SINGAPORE ENCOURAGES U.S. INVOLVEMENT IN P4, HOPES FOR P8

UNCLAS SECTION 01 OF 02 SINGAPORE 000961 SENSITIVE SIPDIS STATE PASS USTR E.O. 12958: N/A TAGS: ETRD ECON APEC SN SUBJECT: SINGAPORE ENCOURAGES U.S. INVOLVEMENT IN P4, HOPES FOR P8 NEGOTIATIONS IN 2009 ¶1. (SBU) Summary: Singapore MTI Minister Lim Hng Kiang told Deputy USTR Veroneau, joined by the Ambassador, that a window had opened to broaden the multilateral "P4" trade agreement to other countries, and that U.S. participation would energize the process. Lim stressed the high value that Singapore places on establishment of a regional architecture that includes the United States and a blend of large and small, developed and developing economies. Lim also echoed the U.S. view that any regional architecture should be based on high standard agreements such as the U.S.-Singapore FTA, while acknowledging that such a broad undertaking with a diverse set of countries would necessarily temper ambition. He said Singapore hopes to use the P4 agreement as a pathway to a broader Free Trade Agreement of the Asia/Pacific, and that it would ultimately balance economic goals with the considerable political/strategic benefits an expanded P4 would produce. He cautioned that without U.S. engagement in a regional agreement, the architecture would follow China's "model," based on an overtly political agenda. Lim considers Japan to be a good candidate to join the agreement, but was unsure the Japanese could soon commit to serious negotiations. Australia, Thailand, Peru and Vietnam may show interest in joining the negotiations later this year if the U.S. makes a decision this September to participate. End Summary. ¶2. (SBU) In an August 21 meeting, Minister of Trade and Investment Lim Hng Kiang told Deputy USTR John Veroneau, joined by the Ambassador, that Singapore was fully supportive of U.S. participation in the Trans-Pacific Strategic Economic Partnership Agreement, a free trade agreement among Singapore, Chile, New Zealand and Brunei also known as the P4 agreement. Lim said that U.S. participation would change the dynamic of the agreement, turning it from a relatively minor trade agreement into a potentially much broader multilateral agreement. Lim said that Singapore attached great importance to the United States joining the agreement and promised that a Singaporean government Minister would be available for further discussions with the United States prior to our finalizing our decision. ¶3. (SBU) Ambassador Veroneau told Minister Lim that the U.S. wanted the P4 to "take off" and become something larger that would stretch 
across the Pacific. However, the initial reaction among many U.S. stakeholders was that the trade benefits from joining an FTA with the P4 countries would be relatively small, and that the "gold standard" FTAs already in place with Singapore and Chile could be weakened. There was stronger interest among stakeholders in a broader agreement that would include other significant trading partners. Amb. Veroneau said that the USG was aware of the challenges posed by U.S. demands for gold standard FTAs, but was confident this exercise would lead to a high standard agreement. ¶4. (SBU) Lim confirmed that Singapore shares the U.S. goal of high standard trade agreements, whether they are bilateral, regional or large multilateral undertakings. Lim acknowledged that elements of the existing P4 Agreement would need to be strengthened to meet the definition of gold standard. Lim offered a frank assessment of Singapore's views on the economic, and political/strategic importance of shaping the P4 agreement into an alternative architecture, including the United States and other Pacific Rim countries, in order to balance the existing China-led approach through the ASEAN Plus 3. Lim posited that broadening the P4 to include other countries would inevitably lower the ambition of the agreement from an economic standpoint, but said Singapore placed great weight on the strategic and political benefits such an agreement would bring to the country and the region. "We can't just be rich and not safe," Lim said. At the outset of the meeting Lim was very forthcoming that Singapore believes that APEC members should not wait too long before taking steps to realize the vision set out in the Free Trade Agreement of the Asia/Pacific (FTAAP). Singapore sees the P4 Agreement as a viable precursor to the FTAAP. ¶5. (SBU) Lim said that without strategic leadership by the United States on arrangements like the P4, China would begin to dominate the region in an ASEAN Plus Three framework that would include Korea and Japan, but with China in the lead. Lim said that although Singapore worked well within the ASEAN Plus Three framework, it preferred to include the United States, Japan, Australia and eventually India in an ASEAN framework. In Lim's opinion, China viewed trade agreements primarily through a political lens, pursuing early harvest agreements and then slowly broadening them to include more goods and later services, "giving everyone a little slice of salami." Korea and Japan struggle to keep up with China, and in reality, Lim said, Singapore faced an ASEAN Plus One -- China. Broadening the P4 -------------- SINGAPORE 00000961 002 OF 002 ¶6. (SBU) Lim said that the APEC timetable gave P4 participants a convenient window to broaden the agreement. With possible partner Peru as APEC host this year, followed by Singapore, Japan and the United States, there would be opportunities to build momentum and move the process along. Lim hoped that if the United States committed in September to join negotiations, other countries could be lined up in November during APEC meetings in Lima. Within six to nine months Lim believed there would be varying levels of commitment from other countries, sufficient for a P8 to begin negotiating seriously. Ambassador Veroneau suggested using the APEC schedule to set deadlines for more definitive responses from other potential P4 participants. ¶7. (SBU) Ambassador Veroneau said that interest in participation by Japan was unclear and surmised the Japanese might be interested in being involved in the negotiation process but without fully committing. Lim said that he considers Japan to be a good candidate for inclusion in a wider P4 agreement but that Japanese enthusiasm was not high. Japan's business lobbies and other concerns outweighed the political and strategic advantages in joining the agreement. Lim said that Minister Nikai of the Ministry of Economy, Trade and Industry would be in Singapore in late August and that he would discuss the agreement further with him. However, he believed Japan would not be able to make a decision on the P4 before December. Lim said that Japan needed time to work through political issues, but would need to show a strong level of commitment to begin negotiating seriously, and couldn't simply "dip their toes in the pool to see if the temperature was right." Ambassador Veroneau responded that if the U.S. commits to the P4 process soon it would expect Japan to be ready to "jump in the pool" within six to nine months. ¶8. (SBU) Lim suggested that without firm Japanese commitment, "Plan B" would be to include an announcement by Australia during the November Lima APEC Leaders' meeting. Australian participation would provide fewer gains in market access, since Singapore and the United States already have FTAs with Australia. However, Australian participation would also raise the ambition of the P4 more than would Japan, and would still add another APEC member to the P4. Lim said that other APEC economies, developed and developing, should also be considered for inclusion. Lim specifically mentioned Vietnam, Thailand and Peru. Singapore had discussed the agreement with Vietnam, but saw the Vietnamese as currently distracted by other economic problems including high inflation. Lim believed the Thais were too distracted by ongoing political difficulties to focus on the P4. In a separate meeting, MTI PermSec Peter Ong said Peru could be willing to announce participation in the P4 in November during its hosting of APEC meetings in Lima. ¶9. (U) Ambassador Veroneau cleared this cable. HERBOLD