Cablegate: Fta at Year Three - Zeroing in On Commitments

DE RUEHGP #0996/01 1440350
R 240350Z MAY 07





E.O. 12958: N/A

REF: A) 06 Singapore 1119 B) Singapore 371

1. (SBU) Summary/Action Items: Assistant U.S. Trade
Representative Barbara Weisel singled out Singapore's continued
failure to fulfill its telecom commitments as the USG's top
priority during the third annual review of the U.S.-Singapore
Free Trade Agreement (FTA) held in Singapore May 11. While
applauding FTA implementation generally so far and the
substantial increases in trade since the FTA came into effect in
January 2004, she expressed concern that the enormous benefits
of the FTA for both economies might be overshadowed by
increasing public scrutiny in the United States of certain
outstanding implementation issues. The review agenda focused
both on implementation of the existing FTA and possible future
programs, including telecommunications, intellectual property
rights (IPR), environmental cooperation, imports of U.S. beef
and chicken products, gas sector liberalization, market access
for goods (tariff acceleration, textiles, harmonized system
revisions, etc.), a regional FTA exploratory working group,
pharmaceuticals, financial and legal services, and competition.
AUSTR Weisel and Ministry of Trade and Industry (MTI) Deputy
Secretary LOH Wai Keong led the respective delegations. The USG

and GOS agreed to following action items:

-- Telecom: The GOS will provide a list of those companies that
have already begun building out to SingTel's multiple local
exchanges, and include specifics related to their
interconnection status.

-- Intellectual Property: The USG and GOS will convene a
digital video conference (DVC) to continue their discussions
related to Singapore's possible accession to the Anti-
Counterfeiting Trade Agreement (ACTA) and enforcement of
simulcasting provisions under the Copyright Act.

The USG will provide a letter to clarify where it believes
discrepancies exist between U.S. and Singapore law governing
exemptions for sound rebroadcasts on the Internet.

The GOS will meet with the Business Software Alliance (BSA) to
assess whether the lack of whistleblower protections has
affected its members' ability to protect their IP.

-- Environment: The USG and GOS have scheduled two DVCs to help
prepare the second Plan of Action (POA) prior to the biennial
review of bilateral cooperation on the environment tentatively
scheduled for fall 2007 in Singapore.

Illegal Logging: Both sides agreed to exchange pointQof-contact
information for illegal logging issues.

-- Agriculture: The GOS agreed to encourage its officials to
meet with USDA technical experts at the earliest possible
opportunity to continue the dialogue concerning market access
for bone-in cuts of U.S. beef and sanitary standards for poultry

-- Tariff Acceleration: The USG will provide an unclassified
version of the International Trade Commission's (ITC) report
concerning Singapore's requests, if available.

-- Textile Tariff Preference Level (TPL): The GOS will submit
additional information related to its TPL request (Note: The
USG emphasized that it could not commit to additional
consideration of this matter. End note.)

-- Textile Short-Supply Request: The USG will confirm in
writing that it approved two (not one) short-supply requests in
July 2006 via an exchange of letters between USTR Schwab and
Minister for Trade and Industry LIM Hng Kiang.

-- Harmonized System of Tariffs (HS2007): The GOS will provide
a report to the USG highlighting potential issues related to
possible transposition errors and recommended solutions to
resolve them.

The USG will provide a copy of its revised tariff schedule.

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The USG will inform the GOS when it is prepared to begin
implementation of the revised HS2007, based on coordination with
other ASEAN countries.

-- Exploratory Working Group on Regional FTAs: The USG and GOS
agreed to establish an exploratory working group to discuss the
future of regional FTAs.

-- Pharmaceuticals: The GOS will provide additional information
about Singapore's Standard Drug List (SDL) approval process.

-- Financial Services: The GOS will provide an update
concerning plans to expand credit bureau access and membership.

The GOS will provide a response to claims made by U.S. industry
that credit cards issued by local branches of foreign banks
cannot be used to obtain cash from ATM machines.

