5. Significant Barriers to U.S. Exports

Singapore has one of the world's most liberal and open trade regimes. Nearly 99 percent of imports enter duty free. Import licenses are not required, customs procedures are minimal and highly efficient, the standards code is reasonable and the government actively encourages foreign investment. All major government procurement is by international tender. The Government ratified the Uruguay Round GATT accord on October 18, 1994.

Singapore maintains some market access restrictions in the services sector. Local retail banking is limited to those foreign banks with full or restricted licenses-the Monetary Authority of Singapore has issued no new ones to foreign or domestic banks since 1970, as it considers Singapore over-banked. Foreign banks hold over half the retail licenses. Foreign retail banks are not allowed additional branches or ATM machines although local banks are allowed to expand. No new licenses for direct (general) insurers are being issued, although re-insurance and captive insurance licenses are freely available. Foreign companies hold about three-quarters of the 58 direct insurance licenses. Foreign securities firms are not permitted to have full membership in the Stock Exchange of Singapore.

The telecommunications sector has been steadily liberalized since 1989. There are no restrictions on the sale of telecommunications consumer goods except that they must meet the technical standards set by the Telecommunications Authority of Singapore (TAS). Provision of value-added network services (VANS) have also been liberalized. Newly listed on the stock exchange, Singapore Telecom's monopoly to provide basic telecommunication services will end in 2007.

6. Export Subsidies Policies

Singapore does not subsidize exports although it does actively promote them. The government offers significant incentives to attract foreign investment, almost all of which is in export-oriented industries. It also offers tax incentives to exporters and reimburses firms for certain costs incurred in trade promotion, but it does not employ multiple exchange rates, preferential financing schemes, import-cost-reduction measures or other trade distorting policy tools.

7. Protection of U.S. Intellectual Property

Singapore has taken concrete measures in recent years to improve its level of intellectual property protection. Singapore recently became a member of the World Intellectual Property Organization (WIPO), and has already ratified the Uruguay Round Accord including the TRIPS provisions. Singapore is not a party to the Berne Convention or the Universal Copyright Convention. In 1987, following close consultation with the U.S. Government, Singapore enacted strict, comprehensive copyright legislation which relaxed the burden of proof for copyright owners pressing charges, strengthened civil and criminal penalties and made unauthorized possession of copyrighted material an offense in certain cases. In January 1991, Singapore similarly strengthened its Trademark Law. In 1994 Singapore enacted a new Patents Act.

Problem Areas

Patent Law: Singapore enacted a new Patents Act in October 1994 which was designed to introduce local patent registration (previously patents had to be registered in the United Kingdom before being registered in Singapore). U.S. companies dislike several provisions of the new law (chiefly in the compulsory licensing area) and a number of provisions do not conform to the TRIPS agreement. The Singapore government has pledged not to invoke the new compulsory license provisions, and has promised to bring the patent law into full compliance with TRIPS provisions within the next several years.

Copyrights: The problem of pirated computer software in Singapore has significantly lessened in the past year as the government has taken a more active stance. In response to concern expressed by the U.S. government and several intellectual property protection associations, Singapore markedly stepped up enforcement of copyright protection in 1994, including government prosecution of one case which resulted in a felony conviction and jail sentence. As a result of stepped up enforcement, copyright infringement in the computer and software areas has been significantly reduced in 1994. In response to motion picture and phonographic industry complaints that the Singapore government is not doing enough to stem the importation and transshipment of pirated videos and compact disks, Singapore's Board of Censors has begun to screen for pirated materials before issuing censorship seals. Industry associations have estimated losses due to compulsory licensing provisions of the patent law total approximately US $5 million. Software piracy losses have been significantly reduced since last year when the industry loss estimate was US $32.2 million. We have no industry estimates for this year.

8. Worker Rights

Article 14 of the Singapore's constitution gives all citizens the right to form associations, including trade unions. Parliament may, however, based on security, public order, or morality grounds impose restrictions. The right of association is delimited by the Societies Act and, labor and education laws and regulations. In practice, communist labor unions are not permitted. Singapore's labor force numbered 1.64 million in 1993, with some 236,000 workers organized in 85 trade unions. Ninety-nine percent of these workers in 80 unions are affiliated with an umbrella organization, the National Trades Union Congress (NTUC), which has a symbiotic relationship with the government. The NTUC's leadership is made up mainly of Members of Parliament belonging to the ruling People's Action Party (PAP). The Secretary-General of the NTUC is also an elected Minister without Portfolio in the Prime Minister's Office.

The Trades Union Act authorizes the formation of unions with broad rights. Collective bargaining is a normal part of labor-management relations in Singapore, particularly in the manufacturing sector. Collective bargaining agreements are renewed every two to three years, although wage increases are negotiated annually.

