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Trade negotiations

Robert Zoellick, the United States Trade Representative, looked pleased. After two years of talks with Singapore to forge a free-trade agreement, the end was in sight - or so it seemed.

Mr Zoellick and his Singapore counterpart, George Yeo Yong-Boon, said late last month that a final push had tied up almost all the loose ends. The pair praised the agreement, saying it promised to boost trade.

A good deal is at stake. For the US, the agreement will be a first with an Asian country and could form a template for others.

For Singapore, the pact could add seven tenths of a percentage point a year to gross domestic product, an inviting prospect as growth falters.

But the last-minute drive failed to resolve one especially thorny issue, which Singapore's lead negotiator, Tommy Koh, says could be a 'deal-breaker' if it is not solved.

The impasse centres on international rules governing the movement of capital in times of crisis.

Singapore wants to retain the right - endorsed by the International Monetary Fund and the World Bank - to restrict money flows to help cope with any financial emergency. Washington, by contrast, wants the city-state to waive its ability to act as gatekeeper.

'We are not comfortable,' Mr Yeo said of the US stance, which has raised eyebrows. Memories of the Asian financial crisis remain fresh. Even though Singapore's economy was sound, it was caught up in the chaos affecting its neighbours.

An economist said the disputed right represented an important tool for Singapore, with its relatively small economy - a stance echoed by the conservative Straits Times.

'One of the most enduring lessons of the 1997 crisis is that financial contagion and capital flight cannot be ruled out . . .' it said. 'There is too much at stake for them to let their differences over this point scuttle the entire trade deal.'

Talks remain open and it will be interesting to see who backs down.

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