IS SINGAPORE DISADVANTAGED BY THE FTA WITH THE US?

Recently Mr Foong Swee Fong made an interesting post on Facebook (reprinted in the box below for those interested). Foong is one of those few Singaporean writers that I follow. Not necessarily that I agree with everything he says but I like the topics raised and different views.

This particular post has issues that are right down my alley so I like to confront. The gist of Foong's post is Singapore is disadvantaged in the US-SG FTA. Note that I am not critical of the messenger, just trying to add value to a discussion from my perspective. So I shall just stick to the facts, not the rhetoric.

Claim #1: Most of the trade is just supply chain shuffling with little value added

The claim made is yes, trade increased partly due to the FTA, but it's just parts moving between 2 countries taking advantage of free tariffs. There is no value-added and consumes resources. It  is meaningless for Singapore and it is economically wasteful. This looks like artificial trade.

"Parts moving around" isn't a loophole, it's literally the point of the economy

I think Foong makes an error big time here. The world had moved towards globalised economies and manufacturing had transformed into fragmented supply chains. This has resulted in components "moving back and forth" that seems puzzling but works to overall resource optimisation and production efficiency. US-SG FTA, signed in 2003, assisted greatly in getting Singapore plugged into this new economic arrangement. Even if components "move around", Singapore captures value in finance, coordination, IP management, and advanced manufacturing. These are high-margin activities, not low-value. What has actually happened is the realisation of Lee Kuan Yew's decision to move up the value chain at the turn of the millenium when neighbouring economies were catching up with our development at the time.

Foong has brought up a very very interesting point here for discussion. I am dedicating the next post to elaborate on this which will cover stuff never properly articulated by anyone in our public square, not even in academia. I promise a very interesting ride, so stay tuned.

Claim #2: The FTA did not contribute to growth in trade and investment between US and Singapore.

The post claims "trade and investment between the two countries were already significant even before the FTA. In all likelihood, it would have continued to grow..."

A classic counterfactual claim that is impossible to prove or disprove

Foong might well be right. There is no way of proving either way. However, what we do know is there are competitors. There is Hongkong, Malaysia, Thailand, etc. And back then, who knew about what Vietnam can do !  Trade may still grow without FTA, but investment goes to where they receive the best treatment. The US-SG FTA lock in zero tariffs, give legal certainty to investors and make Singapore a preferred base for US firms in Asia.

Claim #3: The IP rules in the FTA literally hand-cuffed Singapore

The post makes very strong claims that "more generous terms, and stringently enforced, resulting in fewer generics, restriction of parallel imports for many products, and making it difficult to “nationalise” critical drugs, resulting in extremely expensive medicines, software, entertainment and any other products with an IP component."

It is trade-off, not exploitation

US-SG FTA is a TRIP-plus agreement. TRIP (Trade-Related Aspects of Intellectual Property Rights) is the WTO baseline minimum global standards for IP protection covering patents (20 years), copyrights, trademarks and enforcement rules. TRIP-plus has IP rules that go beyond WTO minimum standards. 

So Foong is right - TRIP-plus benefits the investing US firms more in IP and could raise drug prices by:
- extending patent life beyond 20 years thus generics may enter later than they otherwise would..
- data exclusivity (generic companies must wait further 6-10 years to use existing clinical trial data) - cause further delay for generics.
- limiting or prohibiting parallel imports
- stronger enforcement of copyright (software, media), anti-circumvention rules.

Why the US pushes TRIP-plus. Simple reason -  the US economy is heavily weighted toward pharmaceuticals, software, entertainment and advanced tech IP. There is a strong case for people who invested heavily in original ideas, contents and discoveries to benefit from their effort.

But what the post overstates is -- this is the primary purpose of FTA (US makes more profits), it broadly makes everything prohibitively expensive, it removes policy flexibility. The reality is Singapore had already strong IP standards pre-FTA, government controls healthcare cost pricing via subsidies and procurement, many cost drivers are unrelated to FTA.

