, $51.1
billion in 2003, and $60.4 billion in 2006. By comparison, in 2006, it was $122.6
billion in Australia, $91.8 billion in Japan, $38.1 billion in Hong Kong, and $22.2
billion in China.14
According to the U.S. Department of Commerce, in 2004 and 2005, one of the
strongest increases in the value added of overseas affiliates of U.S. multinational
corporations was in manufacturing operations in Singapore. The attractiveness of the
country as a “manufacturing base for the Asia-Pacific region was heightened by the
enactment of the United States-Singapore Free Trade Agreement, which facilitates
the shipment of inputs to production from the United States.” In 2005, U.S. affiliates
in Singapore accounted for 15% of Singapore’s GDP, up from 13.2% in 2004 and
second only to the share in GDP of U.S. affiliates in Ireland (18.5%). In 2005, U.S.
non-bank affiliates in Singapore employed 123,600 persons, held assets of $150.7
billion, had sales of $162.7 billion, and generated net income of $18.7 billion. This
net income in Singapore exceed that by U.S. non-bank affiliates in Japan ($15.0
billion), Australia ($13.0 billion), or China ($7.9 billion) for the same year.15
U.S. Imports from Singapore
Just as U.S. exports to Singapore have increased since the U.S.-Singapore FTA
came into effect in 2004, so also have U.S. imports. Overall, U.S. imports from
Singapore rose by 0.9% from 2001 to 2003 and by 15.6% from 2004 to 2006 (not
adjusted for inflation). This, however, was considerably below the growth of all U.S.
imports of 10.2% over the first period and 26% since the FTA came into effect.
By sector, however, the growth rates for imports vary considerably. Figure 5
shows the growth rates for the three years prior to and for the three years after the
FTA was implemented for the top 29 products (by 2-digit Harmonized System code)
imported from Singapore. In 2006, the value of these products ranged from a low of
$0.01 billion for paper and paperboard to $6.7 billion for machinery. Imports from
Singapore are concentrated in the top six categories each with amounts exceeding $1
billion. Together these six accounted for 92% of the total imports from Singapore
in 2006.


14 U.S. Bureau of Economic Analysis. On a historical cost basis.
15 Mataloni, Ray. Operations of U.S. Multinational Companies in 2005. Survey of Current
Business, November 2007. pp. 48-49, 51, 58.

Figure 5. Growth in U.S. Imports from Singapore by 2-Digit
Harmonized System Sectors


MachineryElectrical Machinery
Pharmaceutical ProductsSpecial Other2,563%Big 6 Import
Organic ChemicalsProducts
Optic,Nt 8544;Med InstrMineral Fuel, Oil Etc
PlasticKnit Apparel
Book+Newspapr;ManuscrptO Specl Impr Provisions2001-2003
Aircraft,Spacecraft 2004-2006
Misc. Chemical ProductsPrecious Stones,Metals
Vehicles, Not Railway
CocoaFish And Seafood
Tool,Cutlry, Of Base Mtls
Ships And BoatsIron/Steel Products
T a nni ng, Dye , P a i n t, P u tty
Furniture And BeddingRubber
Iron And Steel
AluminumBaking Related
Perfumery,Cosmetic,Etc
Tin + Articles ThereofPaper,Paperboard
0 100 200 300 400-100-200
Percent Change
Source: Data from Global Trade Atlas
Note also that imports of textiles and apparel from Singapore have not increased
significantly. Over the 2004-2006 period, imports of woven apparel fell.
The most significant gains have been in U.S. imports of pharmaceuticals from
Singapore. Imports of such products jumped from $0.09 billion in 2003 to $2.4
billion in 2006. Over the first nine months of 2007, imports of pharmaceuticals from
Singapore had reached $2.2 billion, an increase of 26.4% over the corresponding
period in 2006. The vast majority (98%) of these imports were cardiovascular
medicaments (HS 3004909120). The market for drugs in the United States in 2006
was $174 billion, so imports from Singapore accounted for about 1.3% of the U.S.
market.
Singapore is now the second largest source of imports into the United States of
cardiovascular medicaments. Ireland is the largest with 33% of such U.S. imports
in 2006. It is followed by Singapore with 21%, Sweden with 12%, and France with
10%. In 2004, Singapore accounted for 1% of such imports while Ireland accounted
for 59%. Imports of cardiovascular medicaments from Ireland have held steady from
2004 at about $3.7 billion, whereas those from Singapore, Sweden, and France have
grown rapidly.16
16 Global Trade Atlas.

