Embedding Security into Free Trade: The Case of the United States-Singapore Free Trade Agreement

By Pang, Eul-Soo | Contemporary Southeast Asia, April 2007 | Go to article overview

Embedding Security into Free Trade: The Case of the United States-Singapore Free Trade Agreement


Pang, Eul-Soo, Contemporary Southeast Asia


Nations have no permanent alliances, just permanent interests.

--Castlereagh

The United States-Singapore Free Trade Agreement (USSFTA) is the result of the overlapping interests of the two countries seeking to embed security into trade ties. Since 2005, the Bush administration has been pushing for the linking of the two in various meetings of the Association of Southeast Asian Nations (ASEAN), ASEAN Regional Forum (ARF), and Asia Pacific Economic Cooperation (APEC). (1) Unlike other free trade agreements, it goes beyond the economics; the security relationship between the two countries had been forging for at least a decade and half, but since 11 September 2001 it has become the driver for the bilateral relations between the two. Singapore and the United States continue to support the multilateral trade liberalization of the World Trade Organization (WTO), but also see bilateral free trade areas (FTAs) as complementary building blocks, not stumbling blocks, for an eventual single world market. Even more curious is that the usual motivation for reducing tariffs, removing non-trade barriers, and promoting fair access to each other's goods, services, and financial markets does not seem to apply. The two countries have had the lowest tariff rates on the planet: Singapore has been the most free entrepot in the world, which imposes duties only on four items--beer, stout, samsoo, and medical samsoo (Wong 2004, p. 15). At the conclusion of negotiations in mid-2003, the bilateral trade stood at US$39 billion and at the end of the first year of the FTA in action, the amount climbed to US$40 billion; the US investment in Singapore reached US$33 billion; and some 1,500 US multinationals were based in the city-state. (2)

Moreover, Jeffrey Schott has pointed out that when a small country signs an FTA with the United States (whose economy is 130 times Singapore's, according to the World Bank's 2006 World Development Indicators), economic gains are in favour of the smaller partner (Schott 2004, pp. 369-81). In terms of growth prospects, Singapore, an economy of US$90 billion gross domestic product (GDP) and 4 million inhabitants, offers its government-linked and private firms little room for further market expansion (Wong 2004, pp. 10-11). Going global is not an option; it is the only way for Singapore to survive. For the United States, the FTA as an enterprise makes little economic sense; it has created an asymmetry of opportunities for the trade in goods and services in favour of the city-state. The United States has just become Singapore's newest "hinterland", (3) arguably the most important one. It has offered Singapore greater market access than ASEAN's major economies combined.

For Singapore, "survival" has been the foremost preoccupation since independence and "has been the city-state's credo in its foreign [economic] policy" (Leifer 2000, p. 68). Deputy Prime Minister (also Minister for Defence) Tan was more emphatic:

   Without security, there can be no economic development. Conversely,
   stability and security are in serious jeopardy without economic
   development. This is the basis for the priority that Singapore has
   placed on ensuring our defence and security since the earliest days
   of our independence. (4)

Region-wide insecure environment lurks from Singapore's Muslim neighbours, the Taiwan straits, the Korean peninsula, China-Japan, Korea-China, and Japan-Korea animus in Northeast Asia to the Spratly islands disputes in the South China Sea and frequent border clashes and territorial claims over natural resources in Southeast Asia. These have instilled a deep sense of vulnerability in Singaporeans and in turn increased a genuine concern for their survival as a state and as a free trading economy. For these reasons, Singapore has embedded its security needs into trade activities from the outset of the statehood. With the best harbour and transportation hub facilities in the region, Singapore has offered its neighbours unfettered access. …

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