Summary:

The US-Singapore FTA has been a remarkable success, significantly transforming US-Singapore bilateral trade patterns since its inception in 2004. According to the Office of the United States Trade Representative, the U.S. goods and services trade surplus with Singapore reached $38.3 billion in 2022, making Singapore the second-largest trade surplus partner of the United States that year. This week’s chart focuses on one key aspect: the growth of services trade under the USSFTA. It examines how U.S. services exports to Singapore have evolved during this period and compares them with exports to other Asia-Pacific destinations.

The two charts illustrate U.S. services exports to Asia-Pacific destinations, detailing both the trade value and changes in the services share of US exports from 2003 to 2022. The first chart shows that all destinations in the region experienced an increase in the value of U.S. services exports during this period. However, the second chart reveals significant variations in the composition of U.S. export growth, with some destinations seeing a marked increase in the services share of overall exports, while others experienced a decrease in the relative importance of services exports as the growth of goods exports outpaced that of services.

Focusing specifically on the top performers, Singapore has markedly emerged as a key destination for U.S. services exports within the Asia-Pacific. This significant development has unfolded since the U.S.-Singapore Free Trade Agreement (USSFTA) was implemented in 2004. By 2022, U.S. services exports to Singapore reached USD 34.3 billion, making it third highest in the region. Notably, between 2003 and 2022, Singapore experienced the most significant increase in the services share of US goods and services exports among the Asia-Pacific destinations, at 15.3%. This substantial change underscores a pivotal shift in the composition of US exports to Singapore, with high value-added professional services increasingly playing a crucial role.

Several factors could explain the shift toward services. First, the USSFTA provided American firms operating in Singapore with national treatment and improved market access for services, potentially attracting more U.S. companies to enter the Singapore market. Second, the agreement introduced a robust investor-state dispute settlement mechanism, which enhances investor confidence and legal protection for U.S. firms. Third, the USSFTA established a strong Intellectual Property Rights (IPR) protection regime, which is particularly significant considering that the largest category of U.S. services exports to Singapore is R&D services. This robust protection likely incentivized more U.S. companies to engage in high-value, IP-intensive activities in Singapore.

In conclusion, the US-Singapore Free Trade Agreement has been instrumental in transforming the trade dynamics between the two nations, particularly by strengthening the services sector. The substantial increase in U.S. services exports to Singapore, particularly in high-value sectors such as R&D, highlights the agreement’s effectiveness in fostering a conducive environment for the American services sector, which represents the comparative advantage of the US economy. As U.S. firms continue to benefit from Singapore’s strong IP protections and open market access, Singapore’s strategic role as a key hub for services trade in the Asia-Pacific region is poised to expand even further.

Highlights:

1. Since the USSFTA’s inception in 2004, Singapore has emerged as a leading recipient of U.S. services exports, reaching $34.3 billion in 2022 as third ranking among Asia-Pacific destinations.

2. Singapore has experienced the most notable regional shift toward services trade among US export destinations in the Asia-Pacific, with a 15.3% increase in the services share of overall US goods and services exports to Singapore, primarily driven by high-value-added professional services.

3. The rapid growth of U.S. services exports to Singapore is a testament to the strong bilateral collaboration fostered by the USSFTA since 2004.

Article By LU, Miranda

Graphic By BALAJI, Akshaya