Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION IV.4: ASIA AND ASIA PACIFIC

U.S. trade and investment with Asia and Asia Pacific have expanded significantly over the last decade. In recent years, the United States has actively sought free trade agreements (FTAs) with several of our most important trading and investment partners in Asia and Asia Pacific. U.S. FTAs with our 16th and 23rd largest trading partners – Singapore and Australia – entered into force in 2004 and 2005 respectively. The United States and Korea signed a bilateral free trade agreement on June 30, 2007. The United States has also begun negotiating FTAs with Thailand and Malaysia. The Thai negotiations are currently on hold and negotiations with Malaysia are stalled over several key differences. In February 2008, the United States announced that it would be joining negotiations on investment and financial-services liberalization with the P-4 countries (Chile, Singapore, New Zealand and Brunei), which have negotiated an economic partnership agreement. The recently concluded FTA with Korea and the ongoing negotiations with Malaysia, Thailand and the P-4 are discussed in section II.2.

This section discusses first the Asia Pacific region, including the Asia Pacific Economic Cooperation (APEC) forum and bilateral relations with Australia. This section then covers U.S.-trade and investment relations with Asia, the Association of Southeast Asian Nations (ASEAN) and a number of our largest trading partners in Asia: Japan, Singapore, India, Indonesia and Vietnam. U.S.-China trade and investment relations are discussed in section IV.1.

Asia Pacific

Asia Pacific Economic Cooperation Forum

The Asia Pacific Economic Cooperation (APEC) forum has 21 members and accounts for approximately 46 percent of global trade. In addition to the United States, APEC members are Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Chinese Taipei, Thailand, and Vietnam.

Total U.S. trade with APEC members increased to $1.9 trillion in 2007, representing 63.2 percent of total U.S. trade last year. In 2007, U.S. goods exports to APEC countries totaled $696 billion and U.S. goods imports from APEC countries equaled $1.24 trillion.

Background on APEC

The 1994 APEC Bogor Declaration established the goal of achieving free and open trade in the Asia-Pacific region by the year 2010 for developed countries and 2020 for developing countries. The 1995 Osaka Action Agenda established a plan for achieving liberalization consistent with the Bogor Declaration goals in 14 areas, including tariffs, non-tariff measures, services, investment, customs, intellectual property, and government procurement. APEC members have developed individual and collective action plans to implement liberalization in these areas. In 1997, APEC members established the Accelerated Tariff Liberalization (ATL) initiative to seek to eliminate tariffs in eight sectors: chemicals, energy products, environmental products, fish, forest products, gems and jewelry, medical and scientific equipment, and toys. APEC sought the initiative’s expansion to the WTO in 1998 with the goal of achieving the critical mass of participation necessary to conclude the agreements. The eight sectors represent a balanced package and reflect the interests of both developed and developing countries. These sectors account for approximately one-third of total U.S. industrial exports in 2001. While not formally part of the Doha Declaration, efforts will continue to push for a WTO agreement to eliminate tariffs in these sectors.

At the 13th APEC Summit in Shanghai, China, in 2001, APEC Ministers “reaffirmed their strong commitment to launch the WTO new round of multilateral trade negotiations in 2001.” The Ministers reiterated support for the WTO accession of China and Taiwan and the “advancement” of accession by Russia and Vietnam. APEC Ministers also agreed to extend the APEC-wide moratorium on the imposition of customs duties on electronic transmissions until the next WTO Ministerial Conference.

Recent APEC Initiatives

At the 14th APEC Summit in Los Cabos, Mexico, in 2002, APEC leaders agreed to take a leading role in the multilateral trading system to pursue concrete negotiations across all areas of the Doha Development Agenda (DDA). In particular, APEC Trade Ministers agreed to adopt the specific transparency standards in the 2001 APEC Shanghai Accord to bring about openness and predictability in government, and to reduce trade obstacles for the digital economy by creating cooperative settings among groups of countries called “Pathfinder Initiatives,” in which 16 economies have agreed to participate. They also initiated a Trade Facilitation Action Plan, with the goal of decreasing international business transactional costs by five percent over the course of five years within the APEC region.

