US baseline 10% tariff not ideal but Singapore ‘can live with it’: PM Wong
The country must ‘take the world as it is’ but can still shape its own destiny, he says
[SINGAPORE] While the US’ baseline tariff of 10 per cent is not ideal, it is a rate Singapore “can live with”, said Prime Minister Lawrence Wong on Tuesday (Jul 29).
While zero tariffs are preferred, the baseline rate is the lowest category, he noted. “We can live with it, and we can still do business.”
There will still be many opportunities for trade and investment with the US, PM Wong added.
Even as Singapore must “be realistic and take the world as it is”, it can also shape its own destiny, he said at a dialogue at an SG60 conference held by the Institute of Policy Studies (IPS) and Singapore Business Federation.
Beyond tariffs, the US is pulling back from upholding the global order, leading to a messier world with no leadership, he noted.
Asked by moderator and IPS director Janadas Devan if Singapore is helpless, PM Wong said: “There is not much we can do to change these large, powerful forces, but, at the same time, we are not passive bystanders.”
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Singapore has the agency to shape its own destiny, he said. It can work to strengthen multilateral institutions; deepen partnerships bilaterally and in different groupings; and focus on Asean.
On partnerships, Singapore is pushing for ties between the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union. This is gaining traction, said PM Wong, adding that he hopes the partnership can be formalised.
In Asean, more can be done to strengthen integration, remove non-tariff barriers and create a single market.
“If we can remove all the unnecessary distractions like border issues and make sure that we have peace and stability to focus on concrete initiatives that can bring Asean together, we can make progress.”
Asean’s per capita gross domestic product is low at under US$6,000, but if it rises to US$10,000 or more, that would be “a complete game changer for the region”, he added.
Replying to an audience question about Asean’s growing income gap, PM Wong said “it does help when you have a bigger pie”.
Individual countries will have to try to uplift the poor, he added, noting that Singapore can share best practices as it has also tried hard to reduce income inequality.
The real benefits of AI
To a question on artificial intelligence (AI), PM Wong said Singapore “should not rush headlong into AI”, but harness it to benefit rather than replace workers.
Frontier technology may be impressive, but the true benefits come with broad-based adoption, and Singapore must think about how to encourage this, he said.
“Most of us use AI the way we use Google – that’s not exactly the best way to use AI or to harness the potential of AI,” he added. More can be done, and the government aims to help businesses tap AI for transformation and productivity.
Acknowledging concerns about jobs, he said history has shown that “jobs will disappear, existing jobs will evolve, but new jobs will get created” with new waves of technology.
Yet history may not guide the future, given how powerful AI is, he added. “We also have to think equally hard about applying AI in a meaningful and deliberate manner that creates jobs for Singaporeans.”
Navigating the changed world will be a theme of the upcoming National Day Rally in August, said PM Wong. This is not just about immediate uncertainty, but preparing for the longer term.
Some Singaporeans feel that “the big moves have all been done because we went from Third World to First”, and that the country cannot advance much further, he noted. “It’s a misconception.”
That journey was a dramatic one, and that magnitude of change cannot be achieved again – at least not without going back down.
Yet, there is still room for Singapore to progress, he concluded. “We should not ever think that the era of bold moves is over, but we have to take the same mindset of our pioneers, think boldly and chart a new way forward for Singapore that will continue to secure Singapore’s future (and) keep Singapore exceptional.”
Backlash against globalisation
At a separate panel discussion, former central bank managing director Ravi Menon said that sound economic and social policies are the most important enabler for globalisation.
“Much of the backlash against globalisation... has been primarily due to the failure of domestic policies to upskill the local workforce, to bring in new investments, to strengthen local spillover effects and spread the benefits consciously,” said Menon, who is now Singapore’s ambassador for climate action and IPS’ ninth SR Nathan Fellow.
Governments must get this right in the next phase of globalisation, he said. “There is no global integration without domestic integration.”
Smaller European countries such as Switzerland, Denmark and the Nordic countries, as well as Singapore, have done a “decent” job at this, he added.
While staying open, Singapore has also reinvested in and reskilled its workers, he noted. Similarly, Denmark has active labour market policies with training and career facilitation.
“A strategy of protecting workers and equipping workers and empowering workers is much more resilient... than trying to protect jobs, which are going to be under pressure anyway.”
Global talent must also be integrated into society, he added.
“We need to pay a lot more attention to domestic, economic and social policies in every country and not take a laissez-faire attitude towards what the outcome of globalisation is going to be.”
Updating trade frameworks
The global trade playbook must also be updated for the new century, said International Chamber of Commerce secretary-general John Denton.
In the event’s keynote address, Denton noted that the World Trade Organization was created about a year and half after the Internet went public. Today, 30 years later, its member states still have not updated the rulebook for e-commerce.
The private sector has evolved, and so must trade policy and global trading systems, he said.
Meanwhile, the private sector should also be engaged in trade policy, he added, noting that many such negotiations do not involve the “end user”.
He cited a study led by the National University of Singapore, which found that only 29 per cent of Singapore firms have obtained a rules-of-origin certificate under at least one trade agreement.
When making policies, the government should engage the private sector much more, he said.
“Politicians will often argue that it’s very hard: the private sector has its interests, and they can be selfish. But the reality is that the private sector is the key driver of opportunity.”
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