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Cablegate: Singapore Concludes Comprehensive Fta with China

VZCZCXRO9095
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHGP #1036 2670749
ZNR UUUUU ZZH
R 230749Z SEP 08
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 5809
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE
RUEHUL/AMEMBASSY SEOUL 4239
RUEHKO/AMEMBASSY TOKYO 5935
RUEHWL/AMEMBASSY WELLINGTON 1456
RUEHBY/AMEMBASSY CANBERRA 2172
RUEHNE/AMEMBASSY NEW DELHI 2098

UNCLAS SINGAPORE 001036

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON ASEAN SN

SUBJECT: SINGAPORE CONCLUDES COMPREHENSIVE FTA WITH CHINA

1. (SBU) Summary: On September 4, China and Singapore announced
they had concluded a bilateral Free Trade Agreement (FTA), billed as
China's first comprehensive bilateral FTA with another Asian
country. Although the text of the agreement has not yet been
released pending a planned signing in late October, the agreement
reportedly goes beyond trade in goods and includes commitments in
services and investment, among other areas. The political symbolism
of the agreement is at least as important for the two sides as the
increased flows of trade and investment that may result. Both sides
are keen to demonstrate their mutual friendship and commitment to
economic links. The FTA may also give a spur to the rest of ASEAN
to move ahead with economic commitments. End Summary.

2. (SBU) On September 4, Singapore and China completed the eighth
and final round of FTA negotiations on the margins of a meeting of
the Joint Council for Bilateral Cooperation. In contrast to several
other FTAs that China has pursued in the region and with ASEAN that
cover only trade in goods, the Singapore FTA is comprehensive,
covering goods, services, investment, movement of persons, technical
barriers to trade, sanitary/phytosanitary measures, trade remedies
and economic cooperation, according to press reports. The two sides
plan to sign the agreement in Beijing when Singapore PM Lee visits
for a scheduled Asia-Europe Summit meeting on October 24-25.

3. (SBU) The Singapore-China FTA is seen as another symbol of
improved ties between the two trading partners. Relations hit a
rocky patch in 2004 when then-Deputy Prime Minister Lee Hsien Loong
paid a private visit to Taiwan just before assuming his role as
Prime Minister. Gradually warming ties allowed the talks to launch
in August 2006, but negotiations were not expected to finish until
after fuller implementation of previous agreements with ASEAN on
trade in goods and services and completion of an investment
agreement. Dr. Chen Gang, a Chinese research fellow at the East
Asian Institute (EAI), told us China may have moved faster than
expected to complete the FTA as a "reward" for Singapore's capacity
building efforts with China, including on environmental issues in
the run-up to the Beijing Olympics. Mr. Teng Siow Song, another EAI
researcher, credited the afterglow of the successful Beijing
Olympics as a factor in concluding the negotiations. China is
increasingly more optimistic about its relationships in the region,
Teng said, and Singapore took advantage of the timing to conclude
the agreement.

What's in it for China and Singapore?
-------------------------------------

4. (SBU) Given Singapore's already wide open markets for trade in
goods and services, analysts say China's interest in pursuing an FTA
with Singapore has obvious political and strategic implications on
top of any economic interest. Mr. Minn Naing Oo, Director of the
Ministry of Trade and Industry's (MTI) office for FTA Negotiations,
was unable to discuss the still unsigned FTA in detail but told
Econoff that China was able to obtain certain economic benefits from
the agreement. However, in addition to trade gains, Minn said that
China was eager to demonstrate to the region its openness to trade
liberalization by negotiating trade agreements and that, as a top
regional trading partner, Singapore was a natural choice for a
bilateral FTA. Singapore's absence of an agricultural sector made
the negotiations that much less complicated.

5. (SBU) For its part, Singapore is continuing its policy of
pursuing FTAs with all of its major trading partners. As MTI's
Alpana Roy told us September 16, Singapore pursues FTAs as much for
political and strategic reasons as for their trade benefits. In 2007
China was Singapore's third largest trading partner, taking in over
USD 11 billion in non-oil exports from Singapore. Singaporean
direct investment in 2006 surpassed USD 20 billion. MTI's Minn said
the Ministry had not made any predictions on increases in flows in
trade and investment resulting from the agreement.

6. (SBU) The Singapore-China FTA builds on previously signed
ASEAN-wide agreements with China on trade in goods and services and
another on investment expected to be completed by December. MTI's
Minn said that Singapore had insisted that the bilateral FTA go
significantly beyond the ASEAN FTA and was able to obtain further
commitments from the Chinese. EAI's Teng speculated that the
bilateral FTA may spark a nervous reaction from other ASEAN
economies and encourage them to step up domestic reforms and move
more quickly to the ASEAN target of integrating their economies by
2015.
HERBOLD

© Scoop Media

 
 
 
 
 
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