At the 15th APEC Summit in Bangkok, Thailand, in 2003, APEC leaders committed to move the Doha Development Agenda forward and agreed to work to abolish all forms of agricultural export subsidies and unjustifiable export restrictions and to continue to work on rules issues. Work on the Pathfinder Initiatives and Trade Facilitation Action plan continued, and the APEC Ministers endorsed the Future Work Agenda on International Implementation of the APEC Privacy Framework, which includes instructing APEC members to continue efforts to develop a regional approach to privacy that will support global business models, such as privacy codes.

At the 16th APEC Summit in Santiago, Chile, in 2004, APEC leaders:

Identified WTO negotiations as their “first priority;”
Launched the Santiago Initiative for Expanded Trade in APEC to take concrete steps towards trade and investment liberalization and trade facilitation; and
Endorsed the Santiago Commitment to Fight Corruption and Ensure Transparency.

During 2004, APEC completed work on the APEC Privacy Framework, which seeks to promote a consistent approach to information-privacy protection across APEC Member economies, while also avoiding the creation of unnecessary barriers to information flows. Creation of the APEC Framework also contributes to broader APEC e-commerce objectives to increase cross-border trade and growth in e-commerce in the region. The APEC Framework seeks to achieve four main goals: (1) develop appropriate privacy protections for personal information; (2) prevent the creation of unnecessary barriers to information flows; (3) enable multinational businesses to implement uniform approaches to the collection, use and processing of data; and (4) facilitate both domestic and international efforts to promote and enforce information-privacy protections. APEC economies are now working to implement the framework and have agreed to:

Develop a multilateral mechanism for promptly, systematically and efficiently sharing information among APEC Member economies;
Develop cooperative arrangements between privacy investigation and enforcement agencies of Member economies; and
Support the development and recognition of organizations’ cross-border privacy codes across the APEC region.

The APEC privacy initiative is particularly important given concerns about the proliferation of different privacy standards around the world, as discussed with respect to the European Union in section IV.2.

The 17th APEC Summit was held in Busan, Korea, in November 2005, just weeks before the 6th Ministerial Conference of the World Trade Organization in Hong Kong in December 2005. In order to help propel the WTO Doha Development Agenda negotiations forward, APEC leaders issued a strong stand-alone statement on maintaining a “high level of ambition” in those negotiations, emphasizing that the APEC economies alone represented nearly 50 percent of world trade. The APEC leaders also endorsed the so-called Busan Roadmap, which includes:

Support for the multilateral trading system;
Strengthening collective and individual actions;
Promotion of high-quality regional and other free trade agreements;
Support for the Busan Business Agenda, including reductions in trade transaction costs by five percent by 2010 and work on business facilitation, protection of intellectual property rights, anti-corruption, investment and secure trade; and
Support for a strategic approach to capacity building.

APEC leaders also endorsed the APEC Anti-Counterfeiting and Piracy Initiative and model guidelines to reduce trade in pirated and counterfeit goods and the sale of such goods over the Internet, as well as several initiatives to promote secure trade, including the APEC Framework for the Security and Facilitation of Trade.

The 18th APEC Summit was held in Vietnam in November 2006. The Leaders reaffirmed their strong commitment to resuming the WTO Doha Development Agenda negotiations and the promotion of greater trade and investment among APEC countries through the Hanoi Action Plan, promoting the Busan Roadmap. The Leaders endorsed new intellectual-property guidelines as discussed in section III.4 and programs on ant-corruption and the promotion of technology and Internet access.

The 19th APEC Summit was held in Australia in September 2007. At that meeting, APEC Leaders pledged to demonstrate the “political will, flexibility and ambition to ensure the Doha Round negotiations enter their final phase” and to “resume negotiations on the basis of the draft texts tabled by the chairs of the negotiating groups on agriculture and non-agricultural market access.” The APEC Leaders also indicated that a successful Doha agreement was one that “delivers real and substantial market access improvement for agricultural and industrial goods and for services.”