The increase in imports of pharmaceuticals from Singapore cannot be attributed
to a reduction in U.S. tariffs under the FTA. Pharmaceuticals already enter the
United States duty free. Rather what appears to have occurred is the development of
Singapore as a regional center for multinational pharmaceutical companies — both
for manufacturing and for research and development. Two major factors have
contributed to this. The first is the strengthening of intellectual property protection
and new or revised laws in Singapore. The second is the development of a
biomedical industrial park (Tuas Medical Park) for pharmaceutical companies to
locate production and other facilities plus a research complex called Biopolis that
houses biomedical research institutes, councils, and related organizations.
Multinational companies have come to dominate the manufacture of
pharmaceuticals in Singapore. These include Merck Sharp and Dohme, Aventis,
GlaxoSmithKline, Pfizer, Schering-Plough, Wyeth, and Eli Lilly.17 Singapore is
increasingly becoming a base for both regional and global pharmaceutical production
for a growing number of multinational companies. The government goal is to have
at least ten multinational pharmaceutical manufacturing facilities operational in
Singapore by 2010. Much of the production is for export, particularly to the United
States and Europe. Exports from other Asian countries also flow into Singapore for
re-export. The country exports more pharmaceuticals than any other “Asian Tiger”
economy (Hong Kong, Taiwan, and South Korea).18
Before the FTA, a sizable proportion of Singapore’s pharmaceutical exports
were transshipments from other countries. While such re-exports continue to
increase, exports of domestic production now dominate. Figure 6 shows Singapore’s
global exports of pharmaceuticals and the rapid increase in domestic exports relative
to re-exports. From 2002 to 2006, the re-export share of all pharmaceutical exports
dropped from 60% to 11%.


17 The Singapore Association of Pharmaceutical Industries lists 34 companies as members.
18 Espicom Business Intelligence Ltd. The Pharmaceutical Market: Singapore. November

2006. (Report description).



Figure 6. Singapore’s Exports of Pharmaceutical Products by Origin


$Billion
5
4. 4
4
3
2. 4
2
Domestic
Exports
1 0. 7
0. 47 0. 35 0. 45
Re-exports
0
2001 2002 2003 2004 2005 2006
Year
Source: Data from Global Trade Atlas
Balance of Trade by Sectors
In the modern globalized economy, much trade is intra-industry. The old
economic model of trade in which each country specializes in certain products and
exchanges them for others in which it has a comparative disadvantage only remotely
resembles trade between industrialized economies populated by multinational
enterprises. In many cases, the United States both imports and exports products in
the same sector. Some of this trade may occur within a manufacturer’s supply chain
that may straddle several countries. For example, an electronic product may be
designed and marketed in the United States, but final assembly may be in Singapore
using components from the United States as well as from other economies in the
region. The U.S. balance of trade in goods with Singapore is shown in Figure 7 by
two-digit Harmonized System codes.
The balance of trade by sectors also indicates how trade with Singapore may be
affecting sectoral employment in the United States. The first observation is that the
U.S. aerospace and electrical machinery producers are doing well relative to
Singapore. Most other sectors also are experiencing either small surpluses or small
deficits in bilateral trade — less than $1 billion. (The sectors not shown in Figure

7 had balances with an absolute value of less than $50 million.) On the deficit side,


the exceptional sector was pharmaceuticals, a deficit accounting for about 1.3% of
the U.S. market. This industry in Singapore, however, is dominated by multinational
drug companies, some headquartered in the United States. The effect on U.S.
employment in the drug sector, therefore, is unclear, and so far relatively small.

