FTA REVIEW HIGHLIGHTS BENEFITS, UNRESOLVED ISSUES

UNCLAS SECTION 01 OF 05 SINGAPORE 001168 STATE PASS USTR FOR AUSTR WEISEL, DBELL, JMCHALE, EGROVES, AND AMATTICE COMMERCE FOR MHOGGE SIPDIS E.O. 12958: N/A TAGS: ETRD ECON EFIN EINV ECPS SENV EAGR KTEX KIPR SN SUBJECT: FTA REVIEW HIGHLIGHTS BENEFITS, UNRESOLVED ISSUES ¶1. Summary/Action Items: Assistant U.S. Trade Representative Barbara Weisel praised the U.S.-Singapore Free Trade Agreement (FTA) during an annual review of the agreement held via digital videoconference (DVC) October 10, citing its contribution to increased bilateral trade and investment in the nearly five years since it was implemented. However, several bilateral issues remain in areas such as telecommunications, intellectual property rights (IPR),textiles, and market access for U.S. beef, despite efforts to resolve them in previous reviews of the FTA and in interim discussions on specific issues. AUSTR Weisel noted that the recent U.S. decision to begin negotiations to join the Transpacific Partnership (TPP) trade agreement, which includes Singapore, would increase focus on the bilateral FTA. She called for both sides to redouble efforts to resolve outstanding issues and make progress on areas such as environmental cooperation, which is likely to be a priority in the TPP negotiations. AUSTR Weisel and Ms. KOH Lin-Net, Deputy Secretary of the Ministry of Trade and Industry (MTI),led the respective delegations during the DVC discussion. -- Environment: The USG and GOS agreed to continue work under the Plan of Action, and to further discuss a regional dialogue on illegal logging once the USG provides a proposal in 2009. USTR and the GOS may also explore a regional conservation initiative for endangered arowana fish. -- Agriculture: The GOS is to provide a timeline for the completion of its risk assessment of U.S. bone-in beef. -- Dispute Settlement: The U.S. will provide proposed procedures for setting up a contingent list of panelists. -- Textile Short-Supply Request: USTR will move expeditiously to process Singapore's second short supply request. The GOS will submit a third short supply request directly to textile negotiator Scott Quesenberry. -- Intellectual Property: The USG will provide industry feedback and suggest language to amend Singapore's Copyright Law in order to enhance protections for Internet sound rebroadcasts (simulcasts). The USG will also provide suggestions to include a process for agents of copyright owners to request pre-discovery information about copyright infringers. -- Telecom: USTR and Embassy Singapore will follow up with industry and the GOS to clarify whether telecom providers can interconnect to SingTel's lines via a tandem exchange. End Summary/Action Items. FTA Driving Trade and Growth -------------- ¶2. In the fourth annual review of the U.S.-Singapore Free Trade Agreement (FTA) held October 10 via digital videoconference (DVC), Ms. KOH Lin-Net, Deputy Secretary of the Ministry of Trade and Industry (MTI),and Assistant USTR Barbara Weisel agreed that nearly five years after implementation, the FTA continues to create partnerships in many areas of the bilateral relationship. Strong trade and investment flows have been one of the few bright spots during the current difficult economic situation in the United States, and AUSTR Weisel credited the U.S.'s many free trade agreements for keeping U.S. GDP growth positive. Bilateral trade with Singapore rose seven percent in the first half of 2008, and Singapore's investment in the U.S. has doubled in the past two years. ¶3. AUSTR Weisel suggested that the FTA had helped solidify an already strong bilateral relationship and cooperation in multilateral fora like APEC and the latest round of the World Trade Organization. The success of the FTA had helped the United States make the decision to begin negotiations to join the Transpacific Partnership (TPP) trade agreement, of which Singapore is a member along with Chile, New Zealand and Brunei. However, AUSTR Weisel warned that U.S. participation in TPP negotiations will increase domestic scrutiny of the bilateral FTA and sharpen focus on areas of particular concern, such as environmental cooperation. Singapore and the United States should therefore move quickly to effectively address outstanding FTA issues to ensure they do not negatively affect TPP negotiations. DepSec Koh welcomed the recent USG announcement to join the TPP and noted the importance of reaffirming our commitment to free trade and open markets. Environmental Cooperation -------------- -- Review of environmental cooperation work plan (USG/GOS) SINGAPORE 00001168 002 OF 005 -- Combating illegal logging (USG) -- Arowana Dragonfish market access (GOS) ¶4. The USG summarized the status of bilateral environmental cooperation, highlighting the 2007 review of the Memorandum of Intent (MOI) on environmental cooperation, and approval of a 2008-2010 work plan. Zeenat Syed, International Relations Officer in the State Department Bureau of Oceans, Environment and Science, cited joint activities initiated under the MTI in the last year, including