In addition, APEC leaders:

Endorsed the Regional Economic Integration Report (REI Report), with its mandate to explore the prospects for a Free Trade Area of the Asia-Pacific (FTAAP) as a long-term prospect.
Agreed to three additional FTA/Regional Trade Agreement (RTA) model measures on sanitary and phytosanitary measures, electronic commerce, and rules of origin.
Expanded APEC’s existing work program on food-safety regulatory harmonization to intensify cooperation; improve current standards; strengthen scientific risk-based approaches to food and other products; and facilitate trade and ensure the health and safety of consumers.
Adopted U.S.-backed proposals to improve the protection of intellectual property rights (IPR) and IPR enforcement, through a streamlined patent application process and improved border enforcement.
Urged continued work to address effectively the problem of satellite and cable signal theft (so-called signal piracy).
Sought improved understanding throughout the Asia-Pacific region of cutting-edge environmental technologies and the need for WTO trade liberalization in environmental goods and services.
Adopted an action plan to achieve a 5-percent decrease in trade transaction costs by 2010.

The next APEC summit will be held in Peru in 2008.

APEC initiatives on government procurement and transparency are discussed in sections III.3 and III.5 respectively.

ECAT Position: ECAT supports the APEC forum where work is ongoing to expand trade and investment in the Asia-Pacific region. ECAT supports ongoing efforts to promote trade and investment liberalization and trade facilitation, as well as APEC’s transparency programs. ECAT strongly supports concrete work within APEC to implement APEC’s recommendations regarding investment, intellectual-property protection, infrastructure, harmonization of standards for agriculture and food trade (e.g., cooked poultry), and energy. ECAT also supports work to implement the APEC Privacy Framework to achieve a streamlined approach to the recognition of cross-border privacy codes.

Australia

Australia is the United States’ 24th largest trading partner and its 15th largest goods export market, accounting for $19.2 billion in U.S. goods exports in 2007. Australia’s goods exports to the United States equaled $8.6 billion in 2007. The vast majority of U.S. exports to Australia has consisted primarily of manufactured goods (over 90 percent of total exports), as opposed to agricultural products. In 2006, U.S. services exports to Australia equaled $9.1 billion, with U.S. services imports from Australia amounting to $4.8 billion. U.S. foreign direct investment in Australia totaled $122.6 billion in 2006 and inbound investment from Australia into the United States equaled $25.7 billion.

The United States and Australia concluded FTA negotiations in 2004. The FTA entered into force on January 1, 2005.

Major Provisions of the U.S.-Australia Free Trade Agreement

Among the primary provisions of the U.S.-Australia FTA are the following:

Agriculture: Provides that all U.S. agricultural exports to Australia are duty-free immediately upon entry into force of the FTA. The United States and Australia also agreed to work to address sanitary and phytosanitary concerns through a new bilateral mechanism for scientific cooperation. Australia also agreed to work with the United States in the WTO negotiations to develop export competition disciplines to address concerns about Australia’s state-trading enterprises.
Manufactured Goods: Provides that immediately upon entry into force of the FTA, more than 99 percent of U.S. manufactured goods will be duty-free, which manufacturers estimate could result in an additional $2 billion in exports to Australia each year. Tariffs on qualifying textile and apparel goods will phase out over 10 years.
Services: Expands access to Australia’s services markets, including in such key areas as telecommunications, distribution, express delivery, computer and related services, audiovisual and entertainment and construction.
Investment: Exempts new investments in Australia from Australia’s investment screening mechanism and increases the threshold for review with respect to acquisitions of existing investments to A$800 million. While expanding opportunities and access for investment in Australia, the FTA does not include an investor-state dispute settlement mechanism, as discussed further below.
Intellectual Property Rights: Includes state-of-art protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent-term restoration and data exclusivity.
Information Technology: Includes commitments to non-discrimination and national treatment of digital products, and no imposition of customs duties on products delivered electronically.
Government Procurement: Expands the ability of U.S. companies to bid on Australian government contracts, covering 80 percent of purchases by Australia’s central government. Also requires transparent, predictable and fair tendering procedures.
Transparency: Includes state-of-the-art transparency standards, including with respect to regulatory and customs matters.
Labor and environment: Requires the parties to enforce effectively domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Opportunities Created and Bilateral Issues

