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Cablegate: Fta Review Highlights Benefits, Unresolved Issues

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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #1168/01 3090735
ZNR UUUUU ZZH
R 040735Z NOV 08
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 5955
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC

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.
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