a 2007 Ramin wood identification workshop for Singapore Customs officers and bilateral consultations in 2008 between Singapore's Agri-Food and Veterinary Authority (AVA) and the U.S. Fish and Wildlife Service on implementation of the Convention on International Trade in Endangered Species (CITES). The GOS and USG have agreed to future activities under the work plan that would address oil discharge and air emissions from ships, watershed safety and combating trafficking of endangered species. GOS officials expressed regret that they had to postpone planned recent study tours to the United States on terrain decontamination and energy efficient laboratories and indicated they would like to reschedule the trips for early 2009. ¶5. AUSTR Weisel and DepSec Koh concurred that the overall scope of interaction between Singapore and U.S. environmental agencies had increased and progress has been made under the MOI, but Weisel said that more must be done to address issues such as illegal logging. DepSec Koh emphasized that Singapore has no forestry industry of its own, and she conveyed the GOS view that it would be more effective to combat illegal logging at the source of the timber or on the demand side at the point of import rather than at a transshipment point like Singapore. However, she said that the GOS stands ready to support regional efforts to combat the trade of endangered timber. ¶6. Given the complex supply chain involved in illegal logging, DepSec Koh recommended that the joint dialogue under the MOI be broadened to bring in other parties to discuss the issue. USTR said that the U.S. bilateral agreement with Indonesia on illegal logging had shown constructive benefits over the past two years. The USG hoped to table a proposal in early 2009 to expand the agreement into a larger dialogue that would include a range of Singaporean officials covering trade, Customs and forestry issues. ¶7. DepSec Koh reasserted Singapore's request to export captive-bred Arowana dragonfish to the United States, highlighting that the issue remains unresolved since first raised in 2001. She appealed to USTR to facilitate discussions with the U.S. Fish and Wildlife Service. USTR reminded DepSec Koh that the U.S. Endangered Species Act has a strict standard for trade in wildlife, requiring that imports of endangered species directly contribute to conservation of the species in the wild. USTR noted that most efforts to conserve Arowana fish in the wild are actually taking place outside of Singapore in other parts of Asia, and a joint Singapore-U.S. commitment on Arowana fish conservation in the region could ultimately improve access to the U.S. market. The issue could be creatively explored under the MOI and current environmental work plan. Agriculture -------------- -- Imports of bone-in cuts of U.S. beef (USG) ¶8. AUSTR Weisel emphasized that gaining market access for U.S. bone-in beef is a priority and a high-profile issue in Congress that will be scrutinized as the TPP negotiations continue. DepSec Koh pointed out that the FTA does not include sanitary/phytosanitary provisions, but nevertheless welcomed the discussion on beef. The U.S. Department of Agriculture's (USDA) representative said that the USG had been working with trading partners to reopen trade in beef by moving to internationally accepted guidelines from the World Organization for Animal Health (OIE). USDA acknowledged Singapore's right to establish guidelines stricter than international standards, but pointed out that a risk assessment is required to do so and urged Singapore to complete an assessment in a timely fashion. A representative of Singapore's Agri-Food and Veterinary Authority (AVA) said its risk assessment of U.S. bone-in beef was ongoing but that it could not provide a timeline for completion. In addition, Singapore disagrees with the OIE risk classification system for Bovine Spongiform Encephalopathy (BSE) and other OIE safety guidelines and control measures. USDA noted that OIE codes were international guidelines reached in consensus with all its members and encouraged Singapore to reexamine the collected science on the issue that has accumulated over the past 20 years since BSE was first observed. DepSec Koh said she would ask AVA to look into providing a timeline for completion of the assessment. SINGAPORE 00001168 003 OF 005 Financial Services -------------- ¶9. AUSTR Weisel said that a separate financial services committee would undertake a review of the FTA's financial services commitments, but indicated that four issues would be raised: access to ATM networks for locally issued credit cards from foreign banks; participation of non-banks in Singapore's Credit Bureau; the implications of Singapore's draft money lending act; and the lack of transparency in the licensing of Qualified Foreign Banks. DepSec Koh requested information on specific cases in advance of the upcoming review, in particular with respect to the issue of access to the ATM network for credit cards. Customs -------------- -- Customs record keeping requirements (GOS) ¶10. DepSec Koh requested the USG to