By eliminating virtually all agricultural and manufacturing tariffs between the countries on the first day of implementation, the U.S.-Australia FTA is among the most front-loaded of FTAs that the United States has concluded. As a result, it will provide immediately upon implementation concrete benefits to U.S. farmers, manufacturers and their employees, and the U.S. economy. Key manufacturing sectors that benefit include autos and auto parts, chemicals, construction equipment, electrical machinery, fabricated metal products, information technology goods, medical and scientific equipment, and paper and wood products. In agriculture, the FTA will substantially expand access for U.S. farmers and producers of soybeans and oilseeds, fruits, vegetables and certain processed foods. U.S. service providers and investors will also enjoy expanded access in a number of important sectors.

Nevertheless, ECAT regrets that the agreement did not achieve all key objectives. First, it is not comprehensive, by failing to provide any increased access to the U.S. sugar market for Australian sugar exports. This represents a significant deviation from a policy of no exclusions and has already resulted in requests by other sectors to be excluded from the next round of FTAs and the FTAA.

The FTA also fails to include investor-state dispute settlement provisions, rendering the investment chapter effectively unenforceable except through a state-to-state process that is too often politicized. Obviously, U.S. investors will still have recourse to Australia’s legal system, with its respected judiciary, but the specific provisions in the FTA on investment will not, as in other FTAs, be enforceable by the investors. Australia’s refusal to accept this provision, particularly after it was just included in Australia’s FTA with Singapore, puts U.S. companies at a competitive disadvantage. The FTA contemplates that the availability of an investor-state dispute settlement mechanism can be revisited. The investment chapter also fails to provide any protections for investment agreements, which represent a substantial form of U.S. investment abroad.

As well, the FTA makes progress, but fails to reduce fully, the barriers created by Australia’s investment-screening mechanism. This is particularly a concern in the area of financial services where Australia retains a significant ability to prevent the U.S. acquisition of a local company. Finally, the FTA’s provisions on market access for textiles and apparel are particularly limited, adopting not only a yarn-forward requirement, but also failing to eliminate tariffs immediately.

ECAT is following Australia’s implementation of its FTA commitments. While substantial progress has been made, ECAT is concerned by Australia’s implementation of certain intellectual-property provisions, particularly regarding penalties on patent holders and weak data exclusivity provisions. ECAT also would like to see improvements in the access provided in Australia to innovative medicines through further improvements in Australia’s Pharmaceutical Benefits Scheme.

ECAT Position: ECAT strongly supports full implementation of the U.S.-Australia FTA and continued work to improve the trade and investment relationship between the United States and Australia.

ASIA

U.S. trade and investment with Asia have expanded significantly over the last decade. In 2007, U.S. goods exports to all of Asia reached $290 billion, accounting for almost 25 percent of all U.S. goods exports and a $103 billion increase over U.S. goods exports since 1996. U.S. goods imports from Asia totaled $705.5 billion, accounting for 36 percent of all U.S. goods imports in 2007. U.S.-Asia services trade has also expanded rapidly, with U.S. services exports equaling nearly $110 billion in 2006, an expansion of nearly $40 billion over the last 10 years. U.S services imports from Asia totaled $75 billion in 2006, growing $34 billion over the last 10 years. U.S. foreign direct investment in Asia was nearly $380 billion in 2006, an increase of over 250 percent from the U.S. foreign direct investment level of $108.5 billion in 1994. Asian investment in the United States totaled $260 billion in 2006, more than double such investment in 1994.

