U.S.-Singapore Free Trade Agreement: Implications for Asean (Research Notes‪)‬

The signing of the U.S.-Singapore Free Trade Agreement (USSFTA) by the President of the United States and the Prime Minister of Singapore on 8 May 2003 is one of the culminations of Singapore's overall trade initiatives and economic strategy, which involves forging free trade agreements (FTAs) with other countries outside the ASEAN region. The first one was with New Zealand, which was later followed with Australia, while other FTAs are still under negotiations. This particular FTA, however, has caught much attention and has been hailed in the Singapore press as a historic and momentous event because it is the first FTA for the United States with an Asian country. On the other hand, for Singapore FTA means, apart from political considerations, much more in economic terms because of the huge market potential the United States can offer. With a population of 287.7 million and a per capita income of US$36,273, the United States can provide a strong economic stimulus which is badly needed during these times of sluggish regional growth and uncertainties. In fact, the United States has already been the largest export market and the largest source of foreign direct investments for Singapore. However, from the U.S. perspective, Singapore is not as important, as the bulk of U.S. trade is with its neighbouring developed countries such as Canada and Western Europe. This means, however, that there is a large scope for greater flow of exports from Singapore to the U.S. market. The recent FTA can certainly offer economic opportunities for trade-dependent Singapore, but what this means for the ASEAN countries as well as for ASEAN economic integration is not quite straightforward and more difficult to settle. Singapore's pursuit of extra-ASEAN FTAs has long been criticized by some fellow ASEAN members since the start of Singapore's bilateral free trade negotiations. Apart from the criticism that the other ASEAN countries were not adequately consulted by Singapore, these arrangements were seen by some as undermining ASEAN as a preferential trading arrangement. Specifically, it is claimed that these free trade arrangements could be providing Singapore's FTA partners with a back-door entry into the ASEAN Free Trade Area (AFTA).