Business and Economics Growth Related Questions

Singapore's Trade Policies: Priorities and Options

Author(s): Margaret Liang

Source: ASEAN Economic Bulletin , April 2005, Vol. 22, No. 1, Revisiting Trade Policies in Southeast Asia (April 2005), pp. 49-59

Published by: ISEAS - Yusof Ishak Institute

Stable URL: https://www.jstor.org/stable/25773843

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at https://about.jstor.org/terms

ISEAS - Yusof Ishak Institute is collaborating with JSTOR to digitize, preserve and extend access to ASEAN Economic Bulletin

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

ASEAN Economic Bulletin Vol. 22, No. I (2005), pp. 49-59 ISSN 0217-4472

Singapore's Trade Policies Priorities and Options

Margaret Liang

This paper analyses Singapore's multi-pronged approach in pursuing multilateral, bilateral, and regional liberafization initiatives to secure and expand its political and economic space. The paper evaluates trade policy trends pre- and post-Asian crisis. It focuses on Singapore's priority interests and concerns in the Uruguay Round and its role in moving the negotiating process. Looking ahead, the paper discusses prospects in the Doha Round and what it means for Singapore. The WTO and the Doha Round negotiations remain Singapore's top priority in international trade. The paper also discusses the underlying political and strategic rationale in Singapore's pursuit of FTAs/RTAs and examines future challenges faced by Singapore in seeking greater liberalization and open markets. It is contended that strategically such FTAs have strengthened and expanded Singapore's economic linkages globally, as well as helped to anchor the economic interests of major economies beyond the region in Southeast Asia.

I. Introduction

Singapore's trade policy directions are underpinned by its dependence on the global economy, and the constraints of a small domestic market with limited

natural resources. The policy option for Singapore was thus driven by a compelling need to plug into the global economy early in its development. It pursued an export-driven industrialization policy, slashed trade barriers and actively sought foreign investments. With a small domestic market and limited

natural resources, Singapore was forced to plug into the global economy early in its development.

When Singapore separated from Malaysia, it lost its hinterland. It had no choice but to swiftly shift to an export-driven industrialization policy, slashing trade barriers and actively seeking foreign

investment. This change in orientation brought Singapore an average growth rate of 10 per cent from 1965 to 1979. In 1965, when Singapore first became independent, its total trade amounted to S$6.8 billion. Today, Singapore is the fifteenth largest trading nation in the world with its total

merchandise trade in 2004 amounting to S$580 billion, three times Singapore's GDP. By tapping into the global grid of trade, investments, and capital, Singapore recorded an average annual growth rate of 7.3 per cent and the nominal value of its non-oil domestic exports have grown by an average of 12 per cent per annum. Singapore's trade to GDP ratio is the highest in the world. The importance of trade to Singapore is illustrated by the fact that since 1999, Singapore's total trade in goods and services has accounted on average for

ASEAN Economic Bulletin 49 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

nearly 360 per cent of GDP. Singapore is thus an advocate of the multilateral trading system as free trade has been crucial for its survival.

Being plugged into the global economy makes Singapore vulnerable to the global environment. Singapore has reached a crossroad in its economic development. The global landscape has changed. After more than two decades of high growth, the Asian financial crisis plunged Southeast Asia and Singapore into political and economic turmoil. The September 11 attacks in 2001 and subsequent terrorist activities has cast a cloud of uncertainty in the world. Globalization and rapid technologi cal advances had their impact on trade-dependent Singapore which is facing significant challenges on the external and domestic fronts.

In Singapore's short history of thirty-nine years, it has suffered three recessions: in 1985,1998, and

2001. Despite its strong fundamentals, Singapore did not escape unscathed from the financial crisis that buffeted the region in 1997-98, due to its close economic interdependence with the neighbouring economies. Real GDP growth fell

sharply from 8.9 per cent in 1997 to 0.3 per cent in 1998, although Singapore was less badly hit than

many of its neighbours, who slipped into negative growth for the first time in more than a decade. Nevertheless, Singapore's sound macroeconomic policies, coupled with its openness helped it to recover rapidly from the effects of the Asian crisis. The Singapore economy recovered in 1999 and 2000 to register GDP growth of 6.9 per cent and 9.7 per cent respectively. This growth was fuelled by growth in IT spending as a result of the dot.com boom.

