Speeches

US-ASEAN Business Council Interview with United States Ambassador to Singapore, Mr Frank Lavin and Singapore Ambassador to the United States Chan Heng Chee

January 28, 2003

ERNIE BOWER: Good afternoon. I am Ernie Bower, President of the US-ASEAN Business Council. I would like to welcome you to our interview with US Ambassador to Singapore, Frank Lavin, and the Singapore Ambassador to the United States, Chan Heng Chee. Welcome both of you to the US-ASEAN Business Council.

What we would like to do is talk a little bit about the US-Singapore relationship and the US-Singapore FTA today. I would like to start with Ambassador Chan. Ambassador, what does the FTA mean for Singapore?

AMBASSADOR CHAN: Well, first of all, an FTA is about trade. It would mean (benefits) for Singapore businessmen and Singapore interests. We would have greater access to the US markets. Tariffs will go down and that's the most important thing.

For the American businessmen, tariffs in Singapore will go down, we will have new regimes to do with IPR, customs cooperation, transparency, and we hope that makes Singapore a more attractive place to do business.

ERNIE BOWER: Ambassador Lavin, from your point of view, what are the advantages for the United States?

AMBASSADOR LAVIN: I would build on Ambassador Chan's comments and say that there are some important openings in financial services, intellectual property rights-related industries, bio-tech and agriculture food processing. But it's also a very important signal to markets. We have a lot of US companies, sometimes the small and medium enterprises, who are just thinking about Asia, of how to get into Asia. And this is an important reminder that Singapore is the easiest market to enter in Asia. So, US companies who are just thinking about Asia, you should really think about Singapore first.

ERNIE BOWER: I want to pick up on that point, as I think it's really important. Our companies obviously do a lot of business in Singapore. But you're living in a neighborhood that's been troubled since 1997. Where is the strategy Singapore is pursuing behind the FTAs and generally to cope with the economic downturn in what's obviously a neighborhood that's giving you some challenges?

AMBASSADOR CHAN: Ernie, you know better that anyone that the neighborhood of Singapore is in - the ASEAN neighborhood - is in fact a good neighborhood. Up till the financial crisis, we were really quite a dynamic region with growth rates at the average of eight, nine percent for the whole region. And there is a good infrastructure there, there is an educated population and there are 500m Southeast Asians in ASEAN. Much of that structure is still there. The economies are less dynamic and there are some problems. I think Singapore hopes, with the FTA, to focus American presence in the region, using Singapore, which we believe is still a very healthy economy, to use the vantage point of Singapore, to look around and to view the economies in the region. Investing in us, but with activities that will flow over to the region. And the US presence in Singapore, through the new presence, the added presence, I would add, would in fact show the confidence in the region which is warranted.

ERNIE BOWER: In the region, you are not limiting to the 10-country ASEAN group but talking of Asia broadly?

AMBASSADOR CHAN: I am talking of the 10 countries in Southeast Asia - ASEAN. Because the US presence in China, in Japan, it's traditional. In Korea, South Korea, it's traditional too, and US presence in China is increasing. In fact, it is a bit of competition for us. So, for the United States to revisit Southeast Asia, the way it has prior to the financial crisis, that's what we want.

ERNIE BOWER: I see. And Frank, in terms of US strategy, are there elements that mesh nicely with Singapore's strategy?

AMBASSADOR LAVIN: Yes, here is the important point that I try to keep in mind when I talk to US businesses. Certainly, some of the economies in Southeast Asia are underperforming - some are positive, some aren't, and sometimes there's political turbulence as well. But my point is this - a good international company, a strong MNC, will calibrate its risk and its exposure with opportunity. US companies don't stay out of markets in the US if that state has a weak economy or if that city has a weaker economy. They figure out how to manage their risk, their exposure and their opportunity. So, these are huge markets, 500m people as Ambassador Chan said. There are literally thousands of US companies in these markets, and what we need to do is think about how to allocate appropriate presence in these markets, given the opportunities that are there.

AMBASSADOR CHAN: I think the US-Singapore FTA will in fact bring about some changes in our trade regimes. There would be new disciplines that Singapore would be introducing. Though we are a very open trading country, we still have to do more openings - sectoral openings, financial services, professional services and different areas where we want to meet better standards and higher standards. Now, I think when countries in the region see that Singapore, by adhering to these disciplines and openings, really gain substantially as we know we will, there will be an incentive for others to follow, to introduce the same disciplines. And as you know, there is an Enterprise for ASEAN Initiative on the table offered by President Bush at Los Cabos, which allows the building towards a free trade agreement by countries in the region.