consider reducing from five years to three its requirement to maintain Customs records. The GOS believes that a three-year limit is conducive to more efficient business transactions and would be consistent with the provisions of Singapore's other bilateral FTAs and the TPP. AUSTR Weisel explained that the U.S. Congress is currently moving to strengthen Customs-related regulations and any move that appeared to weaken Customs provisions would be controversial. The five-year requirement is standard in all U.S. FTAs and USTR would likely have to re-examine the issue during TPP negotiations. Dispute Settlement -------------- -- Establishment of dispute settlement panel (USG/GOS) ¶11. DepSec Koh noted that the United States and Singapore had yet to establish a contingent list of five panelists for a dispute settlement panel as called for in the FTA. Although no disputes awaited settlement, she suggested progress needed to be made in setting up a panel. AUSTR Weisel confirmed that USTR would follow up quickly to resolve the issue. Textiles -------------- -- Short supply request (GOS) -- Tariff preference levels (GOS) -- Customs inspections (GOS) ¶12. AUSTR Weisel informed DepSec Koh that USTR had agreed in substance to Singapore's second short supply request, filed in 2005. Deputy Special Textile Negotiator Caroyl Miller said USTR would move forward to process the request expeditiously but that USTR was required to follow certain procedures, including an International Trade Commission (ITC) review of the 19 products under the request. USTR did not know how long the ITC review would take and said it has no ability to influence the timing of the review. ¶13. DepSec Koh pointed out that the U.S.-Central America FTA (CAFTA) included a short supply process that lasted a maximum of 44 days. She requested a similar time frame for Singapore's requests. Miller explained that the CAFTA is structured differently and its provisions do not require an amendment to the agreement. In the U.S.-Singapore FTA, the changes tabled by Singapore would require a formal review process in both the United States and Singapore and an amendment of the FTA. According to MTI, Singapore's legal procedure does not require review by Parliament, and entails only an exchange of letters, publication of the change on Customs' website and issuance of a Customs circular. Singapore noted that it has submitted a third short supply request. USTR requested that it be submitted directly to Special Textile Negotiator Scott Quesenberry. ¶14. DepSec Koh requested a modification to the FTA's tariff preference level on textile products, saying that the FTA's yarn-forward rule was too restrictive for many companies to utilize. USTR said that other U.S. FTAs did not have textile tariff preference levels and given their unpopularity with industry the United States would not be able to accommodate the request. DepSec Koh said she understood the issue was complicated and recommended that technical experts take up the issue at future reviews. ¶15. DepSec Koh requested that the onsite customs inspection requirement be reduced from twice to once yearly. She highlighted that Singapore's textile industry had consolidated to about 50 companies, and customs compliance among the textile and apparel SINGAPORE 00001168 004 OF 005 manufacturers had been excellent. She noted that the U.S. had not conducted inspections since 2004, presumably in recognition of the high level of compliance. Miller expressed gratitude for the ongoing cooperation between Singapore and U.S. Customs and urged that it continue. Textiles continue to be a sensitive trade issue in the United States, particularly with transshipment concerns and the recent phase out of textile quotas on Chinese exports. AUSTR Weisel noted that changes to U.S. textile rules and customs inspection requirements in this environment would be very difficult. Market Access -------------- -- Rules of origin for optical components (GOS) ¶16. DepSec Koh requested alternative rules of origin requirements for export of optical lenses. Koh said that industry had found the requirement for at least 45 percent value-added component too high and numerous manufacturers were unable to export. She suggested a 35 percent requirement would be a rule industry could work with. AUSTR Weisel responded that as this issue was newly added to the agenda that she would have to examine the issue more closely. Intellectual Property Rights (IPR) -------------- -- Remuneration for simulcasting (USG) -- Deterrent penalties for IPR violations (USG) -- Enforcement against infringement on the Internet (USG) ¶17. USTR and the GOS reviewed the outcome of a DVC held over the summer to discuss section 107B of Singapore Copyright law that appears to provide an exception to remuneration for copyright owners in the case of sound rebroadcasts over the Internet, also known as simulcasting. The two sides acknowledged continuing disagreement over whether Singapore copyright law violates the FTA by failing to adequately protect copyright owners and allowing an exemption for simulcasting. However, the GOS