Given Singapore's high dependence on export markets, it was again subject to a series of external shocks in 2001-03. The global economic downturn and the aftermath of the September 11 terrorist attacks resulted in the Singapore economy entering a recession. In 2001, Singapore experienced its worst recession since independence when its economy contracted by 1.9 per cent (Table 1). This drastic contraction was brought about by a sharp slump in external demand, as a result of the downturn in the global electronics industry, the

TABLE 1 Singapore: Key Economic Indicators

Indicator 1999 2000 2001 2002 2003

Gross Domestic Product: At Current Market Prices

(S$ million) 139,615.9 159,662.1 154,078.0 158.064.1 159,135.0 Annual Change (%) 1.8 14.4 -3.5 2.6 0.7 At 1995 Market Prices

(S$ million) 147,834.4 162,162.3 159,073.0 162,493.2 164,265.9 Annual Change (%) 6.9 9.7 -1.9 2.2 1.1

Per Capita GNI in S$ 36,097 39,599 37,634 37,834 37,555 Gross Fixed Capital Formation:

At Current Market Prices

(S$ million) 47,091.9 47,538.2 45,586.0 40,705.0 39,573.4 Average US$/S$ 1.6949 1.7239 1.7917 1.7906 1.7422 Inflation Rate (CPI Change, %) 0.0 1.3 1.0 -0.4 0.5 Unemployment Rate (%) 3.5 3.1 3.3 4.4 4.7 Productivity (Annual Change, %) 7.3 5.4 -5.2 3.6 2.3

Source: Department of Statistics, 2004.

ASEAN Economic Bulletin 50 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

U.S. recession, weaker regional growth, and the severe impact of the September 11 attacks on the global airline industry.

Notwithstanding a difficult year in 2002, the economy managed to grow by 2.2 per cent in 2002. However, in the first half of 2003, Singapore's economy was again hit simultaneously by the outbreak of Severe Acute Respiratory Syndrome (SARS) and the war in Iraq which affected regional tourism. With SARS being contained by June 2003, and a more positive external environment, Singapore's economy turned around in the second half and registered a growth of 1.4 per cent for the whole of 2003. The Singapore economy rebounded strongly in 2004 with a growth of 8.4 per cent.

With a positive global environment, the Singapore economy is expected to gain momentum through 2005. The economy is forecast to grow between 3 and 5 per cent in 2005 (MTI2004).

In the above context, this paper analyses Singapore's multi-pronged approach in pursuing multilateral, bilateral, and regional liberalization initiatives to secure and expand its political and economic space. The remainder of this paper is organized as follows. Section II analayses the macroeconomic and policy trends of the Singapore economy. Section IE analyses Singapore's role in multilateral trade liberalization in the WTO, while Section IV analyses its rationale for and involvement in bilateral and regional trade liberalization by pursuing free trade agreements (FTAs). Section V analyses the future directions of Singapore's trade policy and concludes the paper.

II. Macroeconomic and Policy Trends

Singapore is a small economy accounting for only 1.2 per cent of East Asia's GDP and 0.3 per cent of world GDP. Its economy is, however, highly dependent on external demands. Manufacturing, together with services, make up Singapore's twin engines of growth. The manufacturing sector accounted for 26.3 per cent of Singapore's GDP whilst services accounted for 63 per cent of GDP in 2003. The services sector is a major employer, accounting for 75 per cent of total employment. Agriculture is of very limited significance to the

Singapore economy. The sector contributes less than 0.1 per cent of Singapore's GDP. Currently, only about 2 per cent of the land area is used for agricultural purposes and about 90 per cent of Singapore's food items are imported.

Ill Trade in Goods

Singapore's external trade pattern reflects the conditions in the external environment. Total trade

recovered in 1999 as external conditions improved after the Asian financial crisis. Following a 22.9 per cent expansion in 2000, Singapore's external trade contracted sharply by 9.4 per cent during the 2001 recession (Table 2). It has, however, stayed positive since 2002 with a 9.6 per cent expansion in 2003 and an exceptionally strong growth of 22.5 per cent in 2004, largely due to the rebound in global electronics demand, increase in pharma ceutical exports and pick up in demand from key markets. Malaysia, the United States, EU, Japan, and China were Singapore's top five trading partners, accounting for 59 per cent of total trade in 2004. Singapore's main exports and imports are electronics, oil, and chemicals. Total trade growth is projected to be in the range of 7.0 per cent to 9.0 per cent for 2005, consolidating from the high 22.5 per cent achieved in 2004.

IL2 Trade in Services

Singapore's total trade in services increased steadily from 51 per cent of GDP in 1998 to approximately 63 per cent in 2003. Its major trading partners in trade in commercial services are the United States, EU, Japan, and the regional developing economies. The top ten trading partners accounted for more than three-fourths of Singapore's trade in services in 2003. The geographical pattern of Singapore's trade in services is thus broadly similar to trade in goods.