Figure 7. U.S.-Singapore Balance of Trade by Sectors, 2006


HS 2-digit Sector
3.5Aircraft, Spacecraft
2.9Electrical Machinery
0.84Mineral Fuel, Oil, etc
0.73Optical & Medical Instruments
0.54Plastic
0.47Misc. Chemical Products
0.19Iron/Steel Products
0.18Tanning, Dye, Paint, Putty
0.14Vehicles, Not Railway
0.12Phot ographic/ Cinem at ographic
0.1Inorganic Chem.; Rare Earth Metals
0.09Soap, Wax, etc.; Dental Prep.
0.08Tools, Cutlery, of Base Metals
0.08Precious Stones, Metals
0.07Toys And Sports Equipment
0.07Rubber
0.07Perfumery, Cosmetics, etc
0.06Paper, Paperboard
0.05Stone, Plaster, Cement, etc.
-0.05Books, Newspapers; Manuscripts
-0.11Other Special Import Provisions
-0.14Knit Apparel
-0.19Organic Chemicals
-0 . 2 3Machiner y
-0.79Special Other
-2.4Pharmaceutical Products
01234-1-2-3
Source: Data from Global Trade Atlas$Billion
Labor Issues
In the U.S.-Singapore FTA, labor obligations are part of the core text of the
trade agreement. Both parties were to reaffirm their obligations as members of the
International Labor Organization, and they are to strive to ensure that their domestic
laws provide for labor standards consistent with internationally recognized labor
principles. The agreement also contains language that it is inappropriate to weaken
or reduce domestic labor protections to encourage trade or investment. The
agreement further requires parties to effectively enforce their own domestic labor
laws. This obligation is to be enforceable through the agreement’s dispute settlement
procedures.
Singapore has ratified 24 ILO Conventions (20 in force), including five Core
Conventions that cover child labor (ratified in 2001); forced labor; collective
bargaining, and equal remuneration (ratified in 2002). The country ratified the
Minimum Age Convention in November 2005 after the FTA went into effect. Unless
otherwise indicated, the other conventions were ratified in 1965. (The United States
has ratified 14 ILO Conventions [12 in force] including 2 [Forced Labor and Child19
Labor] of the five Core Conventions.)
In 2004 Singapore’s national labor force was made up of approximately 2.18
million workers of which nearly 420,000 were unionized and represented by 68
19 International Labour Organization. See website at [http://www.ilo.org].

unions. The number of unionized workers was up from 338,311 workers in 2002.
Almost all of the unions (which represent virtually all of the union members) were
affiliated with the National Trade Union Congress (NTUC), an umbrella organization
with a close relationship with the government.
Environmental Issues
In the U.S.-Singapore FTA, both parties agreed to ensure that their domestic
environmental laws provide for high levels of environmental protection and that they
are to strive to continue to improve such laws. They are not to weaken or reduce
domestic environmental protections to encourage trade or investment. The
agreement also requires that parties effectively enforce their own domestic
environmental laws. This obligation is to be enforceable through the agreement’s
dispute settlement procedures.
Since Singapore is an island (3.4 million population) the size of the Washington,
DC, area inside the Beltway, it has virtually no natural resources. Its environmental
issues are characteristic of a highly urbanized city. It has no problems associated
with mining, forestry, or large-scale agriculture. Singapore touts itself as the “garden
city of the East.” It is relatively clean, ordered, and well-planned. Waste water is
purified and recycled. The restricted space available in the country raises issues
pertaining to industrial pollution (tightly regulated), urbanization, and the protection
of the few natural areas still existing. Vehicular traffic is alleviated by charging
special tolls to travel into the inner city during rush hours and by levying taxes and20
other fees on new or used cars.
Cargo Security
The closer economic links established under the FTA appear to have assisted in
areas such as cargo security. In December 2007, Singapore announced that it was to
conduct a six-month trial project under the Secure Freight Initiative. Under this
initiative, 100% of U.S.-bound shipping containers are to be scanned for nuclear or
radiological materials before being loaded on ships. Singapore is to be one of seven
ports participating in the trial.21
The Ports Command in Singapore already had been cooperating with the United
States in various security initiatives. It now scans about 15% of the 24 million cargo
containers that pass through its ports, and it is able to scan an incoming container


20 Tan, Alan K.J. “Preliminary Assessment of Singapore’s Environmental Law.” United
Nations Online Network in Public Administration and Finance report. June 24, 2007.
21 U.S. Embassy, Singapore. Singapore Participates in Six-month Trial Project to Scan
Shipping Containers Bound for the United States under Secure Freight Initiative. Press
Release. December 17, 2007.

