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S'pore must speak up for free trade, deepen and widen global links
FEW would disagree that keeping trade and investment flows free is key, not just to Singapore’s prosperity, but also to its very livelihood. Yet, like the air we breathe, this is often taken for granted.
The "dark shift in mood" away from globalisation and the rising tide of trade protectionism in the past year, as the Committee on the Future Economy (CFE) observes in its report, is thus a wake-up call for Singapore.
"The strategic imperative for free and open markets remains as important as ever, for Singapore and the global economy," it says. "The free movement of goods, services and investments enables efficient specialisation and rising living standards around the world." The CFE cannot predict which industries will succeed tomorrow, but its 133-page report says one thing is for sure: Singapore must stay open to trade, talent and ideas.
The knee-jerk reaction to the threat to one's rice bowl is to reach out for cover to ward off the danger. This defensive gesture is only natural, but the report says Singapore must not only focus on resisting protectionism; it must go on the offensive to connect with overseas partners and seek opportunities in new markets - especially in Asia. "Our public officials, businesses and individual citizens should build strong ties with their overseas counterparts, and strengthen economic cooperation with other countries and regions through specific projects."
If followed through, such moves should deepen and diversify Singapore's global connections - which is one of seven strategies the CFE has identified to achieve yearly growth of 2-3 per cent on average for Singapore, faster than most advanced economies.
Of course, Singapore must at the same time still work to keep protectionism at bay. "We (also) need to lean against trends that threaten to make our world more inward-looking and protectionist," the report says. In fact, with trade so key to Singapore's economy - which derives two-thirds of its gross domestic product (GDP) from external demand, it says Singapore must continue "to work with like-minded partners to advance the liberalisation of trade and investment". These should include partners in less traditional markets seeking to plug into the global economy.
Selena Ling, Treasury & Strategy Research head at OCBC Bank, agrees: "Singapore will essentially have to continue to keep up a brave front and push on with free trade and investments, notwithstanding the US pushback on the TPP (Trans Pacific Partnership trade deal) after President Donald Trump's victory." The bad news about the US's withdrawal is that it may signal more such moves to come. France's election this year, for instance, may usher in a right-wing, inward-looking government that follows in the US's footsteps.
But Trade and Industry Minister Lim Hng Kiang says that the US's move for now, while a "setback", will not have a big impact on Singapore. After all, as some private-sector economists point out, Singapore has been importing more goods and services than it exports to the US.
In any case, Singapore still has a bilateral free-trade pact with the US - one which the US isn't about to abandon. In fact, it is what the new US president prefers.
While the US remains one of Singapore's top 10 trading partners, it now accounts for a smaller chunk of Singapore's total trade. On the other hand, China, which is tipped to overtake the US as the world's biggest economy, has become Singapore's biggest market and trading partner. And China remains a free trader, says Irvin Seah of DBS Bank and Song Seng Wun of CIMB Bank. Many fast-growing economies, especially those in Asia, still embrace free trade, says Mr Seah. They are the ones Singapore should seek out in order to turn the tide of protectionism and push for greater openness in trade and investments. Singapore should also capitalise on the region's fast-growing and huge markets to draw Europe to the free-trade camp, he adds.
Mr Song says: "So Singapore should speak louder (for free trade), fly the flag higher and stand next to big brother China."
This raises the question: Can tiny Singapore champion trade and sway others to join the free-trade camp?
Francis Tan of UOB Bank believes Singapore has the clout to punch above its weight. Though small, the Republic is among the top 15 trading nations in the world, which means it can leverage its buying and selling power to get its way.
Mr Tan and Mr Song also point to the Singapore "brand" name, which speaks of a highly successful and can-do nation, one that commands respect - and listening ears - globally. Mr Tan adds that many trading nations and multinational corporations depend on Singapore's efficient system and hub services to do business, not just in the region, but worldwide as well.
Singapore could deploy these soft powers to do what the CFE report says it should do: Help preserve a rules-based trading system "to ensure certainty and consistency in trade relations".
"As a member of the World Trade Organization, we should continue to do our part to strengthen the multilateral trading system," the report says. It calls on Singapore to boost trade cooperation and reduce tariff and non-tariff barriers to trade through initiatives and platforms such as the Regional Comprehensive Economic Partnership (RCEP), Asia- Pacific Economic Cooperation (Apec) and the eventual Free Trade Area of the Asia-Pacific (FTAAP).
The report says the Asean Economic Community, rolled out in 2015, will make Asean a compelling market and competitive production base, enabling companies to expand into the region at lower costs. "As Asean chair in 2018, Singapore can help to advance economic integration within the regional bloc and with its key partners." The report adds that Singapore needs to reinforce the regional trade architecture to back digital businesses and data flows, like in building mutual recognition of data-protection standards. The report further recommends that Singapore:
- press on with developing specific projects with key trading partners, such as the industrial and business parks in India, Indonesia and Vietnam and the township projects in China;
- boost its collaboration with multilateral institutions such as the World Bank and Asian Development Bank and new institutions such as the Asian Infrastructure Development Bank; and
- work with local trade associations and chambers as key multipliers to share insights and galvanise industry to support the efforts to deepen and diversify Singapore's global connections.