Mr Tom Donohue

Distinguished Guests

Ladies and Gentlemen

The United States plays a major role in the Asian economy. In 2000, 31.4% (US$ 219 billion) of overall US exports went to Asia, second only to NAFTA (41.7%) but more than EU (US$ 187 billion or 23.8%). Asia therefore represents the second largest market for US goods. With a population of 500 million, South East Asia forms a significant portion of the Asian market for the US.

At the bilateral level, the United States and Singapore enjoy very close economic relations. The US is Singapore’s number one trading partner. Bilateral trade in 2001 reached US$40 billion. The US is also the largest foreign direct investor in Singapore. Cumulatively, it has invested more than US$24 billion in Singapore, primarily in manufacturing and services industries.

Singapore is the US’ 10^th largest export market. Though it may be a small dot on the world map, Singapore purchased one and a half times more US goods and services than China, four times more than India and more than many European countries including Italy and Spain.

In 2001, both the Global Competitiveness Report and the World Competitiveness Yearbook ranked Singapore the second most competitive economy after the US. Though our two economies are vastly different in size, our good fundamentals enable us to collaborate closely.

Currently, there are more than 1,400 US companies operating in Singapore. More than 80 US companies locate their Asia Pacific headquarters in Singapore. Major investments include ExxonMobil’s integrated petrochemical complex, HP’s printer, handheld devices, PC and server businesses and pharmaceutical facilities owned by Schering Plough, Merck and Pfizer. Singapore is also home to the most advanced manufacturing plant for Seagate’s disk drives. Recently, AMD (Advanced Micro-Devices) announced a joint venture with Taiwan’s TSMC (Taiwan Semi-conductor Manufacturing Corporation) to invest $3 billion in a 12-inch 0.065 micron wafer fab facility.

Building on our excellent strategic and economic relationship, PM Goh and President Clinton launched negotiations for a Free Trade Agreement at the sidelines of the APEC meeting in Brunei in Nov 2000. Both sides have since been working very hard to conclude an agreement of world-class standard. The 7^th round of negotiations has just finished in London yesterday (14 Mar). We have made "excellent progress" on the FTA, to quote Ambassador Zoellick. There has been a broad meeting of minds in many areas. The consolidated text is over 80% done. We have scheduled an 8^th round in Apr and hope to conclude the agreement by the middle of the year.

The USSFTA will be a comprehensive NAFTA-plus agreement. Both sides will go way beyond our WTO commitments in many areas.

In the area of Rules of Origin (ROO), we will adopt rules that reflect the manufacturing realities of a globalised economy, in key sectors such as electronics and IT, machinery and petrochemicals. For example, under the NAFTA ROO, the value add of the product only takes into account the last process of manufacture. This is not suitable in a globalised environment as production involves intermediate products and components shuttling to and fro between countries, harnessing their different comparative advantages. The USSFTA will recognise outward processing operations and allow the accumulation of value-add of a product at different stages of its production.

We will enhance our bilateral customs co-operation framework. We will put in place systems and procedures to ensure that only legitimate goods can claim preferential treatment under the FTA. We will increase the exchange of information so that both sides can use risk management techniques to block illegal trade. The USSFTA will enhance the enforcement of our respective customs laws.

In services and investment, we are adopting a top-down approach where all services sectors are automatically liberalised unless specifically reserved. Under this approach, Singapore has committed to liberalise substantially all sectors including ICT services, express courier, direct selling, many professional services, education and healthcare.

The USSFTA will also contain a new chapter on e-commerce to address the realities of the info-communications age. Under the FTA, we will commit to the non-discriminatory treatment of digital products, lower the barriers to the use and development of e-commerce and undertake not to apply any fees or duties on the electronic transmission of digital products.

In the area of intellectual property, we will adopt protection standards that are relevant and applicable in the digital environment. As Intellectual Property works in digital form are especially vulnerable to piracy, we will enhance our protection standards to keep pace with the technology.

Under the USSFTA, the USTR has proposed the concept of a "Virtual Customs Union" to extend benefits of the USSFTA to Indonesia and other parts of Southeast Asia for selected sectors. Under the Virtual Customs Union, components which do not attract tariff in the US and Singapore will be regarded as if they originated in Singapore. This will boost the local content of the final products and allow more products to benefit from FTA tariff preferences.

The Virtual Customs Union will be confined to sectors that are non-sensitive to the US. We will start with ITA products. USTR Bob Zoellick will be in Indonesia after Easter to meet Indonesia Trade Minister Rini Soewandi to discuss the idea in greater detail. Indonesia Trade Minister is also looking at ways to explore how Indonesia can improve its investment infrastructure to benefit fully from the arrangement.

The Virtual Customs Union is a win-win-win proposal. US businesses will find Southeast Asia more attractive for investment. More Singapore products can qualify for tariff concessions under the FTA. And Indonesia will attract more investment and create more employment for its people. The proposal will strengthen the region as an integrated production space, and help anchor global manufacturing operations in Southeast Asia.

The USSFTA builds a bridge across the Pacific. It will make Singapore a forward post for the US deep in the heart of Asia, and it will make the US a vase hinterland for Singapore.

The US-Singapore Business Partnership Programme between the US Chamber of Commerce and International Enterprise Singapore is another facet of our strong bilateral relationship. It provides a gateway for US companies not only into Singapore but also into a much larger Asia Pacific market. Within an air radius of 7 hours from Singapore, companies can reach a potential market of 2.8 billion people with middle classes in the hundreds of millions.

In the other direction, many Singapore SMEs, as they globalize, would find the US a huge and an attractive market. Partnering US companies would facilitate their entry into the US market.

The US partner Singapore portal, which will be presented later today, is the first initiative under the US-Singapore Business Partnership programme. Through the portal, American and Singaporean companies will find it easier to discover each other and forge partnerships. The agencies in the US and Singapore driving this initiative will facilitate the business links between enterprises that are matched through this portal. It is intended that some of the business partnerships that are forged will result in collaborative activities in third countries in Southeast Asia, China and India.

I congratulate and thank the US Chamber of Commerce and the International Enterprise Singapore for driving this initiative. I would also like to thank Ambassador Stephen Green and the US embassy in Singapore for their encouragement and support.

The US Singapore Business Partnership Programme is an important symbol of cross-Pacific co-operation. Like the USSFTA, it signals the strong commitment of the US to Southeast Asia.

Thank you.