The trade-off is Singapore gets deeper integration with US economy, investor confidence, access to high-value industries and positioning as a trusted IP-safe hub.

Singapore's strategy is not cheap access to generics at all cost. But to position the country as a high-trust, high-value, innovation linked economy.

Foong's point implies IP protection is bad because it generally increases, cost to consumers and corporations reap profits. But IP can incentivise breakthroughs that later become widely accessible and transformative. For example core technologies (like VoIP, compression algorithms, networking methods) were often developed, patented and commercialised. Yet they have enabled massive downstream innovation, where platforms could build services used by billions at low cost. A very good example is VoIP (voice over internet protocols). It's a patented innovation in internet communication which has helped build the infrastructure that platforms like Whatsapp, Messenger and many others, now use to offer near-free global communication.

Claim #4: Housing prices blamed on US-SG FTA

The post claims "US government created astronomical amounts of money during the Great Financial Crisis and the Covid Pandemic and significant portions found their way here as the FTA limited our use of capital controls as well as exempting Americans from paying the 60%.ABSD"

Over-simplification and the weakest point of the article

During the 2009 financial crisis and the pandemic, countries all over the took policy steps to loosen liquidity in order to booster the economy. There were some money printing by way of Fed/central banks buying up securities (Quantitative Easing) or providing direct credit lines. Others loosen interest rates, or like Singapore, loosen exchange rates. Yet others use fiscal approach -- they borrow. Singapore dig into the reserves. The result was global liquidity. So clearly, it was not simply a case of too much USD.

Liquidity in a country drives inflation. Depending on a country's trade position, some countries imported external inflation. By managing the exchange rate well and having a good current account position in out balance of trade, Singapore kept foreign inflation at bay. 

The idea that massive over-printed USD flowed into Singapore is non-empirical and claim that this USD inflow limited our use of capital controls is strange for a country that has no capital controls.

What actually happened during a period of high global liquidity is asset revaluation. Investors do portfolio rebalancing and money flows to assets and places with better risk-adjusted ROI such as real estate and equities. During these two events, real estate adjusted upwards in places like London, Zurich, Tokyo, Toronto, Singapore, Dubai and other emerging markets. But this is better explained in the broader development of global liquidity than simply massive USD printing that flowed into Singapore.

It is true US investors are exempted from the 60% ABSD fee but the post implies (1) the US bulldozes the Singapore government over this, and (2) this by-passes cooling measures and contributes to pushing property prices up. Firstly the exemption is part of a principled model of non-discrimination clauses in standard US FTAs with many countries. This same exemption is given by Singapore not just to US but to Switzerland and Norway which has same non-discrimination clauses in their FTAs. Secondly, US, Swiss and Nowegians are not significant buyers in Singapore real estate market.

Claim #5: Asymmetry in permits for professionals

The post says "Singaporean professionals faced more competition as there was no quota for American professionals wishing to work here ..... but a cap of 5,400 was stipulated the other way round."

Conflation of immigration and trade

Again it implies an unfair treatment. But this has nothing to do with the FTA. It is labour policy. The US has a 5,400 cap for H-1B1 applicants from Singapore, that's true. But the US has caps for H-1B1 for almost every country, with or without FTAs! While Singapore has an open door policy for foreign talents, US applications are like everybody else, subject to our ICA vetting and guidelines. In the case of US corporations, by and large, they tend to bring in only their top executives. They fill mid and low level executives from the local pool to benefit from lower costs. This is unlike CECA where the FTA specifically allows Indian corporations more latitude to bring in executives from their homeland. In the case of India, there is cost advantage to bring in cheaper Indian executives.

Claim #6: Trump tariffs made the FTA meaningless

Like most Trump critics, the post argues that Trump came along and unilaterally increased tariffs, thereby making the USSFTA potentially null and void and making a mockery of the people’s sacrifice as well as slapping our government in the face."