Association of Southeast Asian Nations

Formed in 1967, by Indonesia, Malaysia, the Philippines, Singapore and Thailand, the Association of Southeast Asian Nations (ASEAN) works to promote political and economic cooperation and regional stability. Membership in ASEAN now also includes Brunei, Vietnam, Laos, Myanmar, and Cambodia. The ASEAN region has a population of about 560 million and a combined GDP of approximately US$ 1,100 billion.

At the fourth ASEAN summit in 1993, the then-six members of ASEAN (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) agreed to establish an ASEAN free trade area (AFTA). Newer members of ASEAN, the so-called group of four (Vietnam, Laos, Myanmar and Cambodia), were given longer time frames reduce tariffs. At their annual meeting in Hanoi in September 2001, the ASEAN group of six countries agreed to eliminate tariffs on information and communication technology goods by 2005. The group of four will have until 2010 to eliminate such tariffs.

The group of six (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) has reduced approximately 99 percent of their non-sensitive product tariffs to the 0-to-5 percent tariff range and the group of four (Cambodia, Laos, Myanmar and Vietnam) has also implemented substantial tariff reductions.

ASEAN countries also moved up the deadlines for full implementation of the ASEAN Investment Area. Exceptions for investment in the manufacturing, agriculture, forestry, fisheries and mining sectors were set for elimination by 2003 for the group of six and 2015 for the group of four.

In 2001, ASEAN also agreed to a Closer Economic Partnership with Australia and New Zealand to establish a broad framework to improve trade and economic ties. ASEAN countries have also begun to pursue an FTA with China, which could open up a $2 trillion market with 1.7 billion consumers.

In November 2002, ASEAN and China signed the Framework Agreement on Comprehensive Economic Cooperation, which provides for an ASEAN-China free trade areas (ACFTA) by 2010 for the group of six and 2015 for the group of four.

In October 2002, President Bush announced the Enterprise for ASEAN Initiative (EAI), under which individual ASEAN countries could pursue bilateral FTAs with the United States as long as they are members of the World Trade Organization and have concluded a Trade and Investment Framework Agreement (TIFA). The United States and Singapore FTA entered into force in 2004, as discussed below. In August 2006, the United States entered into TIFAs with the ten ASEAN countries and developed a specific workplan to advance trade. The United States has also begun FTA negotiations with Thailand and Malaysia, as discussed in section II.2.

U.S.-ASEAN trade and investment are significant. U.S. goods exports to the region equaled $60.6 billion in 2007, up slightly from 2006 goods exports of $57.3 billion. U.S. goods imports from the ASEAN countries totaled over $111 billion in 2007.

Japan

U.S.-Japan trade and investment remain very substantial. Total U.S.-Japan goods trade totaled $208.2 billion in 2007, with U.S. goods exports increasing moderately to $62.7 billion in 2007 from $59.7 billion in 2006. U.S. goods imports from Japan equaled $145.5 in 2007, registering a $2.6 billion decline from 2006. Japan fell from the third-largest to the fourth-largest U.S. export market in 2007, as U.S. exports to China continued to increase significantly. Japan remains the United States’ fourth largest trading partner in goods overall. U.S. services exports to Japan equaled $41.2 billion and U.S. services imports from Japan totaled $23.8 billion in 2006. U.S. foreign direct investment in Japan totaled $91.8 billion in 2006, more than double 1994 investment of $34.1 billion. Japanese foreign direct investment in the United States equaled $211 billion in 2006, more than double the $98.5 billion in Japanese investment in the United States in 1994.

In addition to the specific U.S.-Japan trade and investment relations discussed below, the United States continues to press Japan to provide greater leadership in the WTO Doha Development Agenda negotiations. Japan is a leading member of the Group of 10 developed countries that continues to seek protection for key sensitive products, particularly agricultural products.

In June 2001, President Bush and former Japanese Prime Minister Koizumi inaugurated the new U.S.-Japanese Economic Partnership for Growth. This Partnership includes a Subcabinet Economic Dialogue, the Regulatory Reform and Competition Initiative, the Investment Initiative, the Financial Dialogue, and the Trade Forum.