Singapore's export of services can be broadly divided into traditional transportation and travel services and the emerging trade-related financial, business, and technical services. Although the export of services grew at an annual rate of 9.4 per cent during the period 1998-2002, it slowed down

ASEAN Economic Bulletin 51 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

TABLE 2 Singapore's Trade Performance, 1999-2003

Singapore's Trade Performance Annual Percentage Change (At current prices, S$ billion) in Trade (%)

Trade 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003

Total Trade 382.4 Imports 188.1 Exports 194.3 Domestic Exports 116.3 Non-oil 101.2

Oil 15.1

Re-Exports 78.0

470.0 425.7 432.2 232.2 207.7 208.3 237.8 218.0 223.9 135.9 118.4 119.4 113.1 96.7 98.6 22.9 21.7 20.9 101.9 99.6 104.5

473.9 8.1 22.9 222.8 10.8 23.4 251.1 5.7 22.4 138.9 9.8 16.9 113.5 9.5 11.8 25.4 12.4 51.0 112.2 0.2 30.7

-9.4 1.5 9.6 -10.5 0.3 7.0 -8.3 2.7 12.1 -12.9 0.8 16.3 -14.5 1.9 15.1 -5.0 -3.9 21.7 -2.3 4.9 7.4

Source: IE Singapore, 2005.

to 2.8 per cent and 2.9 per cent in 2001 and 2002 respectively, with a contraction of 0.3 per cent in 2003 due to the external impact of the September 11 attacks, SARS, and the Iraq war (Table 3). The two most important components of services imports were transportation and travel. Imports of services recorded an annual growth of 11 per cent during 1998-2002, though it slowed down during the 2001-03 period amidst a deteriorating labour market, high retrenchments, and the occurrence of SARS.

1L3 Foreign Direct Investment

The Singapore economy has remained as one of the largest recipients of foreign direct investment (FDI) in the region in 2002. The United States, EU, and Japan were the three largest foreign investors in Singapore, which demonstrates a close relationship between trade in services, trade in goods, and FDI. The EU accounted for two-fifths of FDI as at end 2002. Investment from

Asia constituted almost a quarter (23.6 per cent) followed by investment from Caribbean/Latin America (19 per cent) and North America (15.6 per cent). The industrial structure of FDI remained relatively unchanged over the period 1998-2002, with foreign investors attracted largely to financial services, manufacturing, and commerce sectors.

Inward FDI stock amounted to S$239 billion in 2002 (Department of Statistics 2004). With respect to outward investments, Singapore

has made significant progress since it launched its regionalization programme in 1993. Between 1993 and 2002, Singapore's investments in the region has increased from S$6 billion to S$25 billion, more than fourfold. Singapore companies, which initially started out in the region, has over the years moved beyond the region to invest in North America, Europe, Latin America, South Asia, and the Middle East.

Since 1993, Singapore's outward FDIs have increased fivefold, reaching S$148 billion in 2002. The Ministry of Trade and Industry expects this figure to reach S$300 billion by 2015, with annual returns of up to S$23 billion. Singapore's FDI abroad is concentrated mainly in financial services and manufacturing. Singapore is a significant investor in ASEAN, China, India, and Australia (Department of Statistics 2004).

HA Policy Options

Singapore's trade policy directions are under pinned by several factors:

Constraints of a small domestic market with limited natural resources.

ASEAN Economic Bulletin 52 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

TABLE 3 Singapore's Trade in Commercial Services, 1999-2003

Singapore's Trade in Services Annual Percentage Change (at current prices, S$ billion) in trade in services (%)

Indicator 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003

Total Trade in Services 85.82 Exports of Services 44.68 Transportation 18.12 Travel 8.63 Insurance 0.61 Govt Services 0.15 Construction 0.28 Financial 2.02 Computer & Information 0.39

Royalties 0.11 Social 0.02 Other Business Services 14.37

Imports of Services 41.13 Transportation 18.79 Travel 6.56 Insurance 1.95 Govt Services 0.20 Construction 0.31 Financial 0.55 Computer & Information 0.31

Royalties 6.53 Social 0.02 Other Business Services 5.92

98.02 102.99 106.91 50.70 52.14 53.68 20.50 20.53 21.47 9.01 8.27 7.99 0.87 1.19 1.32 0.17 0.18 0.18 0.23 0.35 0.36 2.40 2.12 2.33

0.43 0.56 0.57 0.15 0.31 0.33 0.03 0.04 0.03

16.92 18.59 19.09

47.32 50.85 53.23 22.10 22.18 22.87 7.82 9.81 11.30 2.56 2.61 2.98 0.20 0.25 0.26 0.21 0.31 0.28 0.69 0.64 0.71

0.39 0.49 0.39 6.23 6.09 5.65 0.04 0.05 0.06

7.08 8.41 8.73

105.01 18.6 14.2 53.49 13.3 13.5 20.55 19.4 13.2 6.97 12.0 4.5 1.52 15.3 42.6 0.16 -5.2 13.1 0.32 -15.1 -17.3 3.14 0.8 18.8

