SINGAPORE, Feb 17 (Reuters) - Australia signed its first free trade deal in 20 years on Monday, sealing a pact with Singapore that provides tariff-free access to S$9.9 billion ($5.65 billion) of trade. The agreement gives Australia a foothold in Asia for its banking, legal and educational service industries, while putting Singapore businesses, which often include a large element of government ownership, on a more even playing field. "The objective of the FTA is to make Singapore the northern extension of Australia into Asia," the city-state's trade minister, George Yeo, said after signing the deal, which is expected to become effective by the middle of the year. Both Singapore and Australia already run open, market economies with well-established legal systems, making tariff-free entry of goods a small part of the overall deal. Singapore estimates it will save only S$31.6 million from the tariff concessions in the deal, based on its current trade level of about S$2.6 billion. But it took the countries over two years of negotiations to get an agreement which answered each side's demands for access on the fast-growing services sector. The final document includes provisions to ease curbs on wholesale banking licenses, allow mutual recognition between architects and engineers and a doubling in the number of law degrees recognised in Singapore to eight from four. There is a whole section on telecom services, ensuring that one of Singapore's largest investments in Australia, the S$13 billion purchase of Optus by Singapore Telecommunications Ltd , is treated fairly in its dealings with the dominant local carrier Telstra Corp . The provision includes greater controls over the conduct of Telstra, majority-owned by the Australian government, including a deal to resolve interconnection disputes within six months. Rules governing the origin of exports allow Singapore-made goods to qualify for tariff-free status even if part of the manufacturing is done elsewhere.
TRADE DEALS KEY Singapore, which is struggling to emerge from its worst recession since independence in 1965, faces huge challenges from the rise of China and, to a lesser extent, India and has identified free trade deals as key to secure its future. It expects to sign a free trade deal with the United States later this year and already has agreements with Japan, New Zealand and the four-nation European Free Trade Area, which includes Norway, Iceland, Switzerland and Liechtenstein. Australia, in addition to its 20-year Closer Economic Relations Agreement with New Zealand, is also exploring free trade deals with Thailand and the United States. Both Australia and Singapore are keen to paint their deal as consistent with the World Trade Organisation's (WTO) Doha free trade round. "Our number one trade priority is a successful outcome of the Doha trade negotiations," said Australian Trade Minister Mark Vaile. But Vaile added: "We're not prepared to walk at the pace of the slowest common denominator, nor is Singapore." "This is an opportunity to move a bit ahead and show others what can be done," he said. ($1=S$1.75)