-- Legal Services: The GOS will provide an update on strategies
for liberalizing the legal services sector after it has
completed its review of several proposals in the next few

End Summary/Action Items.

FTA Benefits and Levels of Commitment

2. (U) AUSTR Weisel and DepSec Loh agreed that overall
implementation of the FTA in its third year continued to proceed
smoothly, with a minimum of difficult issues and substantial
benefits for both economies. AUSTR Weisel cautioned, however,
that recent U.S. media attention on Singapore in areas such as
environmental protection and cooperation -- as well as the
potential for heightened scrutiny of its record on IPR
enforcement, enhancing competition, and the screening of
transshipped cargo -- could potentially overshadow the enormous
gains achieved thus far. She noted that these news reports
questioned Singapore's commitment to fulfilling certain FTA
obligations and that the U.S.-Singapore trade relationship could
suffer damage should these issues receive wider coverage.
Singapore and the United States needed to be mindful of how they
resolved outstanding trade issues, especially as the debate in
Washington over the renewal of the President's Trade Promotion
Authority intensified. DepSec Loh said that Singapore was
equally concerned about these press reports. He stressed that
the GOS wanted to work with the USG and ASEAN to combat illegal
logging. He cited Singapore's discussion of the regional haze
issue at the United Nations in 2006 as an example of how it was
taking a leading role in resolving transnational environmental


-- Reasonable access to "last mile" leased lines (USG)

3. (SBU) AUSTR Weisel noted that our number-one FTA
implementation issue with Singapore was its continued failure to
fulfill obligations to offer U.S. and other facility-based
operators (FBOs) reasonable access to dominant carrier SingTel's
leased lines. She asked the GOS to reconsider its 2006 decision
that allowed SingTel to deny competitors reasonable access to
leased capacity at tandem exchanges (see below). This request
was all the more urgent in light of SingTel's June 2006
announcement that it would close 12 of its 27 local exchanges at
some unspecified time in the future, which had effectively put
FBOs' investment plans on hold. The Infocomm Development
Authority (IDA) responded that it was still assessing whether to
revise the required prior notification period SingTel must
provide before closing a local exchange from six to eighteen

4. (SBU) AUSTR Weisel emphasized that best solution was for the
GOS to permit high-speed tandem access (i.e., access to the
dominant carriers' leased lines at economically efficient points

SINGAPORE 00000996 003 OF 008

of aggregation). In doing so, the GOS could resolve the litany
of obstacles SingTel had introduced to stymie competitors'
business plans -- some of which dated as far back as December
2003 when IDA first designated "last mile" access as a
wholesale, regulated service. IDA countered that the current
regulatory environment provided adequate provisions for
reasonable access. Although it could not confirm whether any
FBOs had taken advantage of its stated policy objective to
encourage build-out to SingTel's multiple local exchanges, IDA
offered to provide a list to the USG of those companies that it
thought had already begun doing so, to include specifics related
to their interconnection status.

5. (SBU) AUSTR Weisel questioned Singapore's commitment to
liberalizing its telecom sector. In the absence of a vigorous
regulatory response to SingTel's defensive actions, she worried
that Singapore's track record in the telecom sector would
constitute another issue "lurking beneath the surface" that
might come to light under scrutiny by U.S. media or lawmakers.
IDA argued that it was fully committed to increasing competition
in the telecom market and "still very committed" to the FTA and
"very watchful" of any impediments, which it would endeavor to
remove in accordance with Singapore's regulatory process. AUSTR
Weisel said that the USG did not question the integrity of the
regulatory process or IDA's commitment to it, but that SingTel
appeared to be doing its utmost to thwart GOS implementation of
this key FTA commitment. DepSec Loh noted that both sides would
need to continue their dialogue on this issue.