Under sections of Singapore's Destitute Persons Act, any indigent person may be required to reside in a welfare home and engage in suitable work. The Government enforces the Employment Act which prohibits the employment of children under 12 years and restrict children under 16 from certain categories of work. The Singapore labor market offers relatively high wage rates and working conditions consistent with international standards. However, Singapore has no minimum wage or unemployment compensation. Because of a continuing labor shortage, wages have generally stayed high. The government enforces comprehensive occupational safety and health laws. Enforcement procedures, coupled with the promotion of educational and training programs, reduced the frequency of job-related accidents by one-third over the past decade. The average severity of occupational accidents has also been reduced.

U.S. firms have substantial investments in several sectors of the economy, including petroleum, chemicals and related products, electric and electronic equipment, transportation equipment, and other manufacturing areas. Labor conditions in these sectors are the same as in other sectors. The growing labor shortage has forced employers mainly in the electronics industry to hire many unskilled foreign workers. Over 360,000 foreign workers are employed legally in Singapore, 22 percent of the total work force. The government controls the number of foreign workers through immigration regulation and through levies on firms hiring them. Foreign workers face no legal discrimination, but, because they are mostly unskilled, they are general paid less than Singaporeans.

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993

11994 figures are estimates based on data from the Directorate General of Budget, Accounting and Statistics, or extrapolated from data available as of September 1994.

Yearly average of the prime rate listed by the Bank of Taiwan.
Average of figures at the end of the month.

Taiwan Ministry of Finance figures for merchandise trade.
"Outstanding debt owed. AID disbursements stopped in 1968.

1. General Policy Framework

Over the past four decades, Taiwan has produced one of the world's major economic success stories, achieving annual economic growth averaging nine percent between 1952 and 1993. Real gross national product (GNP) increased six percent in 1993 and is expected to expand by another six percent in 1994. Per capita GNP was $10,553 in 1993. Taiwan holds foreign exchange reserves of about $91 billion, more than any country except Japan. Prices rose 2.9 percent in 1993 and are expected to rise about 3.5 percent in 1994.

Taiwan's increasing economic prosperity has been accompanied by a major structural transformation. Appreciation of the New Taiwan Dollar (NTD) and rising labor and land costs have led many manufacturers of labor intensive products such as toys, apparel and footwear to move offshore, mainly to southeast Asia and mainland China. Industrial growth is now concentrated in capital and technology intensive industries such as petrochemicals, computers, and electronic components, as well as consumer goods industries such as food processing. Taiwan's economy continues to be export oriented, with exports accounting for 44.5 percent of GNP. In the past several years, GNP growth has been driven by increases in domestic consumption, increased public spending on infrastructure, and private investment.

Falling official savings and growing public expenditures have caused public debt to increase steadily. This has compelled the local authorities to rely more on bonds and bank loans to finance major expenditures. Consequently, outstanding public debt has climbed, fast reaching almost 109 percent of the total central budget for Taiwan's fiscal year of 1995 (July 1, 1994 to June 30, 1995). While defense spending still accounts for the largest share of public expenditures, it is falling in both absolute and relative terms. The greatest pressure on the budget currently comes from growing demands for social welfare spending.

In the course of multilateral General Agreement on Tariffs and Trade (GATT) negotiations, Taiwan has committed to liberalize its trading regime in many sectors: manufactured products, agricultural products, and services. Taiwan hopes to accede to the GATT and its successor organization, the World Trade Organization (WTO), by early 1995.

2. Exchange Rate Policy

Taiwan has a floating exchange rate system in which bankers and their customers set rates independently of the authorities. Taiwan authorities, however, control the largest banks authorized to deal in foreign exchange. Foreign banks account for onequarter of foreign exchange business, and the number of private domestic banks obtaining permits for foreign exchange dealing is increasing steadily. The exchange rate has been fairly stable at about one U.S. dollar equals 25-27 NT dollars since the major appreciation from one U.S. dollar equals 40 NT dollars in 1985.

The Central Bank of China (CBC) intervenes in the foreign exchange market when it feels that speculation or "drastic fluctuations" in the exchange rate may impair the normal function of the market. Two tools the CBC uses to influence the foreign exchange market are restrictions on banks' overbought and oversold positions and limits on the foreign liabilities banks can incur. Trade-related funds flow freely into and out of Taiwan, although the CBC maintains restrictions on the movement of funds in capital accounts. In the past year the local authorities have, however, relaxed a number of restrictions on capital account transactions. 3. Structural Policies

The Taiwan authorities have committed themselves to further reducing state direction of the macroeconomy and to pursuing a policy of privatization. At present, however, large state-run enterprises still account for nearly one-third of the economy. Electricity, water, petroleum products, transportation, sugar, steel, the domestic production of cigarettes and alcoholic beverages, and banking are all either partly or entirely in the hands of state-owned firms. To meet the goal of accession to the GATT, the authorities said they will reduce the scope of state control by permitting private firms to generate up to 20 percent of electricity. A private firm has already begun to build a naphtha cracker.

Pricing is generally left to the private sector, but is distorted by high tariffs on some sectors. The authorities have set up the Fair Trade Commission to thwart noncompetitive pricing systems, but state-run firms can apply on a case-by-case basis to obtain five-year exemptions.

