"Previously there were some restrictions on foreign electronic components that were doubly taxed when shipped to the U.S. from Asia. Now with the lifting of tariffs and other trade barriers, I forsee greater opportunities for small traders like us," said Adrain Lee, a D-RAM and passive component trader from Dynasource Electronics.

It is estimated that the elimination of tariffs and other trade barriers could generate $33 billion in annual trade between the two countries. Singapore is the United States' 11th- largest trading partner. The agreement is the first trade deal with an Asian country. Singapore is seeking similar deals with Australia, Japan and European Union members.

Some observers here linked the agreement to Singapore's support for the U.S. war in Iraq.

David Yeow, a principle consultant for Fusion Consulting here said the accord was a product of negotiations that began during the Clinton administration. "I basically do not agree with many that speculate that the U.S. and Singapore deal was a by-product of Singapore's strong support of the US during its war with Iraq. It was perhaps accelerated and was delivered after the end of the Iraq campaign. Now Singapore has to focus on the European Union and its neighboring countries as well," he said.

The deal means Singapore could save over $115 million annually in tariff cuts since the U.S. is Singapore's second-largest export market. It will also generate thousands of jobs both in the service, support and manufacturing sectors and induce more U.S. companies to invest here. It will also have an economic spin-off to the other region besides Singapore as the US would be looking to ink similar deals with the rest of the Asean countries although the pace of the rollout might differ from country to country.

Singapore's Prime Minister Goh Chok Tong said the deal "would enhance our close economic relations and also signal the U.S. long-term commitment to engage Southeast Asia and contribute to its development."

Sweeta Amritraj an electronics analyst with Forefront Management and Consulting here said Singapore has set a trade precedent for the region. "Although Singapore is the first Asian country to sign a trade deal with the U.S., this would later induce other countries in Asia to do so likewise with the United States. But it certainly adds leadership status to a country like Singapore that relies on the manufacturing sector for one-fifth of its GDP growth."

Under the agreement, Washington must quickly remove 92 percent of current tariffs on exports from Singapore to the US. The remainder are to be phased out over the next eight years. Singapore agreed to zero tariffs for all imports. This in turn translates into a savings of almost $115 million for U.S. manufacturers shipping products here.

According to a recent survey by the Singapore Confederation of Industries , the trade deal will boost Singapore's manufacturing sector. The survey concluded that the agreement will boost overall trade, investment and employment, and help boost manufacturing activities in Singapore.

A key provision is the Integrated Sourcing Initiative (ISI). Once the initiative, covering information and communications technology as well as medical equipment, is implemented, it would further boost manufacturing here. Around $13.6 billion worth of high-tech and medical equipment was exported from Singapore to the U.S. last year.

Under ISI, Singapore manufacturers will be able to outsource component manufacturing to neighboring countries. Factories in Indonesia want to increase their capacity utilization. The trade provision will allow for this, hence manufacturers will benefit from lower costs of production and preferential tariffs.

By: DocMemory
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