Singapore and the US are to sign a landmark free-trade agreement tomorrow, which is expected to bolster Washington's economic and political ties with Southeast Asia.
Prime Minister Goh Chok Tong will sign the US-Singapore Free Trade Agreement (FTA), the first between the US and an Asian country, with US President George W. Bush at a White House ceremony.
The signing will come more than two years after then president Bill Clinton and Goh discussed the idea of liberalizing bilateral trade during a nocturnal golf game at an Asia-Pacific summit in Brunei in November 2000.
Singapore will eliminate tariffs on US exports and ease conditions for entry by American professionals such as lawyers, engineers and architects.
The city-state will open its market to US banks and firms focusing on the biomedical sciences, software, research and development and entertainment, in addition to traditional areas like headquarter services, manufacturing and logistics.
Singapore Trade Minister George Yeo said the FTA will also put special emphasis on high-tech concerns like the protection of intellectual property and the rules of electronic commerce.
With most of the city-state's exports to the US already subject to low tariffs, analysts said the biggest benefit for Singapore is that it will be positioned as a gateway for US investments into Southeast Asia, a combined market of 550 million people.
Song Seng Wun, a regional economist with GK Goh brokerage here, said the island-republic's more decisive response to the severe acute respiratory syndrome (SARS) outbreak compared to regional rival Hong Kong could prompt US companies, especially those in the services sector, to take advantage of the FTA and relocate here.
"Because of SARS, the FTA might benefit Singapore a bit more than I thought earlier, at the expense of Hong Kong," he told reporters.
"I am starting to hear companies with a regional base in Hong Kong which have been exposed to all kinds of disease scares that are thinking of moving out."
Around 1,300 US companies have a presence in Singapore, many of them regional headquarters. Politically, Singapore is one of Washington's staunchest Asian allies in the war against terrorism and the Iraq campaign.
Singapore is the 11th largest trading partner of the US economic superpower, with bilateral trade totalling around US$34 billion annually.
"We believe that this agreement cements that relationship with a key strategic partner further and will serve as a model for pending negotiations with other ASEAN member countries," the American Chamber of Commerce here said.
Beyond bilateral trade, the pact should also broaden Washington's economic links with the Association of Southeast Asian Nations (ASEAN).
The FTA "signals US intention to be a long-term player in Asia, which is a region which some believe will become more important to the US than Europe," Trade Minister Yeo told the National Press Club in Washington last week.
Strategically, Southeast Asia includes some of the world's most important sea lanes, he said.
He hoped the FTA will also benefit Southeast Asia's 250 million Muslims, a situation which could dim the allure of Islamic militancy.
The FTA has a provision allowing information technology products produced in other Southeast Asian industrial zones to be deemed made in Singapore in order to enter the US market tariff-free, and with less bureaucracy.