In March 1994, the Taiwan authorities cut tariffs on industrial products at the behest of the United States, the latest in a series of tariff cuts Taiwan has implemented in recent years. The authorities have not, however, reduced tariffs on another 758 items requested by the United States. Taiwan's tariff and pricing structure on agricultural products in particular pose obstacles for U.S. exports, with tariffs on some agricultural goods running as high as 40-50 percent, and imports of products such as rice, peanuts, small red beans, sugar, chicken meat, duck parts and some pork products being banned. Retail food prices are higher than those that would prevail in a more liberalized market due to high import duties, commodity taxes on diluted fruit and vegetable juices, protected agricultural production, and an inefficient distribution system characterized by layers of high markups. The Taiwan Tobacco and Wine Monopoly Bureau (TTWMB), which has a monopoly on the do

mestic production of cigarettes and alcoholic beverages, guarantees artificially high prices for tobacco, rice, grapes, and other products.

4. Debt Management Policies

Taiwan is virtually free of foreign debt. By the end of June 1994, Taiwan's long term outstanding external public debt totaled $389 million, compared to gold and foreign exchange reserves of nearly $96 billion. These international reserves suffice to meet Taiwan's capital requirements for 15 months of imports. Taiwan's debt service payment in 1993 totaled $1.8 billion, accounting for only 1.9 percent of exports of goods and services. With these huge international reserves in hand, Taiwan's central authorities and state-owned enterprises see little need to incur foreign debt, even with the spending anticipated for the six-year national development plan and growing demands for domestic welfare spending. As of June 30, 1994, the outstanding external public debt accounted for less than one percent of the central authorities' total outstanding public debt.

Loans committed by the Taiwan authorities to the world exceeded $1 billion at the end of 1993. This number includes credit supplied by the Ministry of Foreign Affairs and the International Economic Cooperation Development Fund (IECDF) but does not include credit from state-owned banks. In 1993 and 1994, the IECDF offered low-interest loans to the Philippines to convert Subic Bay into an industrial zone. Through a relending arrangement, it provided low-interest loans to Vietnam to build highways and industrial parks and finance small business firms' imports from Taiwan. Taiwan has also made contributions to the Central American Bank for Economic Integration, European Bank for Reconstruction and Development, and Asian Development Bank (ADB). In addition, the ADB has floated bonds in Taiwan. 5. Significant Barriers to U.S. Exports

The persistent U.S. trade deficit with Taiwan has been steadily shrinking. Taiwan's accession to GATT/WTO will open markets for goods and services in which the United States is competitive but will also remove area restrictions which favored U.S. suppliers by restricting some other nations' imports to Taiwan.

Import licenses: On July 1, 1994, Taiwan simplified its import procedures for its 8,500 import categories by implementing a negative list. This list increases the percentage of import categories exempt from controls from 34 percent to 85 percent. There are 765 items that require approval documentation from relevant authorities for Customs examination during customs clearance. Another 474 items are imported under special conditions: 320 items require import permits from the Board of Foreign Trade (BOFT) and 154 require pro forma notarization by banks. Imports are banned for 247 items, including ammunition, rice, chicken meat and some fruits (bananas, papayas, guavas, pineapples and mangoes).

Services Barriers: In the past one and a half years, Taiwan has removed many discriminatory limits on foreign securities firms, insurance companies, and banks, including those affecting branching, NT dollar deposits, and scope of business. Remaining services barriers include:

Financial: The local authorities limit foreign ownership of securities investment and trust companies, local brokerage firms dealing in offshore futures, and local companies listed on the Taiwan Stock Exchange (TAIEX). Foreign individuals are prohibited from trading in shares on the TAIEX.

Legal: Foreign law firms that wish to operate in Taiwan must either set up as a consulting firm or enter into a partnership with a local firm.

Insurance: Taiwan prohibits mutual insurance companies. Under current regulations, setting up a branch for a foreign newcomer can be a lengthy process: the foreign applicant must have one year of experience in Taiwan as a representative office before applying to become a branch, and it needs five years of experience dealing with Taiwan before it can establish a representative office.

Transportation: Taiwan does not permit foreign ocean carriers to truck containers to their ultimate destinations on the island.

Telecommunications: U.S. firms are not allowed to provide basic or "type II" value-added network (VAN) services such as information storage and retrieval, information processing, remote transactions, and electronic data interchange.

Motion Pictures: Taiwan restricts the import of foreign film prints to 24 per title (up from 16 as of October 1, 1994). No more than nine theaters in any municipality may show the same foreign film simultaneously.

Standards, Testing, Labeling, and Certification: Taiwan has committed to join the GATT Code on Technical Barriers to Trade as part of its GATT/WTO accession process. Among the existing requirements which particularly affect U.S. products are those pertaining to agriculture. Taiwan's lack of an internationally accepted set of pesticide tolerance levels for imported fruits and vegetables sometimes impedes