National security is a recognised escape valve in international law

Trump imposed blanket-wide tariffs on many countries under the International Emergency Economic Powers Act. As I explained in my earlier post (see here) "the IEEPA is used for national security or emergency threats where there is broad presidential powers that sit above normal trade rules. The president declares a national emergency. Actions are justified on security grounds, not trade fairness.  FTAs are not binding. National security exceptions exist in international law where countries reserve the right to act unilaterally."

I like to expand a bit on this because this is hardly articulated by anyone. So, many Singaporeans go about to "suan seow" (insult?) local leaders as bowing to US, lacking courage to speak up. Trump actually has the legal capacity behind him and that is probably why Mr Shanmugaram and Prof Tommy Koh have not taken issue with it. The fact that SCOTUS has rejected the use of IEEPA for tariffs, which is US internal judiciary status quo, that does not negate on purely legalistic grounds, the right under international law to abrogate FTA for national security reasons.

National security exceptions are not just doctrinal. They are explicitly built into international law, but intentionally broad and only loosely constrained, making them legally valid but politically contestable tools. "National security" in international law is a real legal escape clause, but one whose boundaries are defined as much by super power and politics as by legal rules.

Most major economic treaties explicitly include national security clauses. You can find this in Article XXI of the WTO. The US-SG FTA would certainly carry such a clause. Unfortunately, what is "national security interest" is something that has come to be treated as completely self-judging. It means if "we say it's security, it's security -- period." Trump said it was US national security, that's it. The reason why it is so is because of enforcement problem -- there is no global "police" to definitively reject a security claim.

The reason "national security" exceptions remain ambiguous is simple. A strict rule in international agreements that say "you cannot act in national security interest" would simply result in all countries ignoring the law entirely. So the flexibility is build in the system to remain usable.

So in practice, major powers use "national security" exceptions quite broadly while smaller states are more cautious.

What does this mean in the context of Singapore as a small country? Singapore benefits from rules-based predictability but accepts the reality that it operates in a world where big powers invoke security flexibility. So Singapore's strategy is to respect the rules, but understand their limits. Local critics ought not to be too judgmental.

Claim #7: Singapore should have retaliated but meekly accepted the indignity

Foong says DPM Gan was meek, "did nothing except cowardly continue to observe its side of the agreement". According to Foong, "A stronger government would have at least signalled some tit-for-tat retaliation ...... to maintain its dignity".

Restraint is not cowardice, it's strategy

Machiavelli's "Fox and Lion" analogy (in his famous book The Prince) is instructive. A leader of a small country must be a "fox" to recognize traps and a "lion" to frighten wolves. This requires knowing when to use force and when to use diplomacy (restraint), rather than mindless, continuous force.

Foong suggests Gan should have retaliated against the tariff, and he is not alone amongst Singaporeans holding this sentiment. But what the post failed is explain exactly what leverage does Singapore have? Let's be brutally frank, what card does Singapore have to play. Actually I can can think of only one, and that is threaten the withdrawal of access to Changi and Sembawang ports for the US Navy. That is the only thing that matters to the US in the context of Singapore's strategic importance. In geopolitical terms, that is a terminal escalation for Singapore. It is forcing a resolution with one last chip. If that fails, there is nothing left. A failure would be inflicting irreparable self-harm in the broader scheme of our national defence interest.

As a small state, Singapore's approach is avoid escalation, instead prioritise stability, reputation as rule-abiding and long-term access. Retaliation would have minimal leverage and risks damaging broader ties.

Clause #8: Singapore makes itself a target because of US presence.

The post maintains the Middle East conflict "is clearly showing that US military presence and even their commercial assets are magnets for missiles". 

It's a debatable geopolitical argument, not a fact

The post labels it "cowardice" for refusing to retaliate on tariffs. By the same logic, rejecting credible security partnerships in the name of avoiding attention is "cowardice" in another name -- strategic naivety.