0.56 -7.1 10.1 0.34 15.7 32.7 0.04 42.0 27.6

19.90 10.4 17.7

51.51 25.0 15.0 23.41 17.3 17.6 8.58 29.9 19.3 3.19 7.3 31.4 0.27 1.6 0.7 0.25 -4.1 -31.7 0.60 36.0 26.0

0.38 18.6 26.8 5.81 108.6 -4.6 0.06 95.0 67.9

8.96 3.5 19.5

5.1 3.8 -1.8 2.8 2.9 -0.3 0.1 4.6 -4.3 -8.2 -3.4 -12.8 37.1 11.3 15.1 7.1 -1.8 -8.8 49.4 3.0 -10.8 -11.4 10.0 34.6

31.0 1.2 -1.8 105.7 7.8 2.8 44.4 -6.7 2.0

9.9 2.6 4.3

7.5 4.7 -3.2 0.4 3.1 2.4 25.4 15.3 -24.1 2.1 14.3 6.9 24.5 3.9 6.2 44.5 -10.8 -10.7 -6.6 10.8 -15.2

27.3 -21.3 -1.7 -2.2 -7.3 2.8 28.5 24.2 2.1

18.9 3.8 2.6

Source: Department of Statistics, 2004.

Its dependence on the global economy; Singapore's economy is plugged into the inter national grid and cannot be insulated from key global trends. It is vulnerable to developments around the world.

Its dependence on free access to markets around the world for its economic survival and growth.

Singapore's prosperity is thus inextricably linked to that of the region and the world. To secure and expand its political and economic space, Singapore has adopted a multi-pronged approach in pursuing trade liberalization initiatives through

the multilateral trading system, bilateral free trade agreements (FTAs), regional trading arrangements (RTAs), and through regional groupings such as ASEAN, APEC (Asia-Pacific Economic Co-opera tion), ASEM (Asia Europe Meeting), and FEALAC (Forum for Asia-Latin America Co-operation).

m. Singapore's Approach to Multilateral Trade Liberalization1

On the multilateral front, Singapore continues to give primacy to the WTO multilateral trading

ASEAN Economic Bulletin 53 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

system. Whilst Singapore played a limited role during the Tokyo Round, it was proactive and played a leading role during the Uruguay Round in pursuit of its trade interests and to move the trade liberalization process. Singapore hosted the first

World Trade Organization (WTO) Ministerial Conference in 1996 and has since been in the forefront with other like-minded countries in

facilitating the launch of the Doha Round and the post-Doha negotiating process to maintain the momentum of multilateral trade liberalization.

///. 1 Uruguay Round (1983-93)

The Uruguay Round (UR) was the first truly comprehensive Round, going beyond tariffs and trade in goods to cover important areas such as agriculture, services, and intellectual property. The Uruguay Round eliminated the so-called Voluntary Export Restraints (VERs), decided to remove by 2005 the textile quota restrictions under the Multi-Fibre Agreement (MFA), and adopted agreed modalities to liberalize trade in agriculture. More significantly, the Uruguay Round brought into being a radically new set of rules and disciplines to govern trade in services as well as trade-related intellectual property rights (TRIPs). Indeed the Tokyo Round achievements paled in comparison with the Uruguay Round in terms of scope, depth and impact on the

multilateral trading regime. Singapore played a key role during the Uruguay Round, from the preparatory phase (1983-86) to the launch of the Round at Punta del Este (September 1986) until its final conclusion in December 1993 and the establishment of the WTO in April 1994.

Singapore's main policy objectives in the Uruguay Round were:

(a) to secure greater market access in goods; (b) to achieve strengthened rules in trade remedy

measures (anti-dumping, safeguards, and countervailing duty measures) so as to ensure that market access benefits are not

negated by these non-tariff measures; (c) to ensure that rules in the new areas like

services and trade-related intellectual rights

(TRIPs) would provide a legal framework that would be conducive to world trade expansion; and

(d) to improve the dispute settlement rules to make them more effective in resolving trade disputes.

The four years between 1983 and 1986 that were spent in trying to launch the Uruguay Round were extremely difficult. Strong opposition from some developing GATT contracting parties such as India, Brazil, Egypt, and Argentina against the launch of the New Round forced a group of nearly fifty countries, comprising both developed and developing countries, to take the negotiating process out of the GATT building. Singapore was among this group of "like-minded" countries which met daily for over several weeks in the EFTA building2 to come up with a draft

Declaration that provided the basis for the launch of the Uruguay Round in Punta del Este (Uruguay) in September 1996. The main concerns of those developing countries against the New Round was the inclusion of new subjects like services and intellectual property rights. Although Singapore had some initial reservations about these "new issues", it strongly supported the launch of the

Uruguay Round to protect its interests as a small trading nation that is heavily dependent on a free, open, and stable global trading regime.

