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U.S.-Singapore Trade Pact to Aid California

November 20, 2002|Evelyn Iritani | Times Staff Writer

Some California technology firms will enjoy lower tariffs and streamlined customs processing under a wide-ranging free-trade agreement announced Tuesday between the U.S. and Singapore.

The pact, the first for the United States in Asia, is expected to bolster U.S. efforts to create a free-trade zone across the southeast part of the continent, already the third-largest market for U.S. goods.

Expanding U.S. commercial relations in Asia is particularly good news for California, the leading gateway for Pacific trade.

In addition to helping Silicon Valley firms such as Solectron Corp. and Advanced Micro Devices Inc., which use Singapore as a regional base and production platform, the agreement expands access to the Asian city-state for banks, insurance companies and law firms. Singapore has been hit hard by the slump in the U.S. economy but its citizens are still the wealthiest in Asia behind the Japanese.

"The U.S.-Singapore trade agreement should improve ease of transport, customs controls and potentially lower tariff rates for Solectron," said Birgit Johnston, a spokeswoman for the Milpitas, Calif., chip maker, which has five sites in Singapore, including its Asia headquarters.

Singapore, which conducted $33 billion in trade with the U.S. last year, already attracts twice as much U.S. investment as China and buys 2 1/2 times as many U.S. goods as its much larger Asian neighbor.

U.S. Trade Representative Robert Zoellick, speaking Tuesday in Singapore, said, he hoped to get the deal to Congress before the end of the year. Congress has 90 days to act.

Though the United States has hundreds of bilateral agreements involving relatively narrow matters of international commerce, this is the first time it has negotiated a comprehensive free-trade agreement with an Asian country.

The U.S. has preferred to focus instead on global trade arrangements. It has signed free-trade pacts only with Israel and Jordan and -- through the North American Free Trade Agreement -- with Mexico and Canada.

Zoellick has been aggressively pursuing bilateral trade pacts around the world. Also in the works are accords with Chile, Australia and Central America and expansion of NAFTA throughout Latin America.

Though the details were not disclosed, Zoellick's office said the Singapore deal requires increased transparency in the handling of investment disputes and provides protection for labor and the environment. The governments agreed to accept monetary fines in cases in which there are violations of labor or environmental laws.

Given the lack of contentious issues in the U.S.-Singapore economic relationship, trade experts said they expect the pact to be approved.

By sealing a deal with Singapore, the U.S. increases the pressure on Indonesia and other neighboring countries anxious to keep access to the U.S. market. Last month, the Bush administration launched the Enterprise for ASEAN Initiative, which is viewed as a precursor to a regional free-trade agreement in Southeast Asia.

The Assn. of Southeast Asian Nations, known as ASEAN, is the regional political and economic group. In addition to Singapore, ASEAN's members are Indonesia, Malaysia, Philippines, Thailand, Vietnam, Brunei, Laos, Myanmar and Cambodia.

The U.S.-Singapore trade agreement takes a step toward regional integration, extending duty-free status to electronics components produced in two nearby Indonesian islands, Batam and Bintan, that have become low-cost production platforms for U.S. technology firms such as Solectron and Seagate Technology Holdings.

"ASEAN will be the nexus for trade-opening in Asia," said Ernest Bower, president of the U.S.-ASEAN Business Council, a Washington group. "This was strategically smart for the U.S. and Singapore to reach out to Indonesia in this way."

The Singapore trade pact also bolsters the U.S. stake in Southeast Asia at a time when China has become an increasingly active player.

"China right now has a very forward-looking trade policy and it's trying to negotiate an ASEAN-wide free-trade area of its own," said Edward Gresser, a trade expert at the Progressive Policy Institute in Washington.

In addition to its bigger ambitions, the U.S. appears to have scored a victory in its battle to open up the wealthy Asian city-state to U.S. chewing gum manufacturers.

Zoellick said his negotiators had gotten a "modest entry point" for firms such as Wm. Wrigley Jr. Co. but he would not elaborate. Executives at the Chicago-based company would not comment.

The Singapore government banned the import and sale of gum in 1992 after several incidents in which wads of gum were stuck on subway doors and disrupted service.

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