Calling US military presence a "magnet for missiles" mistakes deterrence for weakness. For a small state, the real risk is not being targeted. It is being undefended and irrelevant where coercion comes cheap. Singapore's entire defence doctrine is built on deterrence and partnerships, precisely to prevent conflict, not invite it. 

If there is an example that I can quote, it is when Philippines foolishly kicked the Americans out of Clark Air Base in 1991 and Subic Naval Base in 1992. Almost immediately in 2009, China claimed the Nine-Dash Lines and moved into the Philippines Seas.

In a world of power politics, a small state is not safer by being invisible. It is safer by being too costly to pressure and too connected to ignore. Risk of being targeted is one side of the coin, deterrence is the flip-side. The post presents only side of a trade-off.

Claim #9: Singapore is disadvantaged overall

"Ordinary Singaporeans are paying a heavy price for the USSFTA, although most are unaware. Given that both the economic and geopolitical reasons for it are crumbling, are we to still continue paying the price?"

This is the summation of the post. It sits on two debatable views

Firstly. it suggests Singapore has been disadvantaged, but data suggests otherwise. If this were true, we should be seeing reduced investment, slower growth and declining US business presence. But clearly, US remains one of Singapore's largest investors, Singapore is a major hub for US firms in Asia, and they are embedded in high-value sectors like finance, tech, and pharma. 

Secondly, it assumes great power pessimism -- that US is declining, will betray partners and small states are exploited. This is one's worldview, not evidence. In today's hate culture, narratives are emotive and exploitative and very often hold no convergence to reality. For example, in any conflict, no matter how powerful one side is, losses are to be expected. But one F-15 down, and the narrative portrays like it's a catastrophe for the US.  

CONCLUSION

The core claim is Singapore gets locked into a bad deal. But on what basis? We get some sense only when we measure ourselves against US FTAs with other like Australia, Sorkor, Mexico etc. In all these we find US consistently pushes for strong IP protections (TRIP-plus), market access to services, investment protections, limits on discrimination against US firms and access for professionals (but keeps immigration control). In other words, what Singapore got into with eyes wide open, is a standard US FTA.

In terms of geopolitics, did Singapore lose more? Singapore already had deep security ties with the US. The FTA reinforced that relationship. Australia is a formal military ally, Sorkor hosts US troops. As a non-ally but close partner, Singapore actually maintains more autonomy than treaty allies. 

Singapore's deal with US is actually quote typical, and in some ways favourable. Singapore's strategy is accept US template rules in exchange for (a) early-mover advantage in Asia, (b) preferred hub status for US firms, and (c) credibility as a rules-based economy. This evidentially worked as Singapore has become one of the top destinations for US investment in Asia.

Foong Swee Fong 21 Mar 2026
(Reprinted with permission)

One of the supposed key achievements of the Goh Chok Tong government was the signing of the US-Singapore Free Trade Agreement (USSFTA) in 2003.

It was viewed as a triumph because it would increase Singapore’s economic space given that  tariffs would be reduced to zero and investments would be better protected in both countries. 

It was also viewed as a geopolitical master stroke because it would secure the US military presence here to protect their even larger investments.

Even though trade increased after the FTA was signed, a significant portion of the trade is not trade per se, but the transfer of parts between the two countries, the so-called supply chain, taking advantage of the zero tariffs and ease of custom procedures, but nonetheless takes up valuable resources, with little value add.

Besides, trade and investment between the two countries were already significant even before the FTA. In all likelihood, it would have continued to grow, regardless.

But having signed the agreement, Singapore has to abide by its rules, with ordinary Singaporeans paying the price while big business enjoying the perks.

The most painful are the intellectual property (IP) rules because more patents were granted, on more generous terms, and stringently enforced, resulting in fewer generics, restriction of parallel imports for many products, and making it difficult to “nationalise” critical drugs, resulting in extremely expensive medicines, software, entertainment and any other products with an IP component.

