Cablegate: Singapore Encourages U.S. Involvement in P4, Hopes for P8

VZCZCXRO7493
RR RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHGP #0961/01 2520950
ZNR UUUUU ZZH
R 080950Z SEP 08
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 5720
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 SINGAPORE 000961

SENSITIVE

SIPDIS

STATE PASS USTR

E.O. 12958: N/A
TAGS: ETRD ECON APEC SN

SUBJECT: SINGAPORE ENCOURAGES U.S. INVOLVEMENT IN P4, HOPES FOR P8
NEGOTIATIONS IN 2009

1. (SBU) Summary: Singapore MTI Minister Lim Hng Kiang told Deputy
USTR Veroneau, joined by the Ambassador, that a window had opened to
broaden the multilateral "P4" trade agreement to other countries,
and that U.S. participation would energize the process. Lim
stressed the high value that Singapore places on establishment of a
regional architecture that includes the United States and a blend of
large and small, developed and developing economies. Lim also
echoed the U.S. view that any regional architecture should be based
on high standard agreements such as the U.S.-Singapore FTA, while
acknowledging that such a broad undertaking with a diverse set of
countries would necessarily temper ambition. He said Singapore
hopes to use the P4 agreement as a pathway to a broader Free Trade
Agreement of the Asia/Pacific, and that it would ultimately balance
economic goals with the considerable political/strategic benefits an
expanded P4 would produce. He cautioned that without U.S.
engagement in a regional agreement, the architecture would follow
China's "model," based on an overtly political agenda. Lim
considers Japan to be a good candidate to join the agreement, but
was unsure the Japanese could soon commit to serious negotiations.
Australia, Thailand, Peru and Vietnam may show interest in joining
the negotiations later this year if the U.S. makes a decision this
September to participate. End Summary.

2. (SBU) In an August 21 meeting, Minister of Trade and Investment
Lim Hng Kiang told Deputy USTR John Veroneau, joined by the
Ambassador, that Singapore was fully supportive of U.S.
participation in the Trans-Pacific Strategic Economic Partnership
Agreement, a free trade agreement among Singapore, Chile, New
Zealand and Brunei also known as the P4 agreement. Lim said that
U.S. participation would change the dynamic of the agreement,
turning it from a relatively minor trade agreement into a
potentially much broader multilateral agreement. Lim said that
Singapore attached great importance to the United States joining the
agreement and promised that a Singaporean government Minister would
be available for further discussions with the United States prior to
our finalizing our decision.

3. (SBU) Ambassador Veroneau told Minister Lim that the U.S. wanted
the P4 to "take off" and become something larger that would stretch
across the Pacific. However, the initial reaction among many U.S.
stakeholders was that the trade benefits from joining an FTA with
the P4 countries would be relatively small, and that the "gold
standard" FTAs already in place with Singapore and Chile could be
weakened. There was stronger interest among stakeholders in a
broader agreement that would include other significant trading
partners. Amb. Veroneau said that the USG was aware of the
challenges posed by U.S. demands for gold standard FTAs, but was
confident this exercise would lead to a high standard agreement.

4. (SBU) Lim confirmed that Singapore shares the U.S. goal of high
standard trade agreements, whether they are bilateral, regional or
large multilateral undertakings. Lim acknowledged that elements of
the existing P4 Agreement would need to be strengthened to meet the
definition of gold standard. Lim offered a frank assessment of
Singapore's views on the economic, and political/strategic
importance of shaping the P4 agreement into an alternative
architecture, including the United States and other Pacific Rim
countries, in order to balance the existing China-led approach
through the ASEAN Plus 3. Lim posited that broadening the P4 to
include other countries would inevitably lower the ambition of the
agreement from an economic standpoint, but said Singapore placed
great weight on the strategic and political benefits such an
agreement would bring to the country and the region. "We can't just
be rich and not safe," Lim said. At the outset of the meeting Lim
was very forthcoming that Singapore believes that APEC members
should not wait too long before taking steps to realize the vision
set out in the Free Trade Agreement of the Asia/Pacific (FTAAP).
Singapore sees the P4 Agreement as a viable precursor to the FTAAP.

5. (SBU) Lim said that without strategic leadership by the United
States on arrangements like the P4, China would begin to dominate
the region in an ASEAN Plus Three framework that would include Korea
and Japan, but with China in the lead. Lim said that although
Singapore worked well within the ASEAN Plus Three framework, it
preferred to include the United States, Japan, Australia and
eventually India in an ASEAN framework. In Lim's opinion, China
viewed trade agreements primarily through a political lens, pursuing
early harvest agreements and then slowly broadening them to include
more goods and later services, "giving everyone a little slice of
salami." Korea and Japan struggle to keep up with China, and in
reality, Lim said, Singapore faced an ASEAN Plus One -- China.

Broadening the P4
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SINGAPORE 00000961 002 OF 002

6. (SBU) Lim said that the APEC timetable gave P4 participants a
convenient window to broaden the agreement. With possible partner
Peru as APEC host this year, followed by Singapore, Japan and the
United States, there would be opportunities to build momentum and
move the process along. Lim hoped that if the United States
committed in September to join negotiations, other countries could
be lined up in November during APEC meetings in Lima. Within six to
nine months Lim believed there would be varying levels of commitment
from other countries, sufficient for a P8 to begin negotiating
seriously. Ambassador Veroneau suggested using the APEC schedule to
set deadlines for more definitive responses from other potential P4
participants.

7. (SBU) Ambassador Veroneau said that interest in participation by
Japan was unclear and surmised the Japanese might be interested in
being involved in the negotiation process but without fully
committing. Lim said that he considers Japan to be a good candidate
for inclusion in a wider P4 agreement but that Japanese enthusiasm
was not high. Japan's business lobbies and other concerns
outweighed the political and strategic advantages in joining the
agreement. Lim said that Minister Nikai of the Ministry of Economy,
Trade and Industry would be in Singapore in late August and that he
would discuss the agreement further with him. However, he believed
Japan would not be able to make a decision on the P4 before
December. Lim said that Japan needed time to work through political
issues, but would need to show a strong level of commitment to begin
negotiating seriously, and couldn't simply "dip their toes in the
pool to see if the temperature was right." Ambassador Veroneau
responded that if the U.S. commits to the P4 process soon it would
expect Japan to be ready to "jump in the pool" within six to nine
months.

8. (SBU) Lim suggested that without firm Japanese commitment, "Plan
B" would be to include an announcement by Australia during the
November Lima APEC Leaders' meeting. Australian participation would
provide fewer gains in market access, since Singapore and the United
States already have FTAs with Australia. However, Australian
participation would also raise the ambition of the P4 more than
would Japan, and would still add another APEC member to the P4. Lim
said that other APEC economies, developed and developing, should
also be considered for inclusion. Lim specifically mentioned
Vietnam, Thailand and Peru. Singapore had discussed the agreement
with Vietnam, but saw the Vietnamese as currently distracted by
other economic problems including high inflation. Lim believed the
Thais were too distracted by ongoing political difficulties to focus
on the P4. In a separate meeting, MTI PermSec Peter Ong said Peru
could be willing to announce participation in the P4 in November
during its hosting of APEC meetings in Lima.

9. (U) Ambassador Veroneau cleared this cable.
HERBOLD

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