Intellectual Property

-- Anti-Counterfeiting Trade Agreement (ACTA) (USG)
-- Simulcasting: Exemptions for Sound Rebroadcasts on the
Internet (USG)
-- Penalties for Copyright Act (136.3A) violations (USG)
-- Whistleblower protections (USG)
-- Exemptions for circumvention of technological access controls
(e.g. lost key codes for computer activation) (USG)

6. (SBU) AUSTR Weisel expressed the USG's desire to conclude an
ACTA with Singapore. An ACTA would enhance existing IPR
protections under the FTA and establish new standards that
better addressed digital applications. The Ministry of Law
representative responded that the GOS had held several
consultations with the USG and was still assessing what its
obligations would be under the ACTA. It recognized that the
ACTA had been intentionally drafted in broad terms, but still
required more specifics before it could commit. MinLaw did not
foresee difficulty agreeing to the ACTA if the GOS' obligations
would be similar to those in the FTA, but said that provisions
beyond that could prove problematic. Both sides agreed that
USTR and the Intellectual Property Office of Singapore (IPOS)
should convene a digital video conference (DVC) to continue
discussions of the issue.

7. (SBU) AUSTR Weisel raised U.S. companies' difficulties with
obtaining royalties from Singapore's government-linked MediaCorp
for sound rebroadcasts on the Internet. MinLaw said it had
concluded that U.S. and Singapore law concerning exemptions for
simulcasts were "fairly compatible." It asked the USG to
provide a letter of clarification to determine where
discrepancies, if any, existed. The GOS could not direct
MediaCorp to pay royalties if they were due; rather, U.S.
companies would have to seek a court settlement. Both sides
agreed to discuss the simulcasting issue in the abovementioned

8. (SBU) AUSTR Weisel highlighted a case in 2006 in which the
penalty levied on a company for illegal software use was
significantly lower than the amount it would have paid for
legitimate product and reiterated her request made at the 2006
FTA review that the GOS consider increasing deterrent penalties
under Section 136(3A) of the Copyright Act. MinLaw argued that
the judge had concluded there were mitigating factors in this
particular case that warranted the low fine. AUSTR Weisel
countered that the issue was less about the money and more about

SINGAPORE 00000996 004 OF 008

how Singapore benchmarked itself against international best
practices. Although Singapore had one of the strongest IPR
regime in Asia, it still had considerably higher piracy rates
than Japan, Australia or the United States. Stiffer penalties,
particularly if pegged to the number of infringing copies, would
offer an excellent opportunity to demonstrate the GOS'
commitment to strong IP protection, she concluded.

9. (SBU) In response to USG concerns about inadequate
whistleblower protections for copyright violations (also raised
at the 2006 FTA review), the GOS said that it would meet (again)
with the Business Software Alliance (BSA) to assess how this
issue affected its members' ability to protect their IP. MinLaw
expressed concern about whether whistleblower protections would
conform to Singapore's legal tradition, which allowed the
accused to face his accuser in court.

10. (SBU) In response to AUSTR Weisel's questioning of a
proposed exemption under Singapore's Copyright (Excluded Works)
Order 2007 for lost key codes used for activating computer
programs, MinLaw said that it had based this provision on U.S.
copyright law. It offered to discuss USG concerns further,
perhaps in the IPR DVC.

Environmental Cooperation

-- Combating illegal logging (USG)
-- Biennial review of environmental cooperation (USG/GOS)
-- Arowana Dragonfish (GOS)

11. (SBU) AUSTR Weisel reiterated the importance of enhanced
bilateral environmental cooperation, especially given the
heightened U.S. media attention to Singapore's record. She
called for continued dialogue on combating illegal logging,
including Ramin timber. She noted that, following on the U.S.-
Indonesia Memorandum of Understanding (MOU) to combat illegal
logging signed in November 2006, she noted that the USG had had
received positive responses from Indonesia, Malaysia, and Brunei
in discussions about ways to improve cooperative efforts.
DepSec Loh welcomed the regional dialogue and said that
Singapore was prepared to participate, including as co-host with
the U.S. Forest Service of a regional workshop on Ramin
scheduled for later this year. He noted that the GOS shared the
USG's commitment to environmental cooperation. Both sides
agreed to exchange pointQof-contact information on the illegal
logging issue.

