Questions:
Ms K Thanaletchimi: To ask the Minister for Trade and
Industry with the ongoing trade war between the US and China (a) what is the
impact on Singapore; (b) how will this affect Singapore workers, employment
prospects and consumers at large both in the short term and in the long term;
(c) whether the US's shift towards protectionist trade affects the global norm
of free trade agreements; and (d) what is Singapore's strategy to overcome
these challenges.
Mr Henry Kwek: To ask the Minister for Trade and Industry
what are the implications on our economy and industries arising from (i) the
increasing trade dispute between US and the rest of the world; (ii) the current
outlook of a multilateralism trading system; and (iii) the recent efforts of EU
and China in exploring closer trade links.
Oral reply (to be attributed to Minister for Trade
& Industry Mr Chan Chun Sing)
- The US and China are major economic partners to
countries around the world. The trade conflict between the US and China, and
indeed with other trading partners such as the EU taking reciprocal measures in
response to the US’ tariffs, will have global consequences. Not only will it
inhibit global trade and global growth, there will also be disruptions to
supply chains impacting businesses, jobs and consumers.
- Our economic agencies are closely monitoring the impact
on Singapore which will be transmitted at three levels. First, impact from
higher generalised tariffs that are applicable to the majority of countries
including Singapore. This is what we call the direct impact. Second, the
indirect impact arising from disruptions to global supply chains due to the
tariffs imposed by the US and China directed at each other. And third, the
consequences of a broad-based slowdown in global trade flows if escalation of
the trade conflict between the US, China, and other trading partners spills
over to business sentiment and other factors of growth. Let me elaborate on each of them.
- First, tariffs directly applicable to Singapore affect
a relatively small set of products. These are essentially US tariffs applied
globally on solar cells and modules, washing machines, steel, and aluminium.
Our exports of these products to the US account for about 0.1% of our total
domestic exports to the world. While this is relatively modest, specific
Singapore-based companies in the general manufacturing and electronics sectors
that export such products to the US will become less competitive compared to
manufacturers in the US when the tariffs are added on. Our agencies are in
contact with impacted companies to facilitate applications for product
exclusion and to explore alternative markets.
- Second, there will be indirect impact from tariffs that
are not targeted at Singapore. Members will have read about the US and China’s
imposition of tariffs on each other. Tariffs applied to products worth US$34
billion from each country have kicked in, with more on the way. With the EU,
Mexico and Canada also imposing retaliatory tariffs on the US for the tariffs
on steel and aluminium, there is significant risk of widening disruption to
supply chains. While these tariffs do not directly affect our exports, they
would have spill-over impact due to our role in global supply chains. For
example, Singapore companies that produce intermediate goods used as inputs in
the production of China’s exports to the US may see softer demand for their
goods.
- The net impact on the Singapore economy and our workers
is less easily quantified given the fluidity of the US and China’s tit-for-tat
responses. The complexity of global value chains is also such that amidst
disruptions, there will be potential for firms to mitigate some of the impact
by redirecting exports of intermediate goods to other markets. In addition,
traders in China which find imports from the US less competitive because of the
tariffs may also source more from the ASEAN region. There is therefore some
offsetting effect. Our modelling indicates that based on the tariffs on product
lines that have been announced, the net impact is likely to be modest. However,
this assumes no further escalation in trade tensions between the US and China.
On the whole, bilateral trade between the US and China indirectly contributes
to 1.1% of Singapore’s GDP, and any sustained disruption is unwelcome for the
region. In the meantime, our economic agencies are working closely with
companies to identify any disruptions promptly and restructure their supply
chains where necessary.
- Third, our greatest concern is the impact from an
escalation of the trade conflict into a vicious cycle of tit-for-tat measures
between major economies. Should these measures reach a tipping point that
triggers a sharp and sustained fall in global business and consumer confidence,
or a tightening of global liquidity conditions, the macro-environment will
fundamentally change. In this scenario, the impact on global consumption and
investment on top of the disruption to trade flows will significantly impact
Singapore’s open economy.
- Amidst these developments, there are strengths in the
composition and features of our economy that serve us well. This includes the
strong trading networks and diversified sectors we have developed over the
years, which will enable companies in Singapore to navigate the disruptions and
seek out new opportunities and alternative suppliers and demand markets. Our
agencies will continue to facilitate this process and provide support where
needed.
- Ms Thanaletchimi and Mr Kwek have also asked about
whether the norm of free trade agreements and the multilateral trading system –
the World Trade Organisation (WTO) – will change. Indeed, the commitment to
free and open trade has come under pressure with greater protectionist
instincts and the US’ unilateral measures to address what it has deemed unfair
trade practices. Nevertheless, for the large majority of economies, the
commitment to the WTO remains unchanged. Numerous economies have made clear
their stance on this. The US has stated its openness to bilateral trade
agreements and has remained engaged in various international forums to share
its views on improving the rules-based multilateral trading system.
- Mr Speaker, let me conclude by reiterating Singapore’s
stance. Singapore’s external linkages that have made us more resilient in
facing uncertainties in the global economy are best safeguarded by a strong set
of WTO rules and enforcement, and by our network of free trade agreements
(FTAs) which we will continue to expand and deepen. We are in good standing
with all our trading partners, including the US and China, and have urged that
ongoing trade disputes be resolved through negotiation. We have also forged
ahead with like-minded partners to continue paving the way for regional
integration to bring about more opportunities and growth. The signing of the
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
in March this year is a tangible demonstration of the parties’ commitment to
the collective goals of greater trade liberalisation and regional integration.
ASEAN and our FTA partners are also pressing on with efforts to reach
substantive conclusion of the Regional Comprehensive Economic Partnership
(RCEP).
- Our
trading partners are also constantly looking for opportunities to improve trade
links. The EU and China for example, which Mr Kwek has asked about, are working
to improve trade connectivity between Asia and Europe to increase economic opportunities.
We have an FTA in place with China, and another that is pending with the EU.
With the FTAs in place, our companies are better positioned to seek out and
benefit from new opportunities arising from new trade linkages and supply
chains that are formed.
- We
will continue to work with all like-minded partners to uphold a rules-based
multilateral trading system, and work towards greater regional integration
which is the best way of maximising opportunities for our companies and
supporting job creation.