ERNIE BOWER: I would like to build on that point, the Enterprise for ASEAN Initiative. Ambassador Lavin, you've been back for discussions with your colleagues from all over East Asia, but certainly your colleagues from the ASEAN countries have been here. Did you talk about the Enterprise for ASEAN Initiative? What's the plan for moving that forward? Obviously, I guess Singapore is the keystone. Where do you move beyond Singapore?

AMBASSADOR LAVIN: Well, I think that is an enormous interest in it. We've a series of discussions of this topic over last week, Ernie. President Bush proposed this to the ASEAN countries at the APEC summit last year. Every country has a slightly different response, a slightly different appetite. We respect that. But there is no question in my mind that there'll be several countries we'll hear formal requests from, most likely later this year, to start a formal process for negotiating FTAs.

I think people realize, just like Ambassador Chan indicated, trade liberalization is the only way to go. If you want to have a modern, efficient economy, you've got to figure it out on how to plug into the major trading powers and there is no sense in spending that money protecting some domestic industries. So this is a perfect opportunity for US businesses to get involved and play a more active role in Southeast Asia.

ERNIE BOWER: You both would be spending time convincing legislators, other policy people about the merits of agreement. What would you say to a Congressman or a Senator who might have reservations about whether we should sign this FTA. What arguments are you using on the Hill and with legislators?

AMBASSADOR CHAN: For me, each case is specific. As I see a Senator or a Congressman, I will try to understand what his constituency is, address his concerns. But some Senators or Congressmen have concerns which are issue-oriented, over above the constituency concerns. So, if I meet, as I did a Senator yesterday from one of the states with agriculture, I would say that in Singapore we don't have a large agricultural sector, so that is quite good. And it should be easier for you to support the free trade agreement. That Senator happens to have supported other free trade agreements, so that's easier. Then, I point to areas of common interests - biotechnology, health services - where there could be collaboration and certainly Singapore is a place, as my colleague Ambassador Lavin has been explaining to others, where we are very forward-looking on GMO issues and it's a good partner to have because we can show others that it's quite alright to deal with GMO products. There is nothing wrong.

ERNIE BOWER: Ambassador Lavin, on the eve of the President's State of the Union address, would movement forward on trade, the relationship with Singapore, factor into the themes the President is going to address?

AMBASSADOR LAVIN: I think very much so. I think post-9/11, there's broad recognition in the United States that what happens overseas can have a dramatic impact on us - on our security, our livelihood, our economy and so forth. So let's be smart about this, let's think through how we're connecting with other societies, what kind of partnership or relationship we want with them. And I think, when you think that through, trade just leaps the top, because it's a win-win relationship. It helps America at its best, projects a very positive role, which is to say our companies, the technology they offer, the services and goods they offer, the employment they offer these other societies. It's an enormous win-win, so I think you're quite right (that) even with the security conscious environment that we are in, the people are typically quite positive towards trade expansion.

ERNIE BOWER: The Americans are kind of counting their friends. Could you comment on the relationship with Singapore in terms of political-security relationship?

AMBASSADOR LAVIN: I think you've made a good point, I think it would be very difficult to propose trade liberalization with a country where there was not mutual respect, friendship and broad ranges of collaborate activities. Because trade is built on trust. Why make an extra effort to move ahead with a country if you don't have that underlying good-will? But with Singapore, we have an enormous range of activities underway from educational/cultural exchanges, to military exchanges and training exercises and so forth. So, this helps underpin the entire relationship. I think you're right, that would give it momentum and help it resonate here in Washington as well.

ERNIE BOWER: Ambassador Chan, I wonder if you would like to comment on that?

AMBASSADOR CHAN: I concur fully with Ambassador Lavin. I think this free trade agreement comes in the wake of very substantial development of bilateral relations on so many areas. I've been in Washington for six and a half years. In just these six and a half years, I've seen us develop relationships at totally different levels. The defence and the broader investments and trade relationship was always there. We built more upon it. And the height before the financial crisis, we were doing $44 billion of bilateral trade. Then we developed education as another level of cooperation. Then research into Silicon Valley, as we developed the new economy. We looked for companies to work with. We came with a fund, an entrepreneurship fund, to try to invest. Then we also developed the bio-technology industry. We looked for new institutions and companies to work out relationships.