With a small team of three negotiators based in the Singapore Permanent Mission in Geneva, Singapore prioritized its negotiating approaches.3 The Geneva team was supported by experts from the capital, for example, in TRIPs, financial services, and telecommunications negotiations. To achieve strength in numbers, Singapore and other countries coalesced themselves into groupings according to issues of common interests rather than along regional or north-south lines. Thus, for example, Singapore worked with Hong Kong to form a group of like-minded countries on anti-dumping, whose common interest was to push for strengthened anti-dumping rules and procedures to prevent the abuse of anti-dumping measures as a disguised protectionist tool. Singapore and Hong Kong also worked together to

ASEAN Economic Bulletin 54 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

push for MFN safeguards and the elimination of Voluntary Export Restraints (VERs). Singapore's services negotiator recalls that they took almost two years to conceptualize and to finalize the four

modes of delivery in trade in services.4 GATT members would then negotiate how much market access and national treatment they would accord to foreign service suppliers.

There was good co-operation between Singapore and the other ASEAN-5 countries. Unlike the EC, ASEAN did not negotiate as a bloc with a single spokesman. Even in the "Green-Room"5 discussion, individual ASEAN members were invited in its national capacity and not as ASEAN spokesman. Singapore, Malaysia, and sometimes Thailand or Indonesia were invited depending on the issues.6 Whilst each of the ASEAN countries

negotiated on an individual national basis, there was regular exchange of information between them and where feasible, inputs would be provided to each other. This arrangement worked well because

there was good rapport between the individuals, and much effort was taken to consult with each other at different levels which led to broad convergence of views among ASEAN on key Uruguay Round issues. This was the strength of the ASEAN co-operation during the Uruguay Round, and when ASEAN spoke as a group in GATT, it was listened to as a moderate force.

Singapore's commitments in the Uruguay Round tariff negotiations were in the form of tariff bindings as more than 98 per cent of all its tariff lines were already at zero rates. Singapore increased its tariff bindings from less than 0.5 per

cent pre-UR to 70 per cent of all tariff lines in the industrial and agricultural sectors, with binding at zero rate in sectors such as agriculture equipment, construction equipment, steel, pharmaceuticals, furniture and medical equipment. Singapore's bindings on industrial products increased from near zero to 65 per cent of all lines, and its average bound rate on industrial products, on a trade-weighted basis declined from 12.4 per cent to 5.1 per cent. Singapore has bound 100 per cent of its tariff lines in agriculture. With the exception of tobacco and liquor products, agriculture tariff lines were bound at a ceiling rate of 10 per cent.

In services, Singapore's schedule of specific commitments covered sixty-one sectors. It cornmitted to maintain its then-current level of

openness in a wide range of sectors including business services, communication services, construction and engineering-related services, financial services, environmental services, tourism

and travel-related services, and transport services. Post-Uruguay Round, Singapore amended its

legislation in the light of the TRIPs and Customs Valuation Agreements ahead of the transition period available to developing countries. In services, Singapore signed both the Agreement on Telecom munication Services (Fourth Protocol to the GATS that entered into force in February 1998) and the Agreement on Financial Services (Fifth Protocol to the GATS that came into force in March 1999). Under the Agreement on Telecommunications Services, Singapore committed to grant up to two additional operators for public switched services and leased circuit facilities from 1 April 2000. This replaced the previous offer, under which exclusivity was granted to Singapore Telecommunications (Singtel) until 2007. Under the Agreement on Financial Services,

Singapore's commitments included an offer to increase offshore bank lending limits to residents of Singapore from S$100 million per bank to S$200 million, and to allow up to 49 per cent aggregate foreign equity ownership in locally owned insurance companies.

Singapore also signed on to the Information Technology Agreement (ITA I) that was concluded during the first WTO Ministerial Conference held in Singapore in December 1996, and a subsequent ITA II that was negotiated in 1999. The ITA I provided for elimination of tariffs on five main categories of information technology products that included computers, telecommunications products, semiconductors, semiconductor manufacturing equipment, and scientific equipment. The ITA II expanded the product coverage to other interactive multimedia products.