12. (SBU) AUSTR WEISEL highlighted the need to conclude a
second Plan of Action (POA) before the biennial review of
bilateral cooperation on the environment, tentatively scheduled
for September or October 2007 in Singapore. A Ministry of the
Environment and Water Resources (MEWR) representative said that
MEWR and its USG counterparts intended to schedule two DVCs in
the run-up to the biennial review. He cited examples of steps
the GOS had taken under the current POA, including a recent MOU
signed with the American Water Works Association to facilitate
technical exchanges. Singapore also chaired the ASEAN
Sustainable Cities Working Group, which was scheduled to review
progress under its Memorandum of Intent (MOI) later this year.
In response to queries about Singapore's commitment to working
with the USG to combat vessel pollution, DepSec Loh asserted
that the GOS had taken action against domestic violators and was
also engaged in regional efforts to address this problem.

13. (SBU) GOS officials expressed frustration with the USG's
"inflexibility" in accommodating its request to allow imports of
Arowana Dragonfish into the United States, first raised at last
year's review. They argued that Singapore's proposal offered a
good balance between trade and conservation, in particular given
that Singapore lacked any wild population of Arowana. OES/ENV
officer explained that U.S. regulations governing trade in
endangered species -- including that such trade must enhance the
species in the wild -- made it extremely difficult to move
forward on this issue. The GOS said that it had not undertaken
any efforts to protect wild populations regionally, but noted
that Malaysia was also interested in exporting Arowana. The USG

SINGAPORE 00000996 005 OF 008

delegation said it would welcome further discussions with the
GOS about potential regional plans, but made no commitments. It
noted that Washington would be extremely reluctant to revise its
policies pertaining to trade in endangered species.


-- Imports of bone-in cuts of U.S. beef and offal (USG)
-- Microbial standards for poultry (USG)

14. (SBU) AUSTR Weisel emphasized the importance to the
President and Congress of beef market access based on OIE (World
Organization for Animal Health) guidelines. The Agriculture
Counselor thanked the GOS for its measured approach to
facilitating imports of boneless cuts of U.S. beef, which
resumed in January 2006. He asked that the Agri-Food Veterinary
Authority (AVA) move expeditiously to lift the ban on bone-in
beef and variety meats following the OIE's anticipated
classification of the United States as a "controlled-risk"
country for BSE (Bovine Spongiform Encephalopathy or mad cow
disease), and based on the extremely low prevalence of BSE in
the United States. (Note: the OIE unanimously approved the
controlled risk classification for the United States during its
May 20-23 General Assembly. End Note.) AUSTR Weisel noted that
lifting the remaining import restrictions on U.S. beef was a top
priority for the President. He had engaged leaders of several
countries in the region on this issue, and they had indicated
they would move quickly to resume imports of U.S. beef following
the OIE decision. GOS officials noted that OIE guidelines were
not binding. They were open to allowing imports of bone-in
beef, but cautioned that this decision would require buy-in from
all constituents, including consumers. They doubted any further
market opening would occur before the President's expected visit
in September to attend the U.S.-ASEAN Summit. DepSec Loh said
he would convey to AVA (which was not present) the need to meet
with USDA technical experts at the earliest possible opportunity
to continue our dialogue.

15. (SBU) The Agriculture Counselor noted that Singapore's zero
tolerance for Salmonella Enteriditis (SE) and low tolerances for
Staph Aureus on raw poultry were not scientifically justified
and had resulted in the rejection of U.S. poultry shipments. He
asked the GOS to reconsider its overly restrictive policies and
expressed his hope that AVA's current assessment of
international standards and best practices would lead it to a
more flexible and science-based approach. DepSec Loh said he
would communicate these concerns to AVA and deferred to our
respective technical experts to determine next steps.