reiterated its willingness to consider suggestions from USTR on how to potentially amend its copyright law to protect sound rebroadcasts over the Internet. USTR reaffirmed it would provide suggested language for the amendment and convey the industry feedback used to develop the suggested language. ¶18. USTR reiterated USG concerns that penalties for copyright violations are insufficient to serve as a deterrent, citing one case in which a Singapore company pled guilty to pirating business software worth S$78,000 (US$54,000),an amount well in excess of Singapore's maximum penalty. Copyright violators had more to gain than lose from piracy. Representatives from the Ministry of Law and MTI pointed out that Singapore is one of few countries to criminalize IP violations and dole out prison sentences. They expressed reluctance to prescribe what penalties judges should impose or to change the penalty system based on one case, but would undertake to monitor the situation to see if there was a pattern of insufficient penalties and revisit the issue if necessary. USTR encouraged the GOS to raise the limit on maximum penalties for IPR violations to allow judges the discretion to levy higher penalties if warranted. ¶19. USTR raised concerns about Singapore regulations that require copyright holders to obtain a court order to request information on Internet copyright violators and a restriction preventing agents of copyright owners from filing such requests. Ministry of Law representatives indicated that they follow existing Singapore court processes for pre-discovery and seemed reluctant to consider introducing a separate process for agents of copyright owners. However, they agreed to consider proposals from the USG on how such a process might work. USTR noted as well that representatives from the music industry complained that the Singapore Police IPR Branch failed to pursue Internet file-sharing cases, purportedly because the law requires violators' actions to be "significant" and "willful", terms that are ill-defined. The Ministry of Law agreed to look into the definitions of those terms as they pertain to Internet piracy and peer-to-peer file sharing. Telecommunications -------------- -- Status of broadband network (USG) -- Access to local leased lines (USG) ¶20. Telecoms Deputy Assistant USTR Jonathan McHale began a review of the telecommunications market by asking for a status update on Singapore's rollout of an island-wide broadband network. An SINGAPORE 00001168 005 OF 005 Infocomm Development Authority (IDA) representative said IDA had issued the first contract at the end of September to construct the passive infrastructure for the network. IDA planned to issue licenses in the first quarter of 2009 to another company to operate the network. There would be no limit on additional licensees, but the first would receive a subsidy. DepSec Koh said the objective was to provide an infrastructure that would create an environment for open competition at the operating level. The infrastructure is scheduled to be 50-percent complete by 2010 and 95-percent by mid-2012, though the timing of the actual operation of the network would depend on individual operators. ¶21. McHale questioned the FTA compatibility of local telecom provider SingTel's continued unwillingness to allow full access to its local leased lines, specifically the company's insistence that other telecom providers connect at end-office points rather than at a more economically efficient aggregation point. USTR proposed that other providers be allowed to interconnect at a tandem exchange that would give access to all local exchanges. IDA insisted that no such tandem exchange system existed in Singapore, despite industry claims. USTR said it would gather input from U.S. operators on the issue and promised to relay the information to IDA. ¶22. USTR continued that SingTel's announced plan in 2006 to close approximately half its local exchanges forced other telecom providers to gamble on building out their network to an exchange without certainty that it would remain open. USTR recommended that IDA require SingTel to provide a "safe harbor", a list of exchanges that would not be closed. IDA responded that outside providers are not required to build out to every exchange, only those where its customers are located. IDA mentioned that SingTel is required to provide 18-months notice before closing an exchange, a time frame USTR said is insufficient to recoup the investment in building the network to an individual exchange. Conclusion -------------- ¶23. In conclusion, AUSTR Weisel observed that overall the FTA was holding up well and relatively few problems had arisen, but reiterated that it was important to follow up and resolve outstanding issues. She said she would provide Singapore a summary in writing of those issues and planned actions. In addition, AUSTR Weisel said USTR would be following up later on additional issues related to pharmaceuticals and Singapore's criteria for including drugs on its Standard Drug List, and access to natural gas infrastructure for energy suppliers. SHIELDS