So, we're looking for new relationships all the time. And that's been enormously helpful. And now it's this trade relationship. And my colleagues, the negotiators, tell me that with this trade negotiations, they have learnt, they've got to know far more Americans. And as an Ambassador here, with my own team, I've got to know far more, deeply, more profoundly how US institutions work.

ERNIE BOWER: That's terrific, I think from a business point of view, we have also seen that relationship shore up in the last five, six years.

AMBASSADOR LAVIN: If I may, we have a close to 20,000 Americans who live in Singapore, and something like 1,600 US companies there. So any Americans go to Singapore - and although its certainly a different country with its own distinct culture, dining, cuisine and so forth - but you feel quite at home there. You can find what you need, play in a softball team and go see an American in the theatre and so forth. And so it's a very inviting locale.

ERNIE BOWER: Let me build on that. Let me ask both of you to comment briefly; if a new company is watching this video, this interview and he says "well, there's a new trade agreement with this country. Should I think about going to Singapore?" Could you answer some fundamental questions? Is Singapore a safe place for Americans to do business? Is it a good place to do business? And maybe just a little bit of why on both those questions for someone who is new to the market?

AMBASSADOR LAVIN: In terms of safety, I've been there for several years. My family is there, my kids are there. We go to school there. My view is, it is as safe as any place in the United States. You know no place is perfectly safe. But Singapore devotes substantial resources and efforts to make sure that nothing bad happens there. And they do a very good job. So we feel quite comfortable there. Singapore does everything it can to protect its people.

ERNIE BOWER: And as a former private sector international banker, it's a good place to start doing business there?

AMBASSADOR LAVIN: No question about it. Ease of entry is there. I tell people that Singapore is a strategic market. It's not a strategic market because of its size; it's actually rather smallish, but it's a strategic market for Americans because of ease of entry. So if you're starting to think about Asia, Southeast Asia, getting in there, start at grab at the low-hanging fruits that's in Singapore because it's predominantly English speaking, because it's highly educated population, because it's a very transactional, commercial society. Anything that you have to sell or do, you'll find distributors, you'll find bankers, you'll find a real estate. You can just look at a phonebook the same way you would look in any American city, and you can be up in business by the end of the day.

ERNIE BOWER: And that entry is now enhanced by this agreement.

AMBASSADOR CHAN: Oh yes it is. I agree with everything that Frank has said about safety, security, I think the present time, you know, in this period, Singapore, which is already a crime-free, secure place, has become even more conscious about security. So, it is really very secure. We are doing all the best we can to keep the place that way.

In terms of ease of doing business, we speak English, the schools are in English, the universities use English as a medium. And perhaps (as) an indication of how easy it is to work in Singapore, a US Congressman said to me, "no insult meant, but as I was talking to some of your business executives in Singapore, if I close my eyes, I could have sworn I was speaking to people in the United States." So, I think that shows you the sort of intellectual and business wavelength we share.

ERNIE BOWER: Business wavelength is a question I have for both of you. As our CEOs wake up in the morning, both Americans and Singaporeans, the news in The Wall Street Journal, the Straits Times and FT has not been good. The business cycle seem down and I wonder, Ambassador Chan, if you could comment in what this agreement do for Singapore in businesses. But also, maybe more broadly, if you could talk about why the Singapore government has pursued this FTA strategy. For a small country, you've got a fairly aggressive agenda of free trade agreements and I wonder if you could talk about why the government feels that it's adding its value to those businessmen who may have hard mornings reading the news.

AMBASSADOR CHAN: By the time this free trade agreement is implemented, we hope it would be January 1, 2004. The agreement as said will not jump-start your economy or my economy. A whole set of other factors will have to be in place. But if the factors are all in place, I think the free trade agreement will help Singapore and the US economic relationship to take-off, and should add, according to the IIE statistics, some seven-tenth points more to our growth rate.

Why is Singapore pursuing this strategy of the FTA so aggressively? I think Singapore lives by trade. Trade is three times our GDP. So, for us an open trading regime in the world is most important. We think it also helps every other country develop. Where trade grows, development takes place. But trade was in danger of stalling and countries were getting protectionist. As you know in APEC, we weren't moving along. And this is one mechanism by which we think if it works between two countries. If they prepared to liberalize, let them liberalize. If three countries are prepared to do it, why not? And that is why we have used the free trade agreement to encourage liberalization on a smaller scale as an experiment. Where it is demonstrated that it works, others will follow.