Singapore was a strong supporter of the Uruguay Round and believed that the WTO Agreement would have a positive impact on its trade. It is estimated that the full implementation of tariff

ASEAN Economic Bulletin 55 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

commitments by WTO members would result in accumulated potential tariff savings of at least US$333 million for Singapore's exports to its major markets. ITA I also resulted in S$1.49 billion of

accumulated tariff savings for Singapore's exports with the full implementation of tariff elimination by 1 January 2000. Singapore also saw benefits stemming from enhanced market access, improved transparency, and a more efficient and expeditious dispute settlement mechanism. On the latter, it was significant that Singapore was the first WTO member to seek recourse to the WTO Dispute Settlement Mechanism in January 1995 when it initiated a dispute settlement case against

Malaysia's Approved Permit Scheme for the import of Polyethylene (PE) and Polypropylene (PP). The dispute was resolved after three consultations under the WTO proceedings, and Singapore did not proceed to the panel phase. This was indeed a good test case on the effectiveness of the strengthened

WTO Dispute Settlement Rules. To ensure global competitiveness, Singapore

continued with autonomous liberalization in several

services sectors, such as in the telecommunications,

energy, and financial services sectors post-Uruguay Round. Despite the financial crisis, Singapore implemented in 1999 the first phase of a five-year programme which progressively increased foreign participation in Singapore's domestic banking market. These autonomous liberalization measures

have in a sense widened the gap between Singapore's GATS commitments in the Uruguay Round and its current applied practice.

III.2 Doha Round (2001 Onwards)

From Uruguay to the Doha Round, Singapore continued to play a leading role in the WTO to maintain the momentum of multilateral trade

liberalization. Working with a group of like-minded countries (which called themselves "Friends of the

Round"), Singapore was proactive in pushing the negotiating process, starting at the first WTO Ministerial Conference (MC) held in Singapore in September 1996, followed by the second WTO MC held in Geneva in May 1998, the third WTO MC in

Seattle in December 1999 (which unfortunately

failed to launch the "millennium round"), but which finally culminated in the successful launch of the Doha Round in November 2001.

As in the Uruguay Round, Singapore's priorities in the Doha Round are to work towards greater

market access in goods and services. Singapore's key interest is to secure greater market access in industrial goods and hence would like a substantive outcome in the the Non-Agricultural Market Access (NAMA) negotiations. Singapore has proposed that

members bind 100 per cent of tariff lines in the NAMA negotiations. Singapore, together with other "Friends of NAMA" is seeking an ambitious "harmonizing" formula that would tackle tariff peaks and tariff escalation and achieve real market access opportunities.

On the services front, Singapore has undertaken autonomous liberalization in several sectors. As

Singapore is essentially a services economy with export interests, particularly in markets in the region, it is also in Singapore's interest to secure greater market access in the services negotiations.

In the area of rules, the main issue is anti dumping. As a non-user of anti-dumping measures, Singapore has an interest in tightening the Anti-Dumping Agreement and to ensure that the negotiations do not lead to a weakening of the Agreement that would negate market access benefits and be detrimental to its exporting interests. In addition, given Singapore's overall policy objectives to achieve greater market access in the Doha Round, achieving a good framework agreement on trade facilitation that would further expedite the movement, release and clearance of goods is another area of interest.

IV. Singapore's Bilateral and Regional Trade Liberalization Strategies: Rationale and Implications

In tandem with its commitments to the WTO and

the Doha Round process, Singapore has embarked on an aggressive drive since the past six years to negotiate FTAs and regional trading arrangements (RTAs). In fact there has been a dramatic rise in the

number of FTAs/RTAs since the Uruguay Round. To date 285 RTAs and FTAs have been notified

ASEAN Economic Bulletin 56 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

to the WTO and these have been driven by economic as well as strategic and political calculations (WTO Secretariat 2003). Increasingly developing countries are turning to FTAs/RTAs to open markets

in developed as well as developing countries.

IV1 Singapore's Bilateral FTAs

On the bilateral front, Singapore has concluded FTAs with New Zealand (entered into force on 1 January 2001), Japan (in force 30 November 2002), EFTA (European Free Trade Association comprising Switzerland, Iceland, Liechtenstein and Norway ? in force 1 January 2003), Australia (in force 28 July 2003), the United States (in force 1 January 2004,) Jordan (expected to enter into force early 2005), and South Korea. Singapore is cur rently engaged in FTA negotiations with Canada, India, Mexico, Panama, Sri Lanka, Qatar, Kuwait, and Peru. It is also negotiating the Pacific Three FTA (P3) with New Zealand and Chile, which is the first trilateral FTA linking economies from three different continents'? Australasia, Latin America,

and Asia. Further, it is expected to launch FTA talks with Bahrain, Egypt, UAE, Pakistan, and China, and explore talks with Iran and Oman. All these initiatives will result in opening up markets in the

Americas, Middle East, South Asia, and North Asia.

Singapore describes its FTA policy as complimen tary and synergistic with its commitments to the

WTO and the multilateral trading system. In this respect, Singapore's FTAs are considered to be

WTO-consistent and WTO-plus. Singapore's FTAs cover "substantially all trade" that includes commitments in agriculture. The elements of Singapore's FTA include the main areas of trade in goods, services, contingency measures, trade facilitation, investment, government procurement,

competition policy, protection of intellectual prop erty rights, and broader economic co-operation. The FTAs also include provisions for dispute settlement.