The Regulatory Reform and Competition Policy Initiative, which replaced the earlier Deregulation Initiative, includes government officials and representatives from the private sector. In establishing this initiative in 2001, the United States and Japan created four working groups – on telecommunications, information technology, energy, and medical devices/pharmaceuticals. A cross-sectoral group also considered economy-wide issues such as regulatory reform, competition policy and corporate restructuring. The United States makes yearly recommendations as a basis for bilateral discussions, and then a report is prepared detailing areas where Japan has made progress.

In June 2007, the United States and Japan issued the Sixth Report to the Leaders on the U.S.-Japan Regulatory Reform and Competition Policy Initiative. The report reviews measures that Japan is taking in key sectors, such as telecommunications, information technology, intellectual property, medical devices, pharmaceuticals, financial services, agriculture, competition policy, transparency, legal reform, commercial law revision and distribution. This report noted Japan’s progress in several key areas, including:

Telecommunications, where Japan committed to make reforms such as mobile phone-number portability and ensure less burdensome requirements for WiFi certification.
Information Technology, where Japan committed to prohibit the recording of movies in theatres and apply penalties for such actions; increase competition and transparency for government procurements of information technology systems; allow contractors to own software created for government procurements; and conclude examination of measures to promote the protection of sound recordings.
Medical Devices and Pharmaceuticals, where Japan committed to increase and speed up reviews of new drugs, increase the number of medical device reviewers, and improve and streamline access for nutritional supplements.
Financial Services, where Japan committed to improve outreach to industries as it moves to update its capital-markets and other financial-market rules.
Competition Policy, where Japan committed to improve fairness and objectivity of its competition-policy administration and strengthen measures against anti-competitive actions.
Transparency, where Japan committed to increase transparency in regulatory and policy decisionmaking.
Market Access, where Japan committed to streamline import procedures for certain agricultural and manufactured products.

The United States is continuing to seek additional reform to reduce regulatory barriers and streamline government practices and issued new detailed recommendations to Japan in December 2007.

Improving access to Japan's auto market continues to be a top priority in 2008. In 1995, the United States and Japan reached an Automotive Agreement intended to eliminate market-access barriers and expand sales opportunities for U.S. auto and auto-parts exports in Japan. This agreement expired at the end of 2000. Prior to its expiration, the United States noted that progress had been made under the agreement, particularly in the areas of vehicle standards, certification and the deregulation of the auto-parts after-market. However, the United States expressed serious concern that the overall market-opening objectives had not been achieved. In particular, sales of U.S.-made vehicles to Japan have fallen dramatically since 1995 and sales of U.S.-made auto parts to Japanese firms and their transplants in the U.S. have also decreased. After months of discussions in 2001, the United States and Japan established the U.S.-Japan Automotive Consultative Group to assess trends in the automotive industry and market-access and regulatory-reform issues in Japan. The Group is co-chaired by the Commerce Department and USTR and the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure and Transport. The Administration has indicated that it will seek to address crosscutting issues, such as transparency, investment and corporate restructuring that affect the automotive sector as part of the Economic Partnership. Despite the work in this forum, the United States remains concerned about falling sales, the lack of transparency and regulatory and other barriers to U.S. automobile and auto-parts manufacturers.

In addition, U.S. auto and other manufacturers are increasingly concerned by Japan’s weak yen policy, which has given its exporters a huge cost and competitive advantage in the U.S. market to the disadvantage of several U.S. industries. In a January 2005 Working Paper, the U.S. Federal Reserve reported that:

Since the early 1990s, the monetary authorities of the major industrialized countries, with one notable exception, have greatly curtailed their foreign-exchange interventions. That exception has been Japan, where the Ministry of Finance has continued to intervene frequently – and at times massively – in foreign exchange markets.

