The agreement is expected to start a sweeping liberalisation of trade in goods and services and enhance the protection of intellectual property rights.

Both nations have completed the legal and administrative requirements to implement the accord, signed in May between President George W. Bush and Prime Minister Goh Chok Tong, the trade ministry said in a statement.

From January 1, 78.7 per cent of Singapore goods will immediately enjoy duty-free entry into the United States, rising to 92 per cent within four years.

All US goods entering Singapore will be duty-free with immediate effect. Singapore will also further open up its economy to American companies.

Initial estimates show the island-state will save between 200 million and 300 million Singapore dollars (118 million and 176 million US dollars) as a result.

"Together with enhanced investor protection, ease of entry and operation for investors and improved commitments in the services industries, the (agreement) will make it more attractive for US companies to invest in Singapore," the trade ministry said.

"Similarly, the (agreement) will make it easier for Singapore-based companies, including (small and medium enterprises), to invest in the US."

Raymond Lim, Singapore's minister of state for foreign affairs and trade and industry, has said the FTA will boost Singapore's gross domestic product (GDP) by 0.5 per cent.

He said the agreement is also likely to encourage hundreds of American companies to open regional offices in Singapore and use the city-state as a springboard for expansion into the Asian market.

There are already 1,300 American companies and 15,000 US nationals in Singapore, where private US investment is estimated at more than 27 billion US dollars. Two-way trade is estimated at 34 billion dollars.