DUSTR BHATIA'S MEETING WITH MTI MINISTER LIM

UNCLAS SECTION 01 OF 02 SINGAPORE 000945

SIPDIS

SENSITIVE
SIPDIS

USTR FOR DUSTR BHATIA AND RDEHAAN

E.O. 12958: N/A
TAGS: ETRD ECON EINV USTR PGOV SN
SUBJECT: DUSTR BHATIA'S MEETING WITH MTI MINISTER LIM



1. (SBU) Summary. Singapore Minister for Trade and
Industry LIM Hng Kiang told Deputy U.S. Trade Representative
Karan Bhatia during a March 18 meeting that the WTO's "big
four" economies needed to work together to finalize a
package that could be sold to other more resistant member
economies. He argued that, although progress on Doha had
been limited, overall positive dynamics among key
negotiating teams boded well for achieving consensus.
Minister Lim advocated pursuit of a sectoral approach at the
upcoming April APEC meetings, and pushed for greater
emphasis on customs facilitation. He welcomed U.S. efforts
to pursue free trade agreements (FTAs) with South Korea and
Malaysia, observing that the determination and negotiating
skills of South Korean Trade Minister Kim and Malaysian
Trade Minister Rafidah would prove essential in the face of
anticipated domestic resistance. He voiced optimism on
Indonesia, noting recent efforts by the GOI and GOS to
resolve investor disputes. In terms of dealing with the
rise of China and India, Minister Lim observed that the key
challenge for Southeast Asia was how to implement the
reforms necessary to take full advantage of shifting trade
and investment flows. End Summary.

Doha Agenda
--------------


2. (SBU) Noting that the March 10-11 WTO meetings in London
had yielded limited results, DUSTR Bhatia said that the USG
valued Singapore's continued support of WTO objectives and its
role as a key proponent of the Doha Round in the region. He
lamented Asia's lack of engagement relative to the weight of
some of its economies, especially China and India. Minister
Lim said it was imperative that the "big four" WTO economies
(United States, EU, Japan, and Canada) work together to
finalize a package that could then be "sold" to more reluctant
members. Lim noted that the broad strategy for Doha was still
viable and that Singapore had its hopes pinned on the upcoming
April meetings designed to move forward the negotiations.


3. (SBU) Minister Lim voiced optimism based on how WTO
Director General Pascal Lamy had handled the December 2005 Hong
Kong negotiations despite their minimal progress. He suggested
that recent dynamics of the "green room" boded well for
achieving consensus. DUSTR Bhatia noted that USTR Portman
thought the APEC Statement issued in conjunction with the Hong
Kong ministerial meetings had been helpful, and that we wanted
to pursue something similar linked to the April meetings.


4. (SBU) Minister Lim agreed with DUSTR Bhatia that recent
efforts to incorporate actual numbers into modeling simulations
were yielding positive results. DUSTR Bhatia cautioned,
however, that some countries like Brazil and India were
resistant to non-agricultural market access (NAMA) initiatives.
He also expressed concern that, without progress on
agriculture, increasing protectionist sentiment in Washington
could circumscribe the USG's own maneuverability.

APEC
--------------


5. (U) Minister Lim said that business groups were urging
Singapore to support a sectoral approach at the April APEC
meetings in Vietnam. He suggested building momentum in this
direction by adopting a strategy similar to that used
previously for the information technology sector. DUSTR Bhatia
noted that while there was some support for a sectoral approach
in Geneva, this was not the case in most Asian countries;
Singapore was an exception. He pointed out that part of the
problem was a lack of awareness among certain trade ministries.
Minister Lim said that APEC should target customs facilitation
as a priority; DUSTR Bhatia agreed. He explained that these
efforts dovetailed with ASEAN's efforts to develop uniform
customs standards.

U.S. Regional Trade Initiatives
--------------


6. (U) Minister Lim said that Singapore welcomed U.S. efforts
to enter into FTA negotiations with South Korea and Malaysia,
noting that this was a step in the right direction for both
APEC and ASEAN. DUSTR Bhatia explained that the Administration

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believed more focus needed to be given to Asia on trade issues;
the expiration to the President's Trade Promotion Authority in
July 2007 would require a concerted effort on both sides to
conclude agreements before this deadline.

South Korea FTA
--------------


7. (SBU) Minister Lim said that he was pleased that South
Korea, through FTA negotiations with the United States as well
as with ASEAN, was attempting to reduce its growing dependence
on the Japanese and Chinese economies. He praised South Korean
Trade Minister Kim Hyun Chong for pursuing free trade
objectives despite considerable domestic resistance.

Malaysia FTA
--------------


8. (SBU) With regard to Malaysia, Minister Lim emphasized that
Singapore strongly supported any ASEAN partner that entered
into FTA negotiations. He commented that Trade Minister
Rafidah Aziz was an excellent negotiator and that she would
prove essential to a successful outcome. Asked if Prime
Minister Badawi would allow Minister Rafidah to be the key
decision maker, Minister Lim replied that it would depend on
the scope of the FTA: if the United States insisted on a "gold
standard" FTA comparable to the the U.S.-Singapore FTA, PM
Badawi would need to intervene to push through required (and
controversial) legal and regulatory reforms in areas such as
bumiputra (ethnic Malay) ownership and labor requirements,
automobiles, and government procurement.

Indonesia
--------------


9. (U) Minister Lim said that he was upbeat about Indonesia.
Vice President Jusuf Kalla and Singapore Foreign Minister
George Yeo had recently met in Batam to resolve investor
difficulties that were symptomatic of problems faced by
investors elsewhere in Indonesia, he said. The GOI understood
that it needed to change its tax, investor and labor laws if it
were to generate the 2.5 million new jobs it needed annually.

China
--------------


10. (U) Minister Lim commented that implementation of the
China-ASEAN FTA agreement on goods was proceeding smoothly.
Trade negotiators would meet the week of March 20 to further
discuss the services component. He noted that China was
Singapore's top investment destination, and trade was growing
by approximately 25 percent annually. Asked for his assessment
of China's push to develop its more remote western provinces,
Minister Lim said that Singapore investors were doing well in
these provinces and that benefits were beginning to trickle
down to the smaller cities and townships. Although Minister
Lim admitted some concern about the large flow of foreign
direct investment (FDI) to China and India relative to ASEAN,
he emphasized that FDI flows were not a zero-sum game; ASEAN's
growing links to both economies would ensure increasing
integration and new jobs growth. Minister Lim concluded that
the challenge for Southeast Asia was how best to implement
reforms to take full advantage of evolving regional trade and
investment flows.


11. (U) DUSTR Bhatia cleared this message.

HERBOLD