Singapore and New Zealand signed the free trade agreement and that was the first (for us). We found trade in the first year increased by some 15 to 18 percent in fact. So that is the impact of a free trade agreement. And you now see a whole number of players wanting free trade agreements. Interestingly, they are all members of APEC. Every member seeking a free trade agreement with the other all belong to the community of APEC. So I think we were right in saying that the way to stimulate APEC trade liberalization was to use free trade agreements. Hopefully it impacts, globally, and on the WTO, too.

ERNIE BOWER: I'm just curious, for the record, was the birth of this strategy a result of frustration of with the pace of APEC trade liberalization, or did it happen after the Seattle and the failed WTO (conference)?

AMBASSADOR CHAN: I would say both. But it came immediately after Seattle. But we were already toying with that idea before.

ERNIE BOWER: Frank, let me ask you about US strategy. (Robert) Zoellick, the US Trade Representative, gets Trade Promotion Authority. The President seems to be moving with Zoellick to play offense on trade in the world. Could you talk about that? We've heard the comment, "competitive liberalization". Is that something that is at play here? And where does the strategy wear out?

AMBASSADOR LAVIN: The approach is not too different from the Singapore approach; which is to say our starting point is that very country has a different appetite, every country has a different political structure, different stage of economic development, different capabilities to liberalize. So let's come up with a response that respects those differences. And if one country wants to move more quickly, we would do it. But if other countries would say not right now, that's okay. But this means we are talking to a lot of different countries around the world. We have Singapore going into the first wave (and) Chile is right there as well.

We are still very serious about the Doha round, getting WTO going. But there is a competitive dynamic. Because it allows us to avoid having one member country of the WTO hold the entire round hostage. If somebody has a go-slow approach for whatever political reason, we have an alternative. We say you go slow if you want, but we're going to go quickly. We have more of an appetite, and so these bilateral and regional moves reinforce the global move. It's a win-win.

ERNIE BOWER: So, is it correct then, as we look at Asia, based on what you just said, Singapore is of course our first free trade agreement in Asia. So, we work with a country that is most willing and the best partner in that sense. Is the next concentric circle the President's Enterprise for ASEAN Initiative, then APEC, then WTO? Or is it not?

AMBASSADOR LAVIN: No, it's more flexible than that. The Enterprise for ASEAN Initiative will definitely get some response within ASEAN, but there might be somebody who are not quite ready, but that is alright. Remember that Australia has already said its interested in the FTA and we are starting negotiations in March with Australia. It's not simply concentric circles, but I think it's opportunistic. You find a partner, and you start talking.

ERNIE BOWER: Right, that makes good sense.

AMBASSADOR CHAN: And there is a trilateral free trade agreement which has been launched between Chile, New Zealand and Singapore. So you carry the levels of liberalization you're prepared to commit to a larger forum. Because once you've committed it bilaterally, going to the world forum - WTO - or multilateral forum, it would be much easier for a country to take that step.

ERNIE BOWER: Let me wind up with an opportunity for both of you to send a message to the members of the US-ASEAN Business Council. What can we do to support you in your effort, as you work through the next (stage). Sounds like the time frame for this agreement signed, sealed and approved by January 1, 2004? What can we do to support you?

AMBASSADOR LAVIN: Two points; one, Singapore is a huge market for the United States. We sell more to Singapore than we sell to all of Africa. We sell more to Singapore than we sell to all of Russia and the former Soviet Union combined. We sell about as much to Singapore as we sell to France. So it's a major trading partner of the United States. My message to the US-ASEAN Business Council and the other businesses watching this is - come on out, click through from this webpage to the embassy webpage; we've got a response form there. Let us know when you're coming, we want to see you and we you want to meet with you and we want to help you get going in Singapore.

AMBASSADOR CHAN: Yes, absolutely. First, support the agreement, so that it will pass through Congress. Get in touch with your local Congressman and the Senator in your state and tell them why it is important for your business that you should want this passed. And secondly, when you are actually coming out to Singapore, and if you haven't been there before, we can certainly help you. Click on to our webpages. Ambassador Lavin would be very happy to help you. My embassy, with our full complement of economic staff, will be prepared to answer questions, to facilitate entry.

ERNIE BOWER: Thank you both. I think we can see that the prospects for the passage of the US-Singapore Free Trade Agreement is certainly very strong with such incredibly talented advocates as Ambassador Chan Heng Chee and Ambassador Frank Lavin and for all US-ASEAN Business Council members, I would like to thank you and I pledge our support in your efforts. Good luck.