IV2 Singapore fs Role in Regional Economic Integration

On the regional front, Singapore is a founding member of ASEAN, APEC, and ASEM. Of the

three regional fora, the ASEAN economic agree ments provide the most comprehensive and deepest commitments. Singapore has already implemented its AFTA commitments insofar as its applied tariff is zero for all items from ASEAN with no product exemptions in the sensitive or highly sensitive list or in the General Exclusion List.

Besides the market for goods, Singapore aims to achieve full integration of market for services under the ASEAN Framework Agreement on Services (AFAS) which was signed in 1995. On the investment front, Singapore is committed to the Framework Agreement on the ASEAN Investment Area (AIA), signed in 1998, and which envisages liberalizing the investment environment in ASEAN to ensure a free flow of investment in the area by 2020. The Agreement covers direct investment in manufacturing, fishery, forestry, mining, and agriculture (excluding portfolio investments) and services incidental to these sectors.

Together with other ASEAN countries, Singapore is working towards achieving an ASEAN Economic Community (AEC) by 2020 which is aimed at creating a single market and production space with free flow of goods, services, investment, and skilled labour, and freer flow of capital.

IV.3 Singapore's Rationale behind Pursuing Bilateral and Regional RTAs

Singapore's pursuit of FTAs/RTAs has been driven by perceived economic benefits of regional integra tion as by strategic and political considerations. Singapore believes that FTAs complement the mul tilateral trading system in the following manner:

1. FTAs can provide impetus to multilateral trade liberalization. FTAs allow countries to identify compatible partners with whom to pursue .faster and broader liberalization, thus acting as catalyst for multilateral trade liberalization.

2. FTAs create positive competitive dynamics that spur further liberalization. FTAs put pressure on those that are slow to liberalize and in the process, help to push everyone towards liberalization at the regional and

multilateral level.

ASEAN Economic Bulletin 57 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

3. FTAs engender the internal economic reform processes. FTAs can help governments to overcome domestic resistance to reforms of sensitive sectors. Governments may be more willing to initiate difficult domestic reforms if they can be carried out on a preferential basis and in measured steps.

4. FTAs improve the economic competitiveness of businesses and provide greater access to the markets of FTA partners.

Singapore maintains that what is central is the need to ensure that FTAs/RTAs are WTO-consistent

and WTO-plus whereby FTAs would contribute towards catalysing the WTO liberalization process and regional integration. In Asia, there is an increasing acceptance that FTAs have become a reality in trade policy options. Even those ASEAN countries which wefe initially sceptical of Singapore's pursuit of FTAs are now engaged in broad-ranging FTA negotiations. Beyond advancing its economic interests, Singapore believes that these intra- and inter-regiohal FTAs help to build a web of strategic linkages for Singapore within the region and with countries outside the region. They serve the broader strategic interest of anchoring the presence of its major trading partners in Southeast Asia, and ensuring that they remain stakeholders in Singapore and the region. The FTAs also help to sustain an open regional orientation that prevents the formation of inward-looking trading blocs. This web of interlocking economic and strategic interests help contribute to regional stability, security, and prosperity.

V. Future Challenges to Singapore's Trade Policy For more than two decades until the Asian financial crisis in 1997, Singapore had enjoyed consistently high growth. However, this phase of double-digit growth is over. Singapore now has to respond to the challenges posed by both external factors and domestic challenges. These include, inter alia: (i) globalization and technological advances; (ii) the emergence of China and India; (iii) regional political and economic uncertainties;

(iv) a maturing economy, and (v) accelerating economic restructuring.

The Economic Review Committee (ERC) that was established in 2001 completed a fundamental review of Singapore's past and existing policies in February 2003 and proposed strategies to remake Singapore into a globalized, entrepreneurial, and diversified economy. In charting out a blueprint for Singapore's next phase of economic development, the ERC reviewed the principles which had guided Singapore's strategies in transforming its economy over the last fifteen years. These principles will continue to include, inter alia, keeping an open and flexible conomy that rely on free market forces, pursuing rational and prudent macroeconomic policies and expanding external ties. The Review sets out the ERC's vision of remaking Singapore in fifteen years into a globalized economy, a creative and entrepreneurial nation, and a diversified economy. To realize this vision, the ERC has identified five key thrusts: (i) expand external ties; (ii) manage Singapore's competitiveness and flexibility; (iii) grow domestic enterprises and encourage entrepreneurship; (iv) promote the twin engines of growth ? manufacturing and services; and (v) develop human capital (ERC 2002a, 2002*, 2003).