truck in less than one minute. In March 2003, Singapore was the first country to sign
on to the U.S.-sponsored Cargo Security Initiative.22
Other Effects
The U.S.-Singapore FTA also generated non-economic effects. At a time when
many in Southeast Asia perceive that the United States is distracted by events in the
Middle East and not paying enough attention to Asia, the FTA provides some degree
of reassurance of U.S. interest in the region. It also created a bandwagon effect as
Malaysia, Thailand, and South Korea soon followed with negotiations of their own
for an FTA with the United States. Singapore has supported the U.S.-backed
proposal to create a Free Trade Area of the Asia Pacific under the Asia Pacific
Economic Cooperation forum. It also has aggressively been concluding other FTAs
that eventually could form the basis for this proposed free trade area.
In addition, the closer economic ties under the U.S.-Singapore FTA contributed
to more diplomatic and military cooperation with Singapore. In July 2005, the
United States and Singapore signed a Strategic Framework Agreement that extended
bilateral cooperation to defense and security. Located in the midst of several secular
Muslim nations, Singapore has been active in cooperating with the United States in
political and security cooperation in the global counterterrorism campaign.
Singapore has been at the forefront of cooperating with neighboring countries
and the United States to enhance maritime security in nearby waters, especially in the
Strait of Malacca where terrorist threats and piracy have been problems. Singapore
also has cooperated extensively to ensure the security of cargo bound for the United
States. Singapore also continues to welcome port visits by the U.S. Navy and allows
U.S. aircraft carriers to use the special pier at its naval base built especially to23
accommodate such large ships.
In 2007, when Buddhist-led demonstrations erupted in Burma, Singapore held
the Chair of ASEAN, the Association of Southeast Asian Nations, of which
Burma/Myanmar is a member. Despite the tradition of non-interference in domestic
affairs of the member states, Singapore supported investigation of the protests in
Burma by the Special U.N. Envoy to Myanmar Ibrahim Gambari. Singapore also
continued its bilateral and multilateral intelligence and law enforcement cooperation


22 U.S. Customs and Border Protection. Singapore to Scan U.S.-Bound Cargo as Part of
Secure Freight Initiative. Press Release, December 17, 2007. Maritime and Port Authority
of Singapore. “A Port’s Role,” Presentation at the International Association of Ports and
Harbors Asia/Oceania Regional Meeting, February 1-2, 2007.
23 Although, Singapore did send some 191 troops — mostly sailors on a ship — to Iraq in
2003, it withdrew them in March 2005 because the small size of Singapore’s Navy made the
one ship critical in the rotation of duties at home.

to investigate terrorist groups with a focus on Jemaah Islamiya, a group that had
plotted to carry out attacks in Singapore in the past.24
Table 2. Major U.S. Imports from Singapore, Customs Value by
Two-Digit Harmonized System Commodity Codes
(million U.S. dollars)
HSCommodity Description2003200420052006
Total 15,137.715,370.415,110.117,768.1
84 Machinery 7,687.1 7,505.9 6,800.9 6,695.4
85Electrical Machinery2,282.42,818.62,841.53,332.5
30Pharmaceutical Products9.391.11,158.32,427.2
98Special Other949.81,055.91,070.01,550.9
29Organic Chemicals2,270.61,810.1839.11,243.3

90Optics, Not 8544;


Medical Instr795.2941.6996.01,044.0
27Mineral Fuel, Oil, etc93.583.5264.7249.3
39 Plastic 104.6 146.4 247.6 224.1
61Knit Apparel233.0208.4144.4139.7

49Books, Newspaper;


Manuscript 129.2 134.2 142.7 136.9
99Other Special Import
Provisions 90.9 93.2 89.3 107.1
88Aircraft, Spacecraft64.174.180.681.7
38Misc. Chemical Products24.728.927.745.1
71Precious Stones, Metals20.022.343.643.2
87Vehicles, Not Railway28.642.544.237.9
18 Cocoa 45.2 18.4 19.6 37.2
03Fish and Seafood46.840.041.036.7
82Tools, Cutlery, of Base
Metals 10.0 12.6 18.0 28.8
89Ships and Boats48.618.726.527.3
73Iron/Steel Products18.014.919.424.1

32Tanning, Dye, Paint,


Putty 3.1 5.3 10.5 23.6

94Furniture and Bedding7.29.315.622.2


24 U.S. Department of State, Office of the Coordinator for Counterterrorism. Country
Reports on Terrorism, April 30, 2007.