There are several international agreements that preclude or limit the use of currency intervention for trade-distorting purposes. Exchange rates, like all prices, should reflect economic fundamentals and be determined by market forces. Given the relative strength of the Japanese economy and the massive current account surplus, a stronger yen would more accurately reflect economic fundamentals. The U.S. government should closely watch this situation and take steps to ensure that only market forces determine yen-dollar rates.

In August 2003, Japan imposed an import ban on U.S. beef as a result of a single case of Bovine Spongiform Encephalopathy (BSE) reported in the United States. Japan partially lifted the ban in December 2005. One month later, in January 2006, the beef ban was reimposed after a single U.S. exporter shipped non-qualifying beef. The United States immediately recognized the breach of the agreement and put additional systems in place to guarantee no repeat offenders. On July 27, 2006, Japan partially reopened its market to U.S. beef, allowing imports of U.S. beef from animals aged 20 months or younger. The United States continues to urge Japan to remove all its barriers to beef. Before the ban, Japan had been the largest export market for U.S. beef.

In its annual consultations under the 1992 U.S.-Japan Computer Agreement, the United States continues to urge Japan to improve its implementation of that agreement, which was intended to increase the sales of U.S. computers to Japan's public sector. Japan has insisted that the 1992 agreement does not guarantee any market share and that its government purchases are conducted in a fair, transparent manner. The most recent bilateral review was held in 2001.

In October 2005, the Government of Japan passed legislation covering the privatization process of Japan Post, the world’s largest financial institution with roughly a quarter of Japan’s individual assets under management. This process began on October 1, 2007 with the formation of the new Japan Post entities and will be phased in over 10 years. Satisfactory implementation of the privatization process, including transparency and the timing of any Japan Post expansion through new competitive product offerings is a key concern. Initiatives taken to date are consistent with the stated intention of achieving equivalent conditions of competition prior to any business expansion.

In December 2006, Japan’s Diet approved changes to its Money Lending Business Law. Several of the changes are positive, including provisions to improve internal governance, raise the standard for capitalization, and take appropriate steps to enhance borrower protections against abusive practices. Industry is concerned, however, with two sets of issues:

The legislation requires a major reduction in the maximum interest ceiling – from 29.2 percent to 18 percent – and a limitation on all unsecured lending to a third of a borrower’s income. Both provisions will be effective from 2010. Such restrictions could exclude over 60 percent of the currently eligible consumer finance market from receiving safe and secure credit from regulated lenders.
The legislation also failed to fix disclosure requirements in the existing law that have been found to be unworkable for revolving credit. The failure to fix this issue perpetuates substantial legal uncertainty for lenders.

ECAT looks forward to further reform of this law to address these issues.

U.S. officials will also continue to monitor trade and enforce key agreements with Japan in insurance, telecommunications, semiconductors, and other sectors. In March 2002, the United States also requested WTO dispute consultations with Japan over sanitary and phytosanitary restrictions imposed on imports of apples. The WTO Appellate Body found in November 2003 that Japan’s measures on apples violated its WTO commitments, as they were imposed without sufficient scientific evidence. While Japan amended its rules, the United States requested a WTO panel to review the rules because they do not appear to be compliant. The WTO panel agreed, and Japan announced in August 2005 that it would eliminate certain restrictive practices. As discussed in sections II.3 and III.1, the United States and Japan are involved in other WTO disputes, particularly over several U.S. trade-remedy issues. In 2007, the United States and Japan signed a mutual recognition agreement on telecommunications equipment to lower costs and speed up the marketing of equipment. The United States and Japan ratified a bilateral tax treaty in 2004.

Japan concluded its first bilateral FTA, with Singapore, in 2001, and its second FTA, with Mexico, in 2004. Suggestions have also been made by Members of Congress and others for the United States and Japan to consider negotiating a bilateral FTA.