Energy Sector Liberalization

-- Intergen: Access to Electrical Power Generation Market (USG)

16. (SBU) AUSTR Weisel urged the GOS to move quickly to
liberalize its gas sector and to resolve longstanding issues
that had prevented U.S. energy company Intergen from entering
the market as Singapore's first independent electricity
producer. (Note: Two government-linked companies -- Gas Supply
and PowerGas -- have been engaged in arbitration since 2004 that
prevents third-party access to a section of pipeline that
carries natural gas to Singapore from Indonesia. End note.)
DepSec Loh said that the GOS was working to resolve this
problem. He expected Parliament to pass an amended Gas Act that
would pave the way for new market entrants after a second
reading May 21, and for the legislation to come into force in
June. (Note: As anticipated, Parliament approved the Gas Act
May 21. End note.) The GOS recognized the need to enhance
market access in the gas sector to ensure alternative supplies,
and MTI Minister Lim had met with Intergen's CEO on several
occasions to assure him of the GOS' support.

17. (SBU) AUSTR Weisel highlighted the tight deadline for
Intergen, given that the Indonesian government had indicated it
would terminate its supply contract with the company in June if
it had not yet finalized the transport of its contracted gas.

SINGAPORE 00000996 006 OF 008

She expressed her concern that one or both of the abovementioned
government-linked companies might seek legal action after the
Gas Act took effect to prevent Intergen from accessing the
disputed pipeline. She asked if the GOS be was prepared to deny
a request to stay the decision if this were the case. DepSec
Loh responded that the GOS was committed "in spirit" to an open-
access regime for gas and that it would work to address any
problems in the market.

Market Access

-- Tariff acceleration process: polycarbonates and peanuts (GOS)
-- Textiles (GOS)
- request for improved TPL
- status of "short supply" request
-- HS2007 changes (GOS)
-- Diagonal Cumulation (GOS)
-- Regional FTA exploratory group (USG/GOS)
-- Customs Administration: reduced record-keeping periods (GOS)

18. (SBU) Following up on Singapore's requests made at the
March 2006 second annual review, AUSTR Weisel said that the USG
was unable to agree to accelerated elimination of tariffs on
certain polycarbonates (HS3907.40.00) and increases in Tariff
Rate Quotas (TRQs) for peanuts (HS2008.11). She explained that
in public comments solicited via a Federal Register Notice
issued in August 2006, U.S. industry expressed strong opposition
to granting these requests, in part due to declining revenues
for these products domestically. According to the International
Trade Commission (ITC), which issued its findings in early 2007,
duties incurred by Singapore shippers of polycarbonates to the
United States were lower than for other countries.
Additionally, the trade balance had shifted in favor of
Singapore since the FTA came into effect, making it the largest
exporter of polycarbonates to the United States. For peanuts,
ITC questioned why Singapore had made this request since it had
significant excess capacity under both its TRQ and global
quotas. AUSTR Weisel indicated that she would provide an
unclassified version of the ITC report if one were available.


19. (SBU) Concerning Singapore's proposed increase of its
textile tariff preference level (TPL) -- also raised at the 2006
FTA review -- AUSTR Weisel said that the USG could not agree to
this request. She noted that Congress had indicated it would
not approve any more FTAs with TPLs, given the domestic
sensitivities in the textile and apparel industries. The GOS
stressed that the TPL increase was a key issue. AUSTR Weisel
said it would be useful if the GOS could submit additional
information concerning this request and related issues in
writing, but did not commit to additional USG consideration of
this matter. With regard to a textile short-supply request that
the GOS believed was still outstanding, AUSTR Weisel agreed to
provide a letter to confirm that the USG had in fact approved
both this and another short-supply request in July 2006 via an
exchange of letters between USTR Schwab and MTI Minister Lim.

20. (SBU) The Joint Committee noted that both governments had
completed transposing the FTA's Goods-Specific Rules to
incorporate changes to the harmonized system of tariffs
("HS2007"). MTI representatives said that Singapore Customs
would begin implementation in October 2007. AUSTR Weisel
explained that the USG had delayed its implementation to
coordinate with other ASEAN countries and would inform the GOS
when it was prepared to begin this process. MTI said that ASEAN
had completed its first round of nomenclature revisions and that
this would not effect the October 2007 deadline. In response to
GOS concerns about possible transposition errors, AUSTR Weisel
noted that the USG had not encountered any problems previously.
The GOS offered to provide a list of its concerns and
recommended solutions to resolve them. The USG agreed to
provide its revised tariff schedule.