In the years ahead, Singapore needs to ensure that it remains integrated with the rest of the world through deeper multilateral, regional, and bilateral links. In light of these challenges, Singapore's policy is to continue to promote greater integration at the multilateral, regional, and bilateral levels. It will continue to adopt a multi-pronged approach to trade policy by engaging in bilateral and regional FTA negotiations. It will continue to play a proactive role at the WTO to keep the momentum of multilateral trade liberalization. For this reason, the WTO and the Doha Round negotiations remain Singapore's top priority in international trade.

However, the road ahead in the Doha Round negotiations will not be easy. The negotiating dynamics have changed with the expansion of the

WTO membership. With 148 members now in the WTO, all with unique needs and diverse voices, it is not easy to achieve consensus. Furthermore,

ASEAN Economic Bulletin 58 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms

a large number of new entrants are from the developing world where their development concerns have to be taken into account in the Doha

Development Agenda. Singapore could help move the negotiating process by acting as the interface between developed and developing countries.

NOTES

1. This section draws on WTO, Trade Policy Review, Singapore (May 1996, February 2000, and May 2004). A few paragraphs in this section and section V have been earlier cited and incorporated in a Business Times article of 30 March 2005, on the WTO, by K. Kesavapany.

2. Office of the members of the European Free Trade Association. 3. Then Permanent Representative (PR) See Chak Mun was the overall chief negotiator as well as negotiator for

services and trade-related investment measures (TRIMs). The author of this paper was die negotiator for the rules areas, namely anti-dumping, safeguards, subsidies, and countervailing duty measures, dispute settlement, GATT Articles and functioning of the GATT System. Another officer took charge of market access in goods.

4. They are cross-border (e.g., mail order), consumption abroad (e.g., tourists visiting abroad), commercial presence (e.g., setting up a bank subsidiary), and movement of natural persons (e.g., doctors, engineers).

5. The Green Room process involved a small group of about twenty-five key players to thrash out problems with the aim of working out compromise solutions in a smaller and intensive set up. Members were invited based on their active participation, intellectual contributions, and value-add to the negotiating process.

6. ASEAN had an informal'but effective arrangement whereby there was some sort of division of labour among ASEAN members, with Singapore taking die lead in the rules negotiations (anti-dumping, safeguards, subsidies, and countervailing duty measures and dispute settlement), Malaysia on tropical products and TRIPs, Thailand on agriculture, Philippines on TRIMs, and Indonesia on textiles.

REFERENCES

Balakrishnan, Vivian, "Trade and Development ? 40 Years On". Speech at UNCTAD XI, Sao Paolo, Brazil, 16 June 2004.

Department of Statistics, Singapore. Singapore Investments Abroad 2001-2002. Singapore: Department of Statistics. -. Foreign Equity Investment in Singapore 2001-2002. Singapore: Department of Statistics. -. Yearbook of Statistics 2004. Singapore: Department of Statistics, 2004.

Economic Review Committee. Entrepreneurship and Internationalisation Subcommittee: Recommendations on Government in Business. 2002a.

-. Subcommittee on Manufacturing. The Pursuit of Competitive Advantage: Value Manufacturing in Singapore. 2W2b.

?-. New Challenges, Fresh Goals: Towards a Dynamic Global City. 2003. Goh Chok Tong. "Anchored in Singapore, Connected to die World". Speech at International Enterprise Forum,

Singapore, 2 February 2005. International Enterprise Singapore. Review of2004 Trade Performance and Outlook for 2005. 17 January 2005.

Ministry of Trade and Industry (MTI). Report on Performance of the Singapore Economy in 2004 and Outlook for 2005, Singapore: MTI, 2004.

See Chak Mun, "Changing Global Trade Scenario and Responses". Financial Express of India, 22 June 2004. World Trade Organization (WTO). Trade Policy Review: Singapore. Geneva: WTO, May 1996.

-. Trade Policy Review: Singapore, Geneva: WTO, February 2000. -. Trade Policy Review: Singapore, Geneva: WTO, May 2004.

WTO Secretariat. The Changing Landscape of RTAs, Seminar on Regional Trade Agreements and the WTO. Geneva: WTO, November 2003.

Margaret Liang has had extensive experience in trade policy and was Singapore's Deputy Permanent Representative to the WTO from 1998 to 2002. She is currently consultant to the Ministry of Foreign Affairs for WTO and Trade Issues, and Adjunct Fellow at the Institute of Defence and Strategic Studies, Singapore.

ASEAN Economic Bulletin 59 Vol. 22, No. 1, April 2005

This content downloaded from �������������66.25.134.98 on Wed, 27 Jan 2021 04:12:56 UTC��������������

All use subject to https://about.jstor.org/terms