Singapore

Singapore is the United States’ 16th largest trading partner. Bilateral goods trade between the United States and Singapore has increased from $17.8 billion in 1990 to $44.7 billion in 2007. U.S. goods exports to Singapore equaled $26.3 billion in 2007. U.S. imports from Singapore totaled $18.4 billion in 2007. In 2006, U.S. services exports to Singapore equaled $6.7 billion and U.S. imports of Singaporean services totaled $3.9 billion. In 2006, U.S. foreign direct investment in Singapore totaled $60.4 billion and was the third-largest destination for U.S. foreign direct investment in Asia. Singapore’s investment in the United States remained stable at $2.4 billion in 2006.

Singapore is a member of APEC and ASEAN and has free trade agreements with Australia, India, Japan, South Korea, Panama, and Peru. Singapore also has completed an FTA with the four-member European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland) and an FTA with Brunei, New Zealand and Chile (the so-called P-4). Its negotiations with the Gulf Cooperation Council are nearing completion. Singapore also has begun FTA negotiations with Canada, Central America, Mexico and Peru. Singapore maintains no external tariffs on goods.

Major Provisions of the U.S.-Singapore Free Trade Agreement

Negotiations of the U.S.-Singapore FTA were completed in 2003 and the FTA entered into force on January 1, 2004. The primary provisions of the U.S.-Singapore FTA include the following:

Services: The FTA commits both parties to provide fair and non-discriminatory treatment on cross-border services and the right to establish a local services presence. Services commitments cover a wide range of sectors, including financial, computer and information technology, telecommunications, direct selling, audiovisual, construction, express delivery, distribution (including wholesaling and retailing), environmental and energy. With regard to banks, the agreement includes the core market-access obligations and requires that the ban on new licenses for full-service banks be lifted within 18 months and within three years for wholesale banks. U.S. insurance firms will also have full rights to establish subsidiaries, branches and joint ventures, and Singapore agreed to end its prohibition on the cross-border supply of insurance services. The FTA also includes important commitments on telecommunications, including reasonable and non-discriminatory access to the telecom network, reasonable and transparent rights of interconnection, and non-discriminatory leasing ability. The FTA applies the non-discrimination principle to products delivered electronically, prohibits tariffs on digital products delivered electronically, and makes binding the voluntary e-commerce commitments made in the WTO. Commitments also include strong transparency and consultation requirements to ensure the fair and impartial regulation of services.
Intellectual property rights: The FTA commits Singapore to strong protections for intellectual property rights, with patent and trade-secret protections stronger than in prior agreements. It also includes very strong enforcement provisions, including criminal penalties for pirated products and both statutory and actual damages for violations.
Competition policy: The FTA commits Singapore to enact legislation regulating anti-competitive business conduct and create a competition commission by 2005. Singapore also has undertaken commitments to ensure commercial enterprises in which the government has effective influence will operate on the basis of commercial considerations.
Investment: The FTA includes many of the same protections included in U.S. Bilateral Investment Treaties to promote a secure and predictable legal framework for U.S. investors. The United States made some changes to the investment framework, as discussed in section III.2, that should not be repeated in future agreements.
Government procurement: Singapore is already a member of the WTO Government Procurement Agreement. The FTA government procurement chapter expands upon Singapore’s existing framework by including important new anti-corruption and transparency rules for government contracting.
Tariffs: The United States agreed to eliminate tariffs on most goods immediately, with remaining tariffs to be phased out over three-to-10 years. The United States agreed to eliminate its 50-percent ad valorem tax on shipbuilding repairs that take place outside of the United States. Singapore guaranteed that U.S. products would continue to enter duty-free, since Singapore already maintains no external tariffs.
Rules of origin: The FTA incorporates relatively flexible rules of origin to promote trade, except with respect to the textile and apparel sector (where a NAFTA-like, yarn-forward rule is employed).
Customs procedures: The FTA requires transparency and efficiency in customs administration, with commitments to publish laws and regulations on the Internet. The parties also included provisions to combat transshipment.
Transparency: The FTA includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking.
Labor and environment: The United States and Singapore commit to enforce effectively their domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
Dispute settlement: Obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.