21. (SBU) The GOS inquired about the status of its proposal
made last year that Singapore, Australia, and the United States
build on their respective bilateral FTAs to introduce "diagonal

SINGAPORE 00000996 007 OF 008

cumulation" to allow accumulated rules of origin for each
others' products. AUSTR Weisel said that the USG was engaged in
a broader discussion about how to advance its FTA agenda in the
Asia-Pacific region and that diagonal cumulation might serve as
a possible model in the context of the proposed Free Trade Area
of the Asia-Pacific (FTAAP). She noted that, according to U.S.
rules, a diagonal cumulation provision could not be appended to
our existing FTAs with Australia and Singapore, but would
require negotiation of new agreements subject to TPA approval.
The USG could not accommodate Singapore's request to establish a
technical working group to assess the diagonal cumulation
concept, but might be willing to convene an exploratory working
group to discuss the future of regional FTAs, including the P-4
FTA between Singapore, New Zealand, Chile, and Brunei. DepSec
Loh said that the GOS would support formation of an exploratory
working group.

22. (SBU) With regard to Singapore's request that the USG
reduce the period required for record-keeping of import and
export-related documentation from five to three years, AUSTR
Weisel explained that this was a statutory obligation under the
Customs Act and would therefore be difficult to revise,
especially given the current security environment.


-- Standard Drug List (SDL) transparency (USG)

23. (SBU) AUSTR Weisel expressed dissatisfaction with the
Ministry of Health's response to issues raised by U.S. industry
during the Special 301 process concerning the lack of clear
procedures for getting pharmaceutical products included in
Singapore's SDL (ref B). She stressed that MOH's explanation
fell short of general transparency provisions in the FTA.
DepSec Loh agreed to provide additional information to help the
USG better understand the SDL approval process.

Medical Products Working Group

24. (SBU) AUSTR Weisel noted that the U.S. Food and Drug
Administration and the Health Services Authority (HSA) enjoyed
excellent and growing cooperation in areas such as information
exchange on product recalls and safety issues. She looked
forward to broader engagement going forward, and to the visit to
Singapore by FDA Administrator von Eschenbach in October 2007.

Financial Services

-- Credit Bureau Access (USG)
-- ATM/credit card access (USG)

25. (SBU) Following up on a USG request raised at the 2006 FTA
review to expand access to Singapore's credit bureaus, AUSTR
Weisel said she was encouraged to learn that the first
commercial credit company not regulated by the Monetary
Authority of Singapore (MAS) would soon be granted membership in
Credit Bureau (Singapore) Pte Ltd. DepSec Loh said he would ask
MAS (which was not present) to provide an update about when this
process would be completed and to discuss any plans to expand
membership more broadly. He would also ask MAS to respond to
claims made by U.S. industry that credit cards issued by local
branches of foreign banks could not be used to obtain cash from
ATM machines (whereas credit cards issued by foreign branches of
the same banks could be used).

Legal Services

-- Liberalizing legal services (USG)

26. (SBU) AUSTR Weisel urged Singapore to further liberalize
its legal services sector in line with similar efforts being
undertaken for other service industries. DepSec Loh said that
MinLaw would provide the USG with an update after it had

SINGAPORE 00000996 008 OF 008

completed its review of several proposals in the next few


-- Expansion of Competition Act (USG)

27. (SBU) AUSTR Weisel inquired whether Singapore was reviewing
sectors exempted from the new Competition Act such as telecom,
media, and financial services. DepSec Loh noted that separate
competition codes governed these "carved-out" sectors and that
the government was currently focused on implementing the final
phase of the Competition Act concerning mergers and
acquisitions, which will come into effect in July 2007. He
claimed that initial phases of the Competition Act had been well
received by U.S. companies.

28. (U) AUSTR Weisel and other members of the U.S. delegation
cleared this message.


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