HSCommodity Description2003200420052006
40 Rubber 28.0 35.9 27.5 22.2
72Iron and Steel0.17.20.116.8
76 Aluminum 4.4 8.4 8.5 15.9
19Baking Related11.211.411.913.0

33Perfumery, Cosmetics,


etc. 5.5 9.1 8.2 12.9
80Tin + Articles Thereof0.10.41.612.3
48Paper, Paperboard8.44.512.411.1
95Toys and Sports
Equipment 7.1 12.1 12.6 10.3
44 Wood 4.9 4.0 6.7 9.0
83Misc Art Of Base Metal5.38.86.58.5
62Woven Apparel36.833.912.36.4
21Miscellaneous Food8.37.56.76.3
81Other Base Metals, etc.0.30.63.66.0
74Copper+Articles Thereof2.33.02.45.9
97Art and Antiques1.72.92.15.5
15Fats And Oils4.76.95.14.4
28Inorganic Chem; Rare
Earth Met2.03.24.13.5
12Misc Grain, Seed, Fruit1.33.94.13.3
16Prepared Meat, Fish, etc2.11.62.03.0
91Clocks And Watches1.32.13.02.9

68Stone, Plaster, Cement,


etc. 0.7 0.8 1.2 2.8
41Hides and Skins2.03.24.52.8
Source: U.S. Dept. of Commerce, Bureau of Census



Table 3. Major U.S. Exports to Singapore, Customs Value by
Two-digit Harmonized System Commodity Codes
(million U.S. dollars)
HS Description 2003 2004 2005 2006
Total 16,560.1719,608.4820,642.2524,683.74
84 Machinery 4,306.83 5,332.21 5,637.14 6,437.63
85Electrical Machinery4,055.475,321.485,185.466,227.82
88Aircraft, Spacecraft2,615.122,349.142,656.923,570.66
90Optics, not 8544; Medical
Instr 1,190.56 1,540.26 1,428.79 1,774.39
27Mineral Fuel, Oil, etc.456.83763.47697.311,089.07
29Organic Chemicals462.51598.64680.821,051.83
39 Plastic 595.58 631.54 764.65 762.06
38Misc. Chemical Products333.95409.85464.85515.60
73Iron/Steel Products129.73128.28141.82218.86
32Tanning, Dye, Paint, Putty123.04157.11190.01200.35
87Vehicles, Not Railway104.94193.63240.25175.23
37 Photographic/Cinema togr 84.17 87.72 102.85 124.91
71Precious Stones, Metals71.27129.43143.18121.69
82Tools, Cutlery, Of Base Metls45.1852.0260.10109.57
28Inorganic Chem; Rare Erth Mt94.7492.24100.35101.74
40 Rubber 79.48 72.08 76.83 91.93
49Book+Newspaper; Manuscript76.8086.2180.6786.99
34Soap, Wax, etc; Dental Prep60.3060.2269.5585.81
33Perfumery, Cosmetics, etc67.0868.8180.2782.20
48Paper, Paperboard59.8065.5463.7669.58
68Stone, Plaster, Cement, etc18.9728.0633.8753.10
72Iron and Steel34.8933.3935.7252.75
70Glass and Glassware24.3933.0930.1649.02
21Miscellaneous Food57.0048.2350.5044.75
83Misc Art Of Base Metal121.7972.6830.8243.01
08Edible Fruit and Nuts56.9947.7941.7839.23
76 Aluminum 109.19 29.29 32.08 39.15
30Pharmaceutical Products49.8628.96280.0539.14
74Copper+Articles Thereof37.8734.6131.7134.05
35Albumins; Mod Starch; Glue19.5623.1729.6531.28
20Preserved Food22.2025.9626.8029.57
41Hides And Skins7.718.2512.4223.24

02 Meat 21.05 13.24 19.10 20.73



HS Description 2003 2004 2005 2006
75Nickel+Articles Thereof8.0311.2010.9618.90
04Dairy, Eggs, Honey, etc5.0112.5815.7518.89
81Other Base Metals, etc.14.2717.9414.2518.16
22 Beve rage s 10.30 12.05 12.86 18.10
42Leather Art; Saddlery; Bags8.8211.9813.0615.08
15Fats and Oils5.1011.3313.0714.01
69Ceramic Products6.204.655.7612.66
19Baking Related9.969.9311.3712.65
55Manmade Staple Fibers10.4510.8312.1012.46
63Misc Textile Articles8.508.5410.2812.14
10 Cereals 11.70 20.42 12.80 10.90
09Spices, Coffee and Tea10.3014.4812.4010.78
16Prepared Meat, Fish, etc5.236.086.1710.53
62Woven Apparel7.356.799.5510.28
Source: U.S. Dept. of Commerce, Bureau of Census