By many objective analysis, this was the primary objective of the FTA for the Americans, because they couldn’t profit from intellectual property unless the government of a foreign jurisdiction is legally committed to help them prosecute “offenders” in their country - people who sell or buy copies, generics or parallel imports, other than the legal original.

Prices of property also shot through the roof making it more difficult for younger Singaporeans to buy a house. This happened because the US government created astronomical amounts of money during the Great Financial Crisis and the Covid Pandemic and significant portions found their way here as the FTA limited our use of capital controls as well as exempting Americans from paying the 60% Additional Buyer Stamp Duty (ABSD) otherwise applicable to all foreigners. (The other exceptions are Switzerland, Norway, Iceland and Lichtenstein by way of the European FTA).

Also, Singaporean professionals faced more competition as there was no quota for American professionals wishing to work here, so long as they qualified, but a cap of  5400 was stipulated the other way round. 

But, ordinary Singaporeans having been sucked dry for more than 20 years to keep our side of the bargain, President Trump came along and unilaterally increased tariffs, thereby making the USSFTA potentially null and void and making a mockery of the people’s sacrifice as well as slapping our government in the face.

And how how did our government respond? By sending DPM Gan to the US to clarify meekly how much tariff we would be charged! A stronger government would have at least signalled some tit-for-tat retaliation, at least those parts that are politically feasible, to maintain its dignity, but it did nothing except cowardly continue to observe its side of the agreement.

Bear in mind we are now the laughing stock of ASEAN as none of them signed an FTA with the US and some even criticised us for undermining the centrality of ASEAN by signing it.

So much for the GCT government’s economic reason for the USSFTA. Its geopolitical or strategic reason is even more calamitous.

As mentioned, with the signing of the USSFTA, the US would pivot more of its military attention to Singapore to protect its investments.

But the current war in the Middle East is clearly showing that US military presence and even their commercial assets are magnets for missiles, with the people and their property being collateral damage. 

So in all likelihood, our security has not been enhanced but we have been put in harm’s way.

Did the government tried to be too clever for its own good? 

Our government like to boast that they manoeuvred a round of midnight golf in Brunei between Bill Clinton and GCT in November 2000, and he made the President agree to start negotiations for the FTA “on the golf course” in an informal atmosphere, as if the US were not keen on the FTA. In all likelihood, they were keener than us as it was an opportunity to lock us in legally into a deal that was always going to be advantageous to them given their far greater bargaining power.

The fact is that weak states often times bear “gifts” to stronger states for protection, be they lop-sided free trade agreements, buying expensive military equipments with strings attached, letting them use our military bases, or sanctioning their enemies but shooting our own foot.

The US is a declining hegemon, although in no way a spent force. Nonetheless, it will likely be more desperate going forward, and will not be averse to throwing its “friends” under the bus to maintain its position. We would do well to keep our distance and not be sucked into their misguided adventures, but given the thick web of ties between the two countries, how is the PAP going to manoeuvre? Or is it going to flow with the tide, given that courage seems to be in short supply, and leave us to the mercy of fate?

The worst form of defence is to rely on outsiders because they are not committed. Even if they are successful, we become even more beholden to them, thereby losing our sovereignty. Either way, it is lose-lose.

Singapore sits in the middle of ASEAN. We would do well to take the lead to create a strong and powerful ASEAN defence bloc. Even though all states will be equal, but by taking the lead and actively organising it, we can be the de facto leader of a powerful defence bloc, thereby enhancing our security, influence and power.

Ordinary Singaporeans are paying a heavy price for the USSFTA, although most are unaware. Given that both the economic and geopolitical reasons for it are crumbling, are we to still continue paying the price?

 ……………… End …………….

(Circumstantial evidence suggests that the President went back to his hotel after the golf game with GCT and had a hot bath with an unknown person but unfortunately for him, was photographed by Epstein, although this, in all probability, has nothing to do with us, and is unrelated to our topic).

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