Mr Teo Siong Seng, Chairman of the Singapore Business Federation,
Ladies and Gentlemen,
1. Let me start by thanking the Singapore Business Federation for its strong support in organising this very significant event with us.
2. Today, we commemorate two decades of Singapore connecting with the world and global markets through FTAs. This is an especially important milestone, as it also coincides with our Bicentennial year. 200 years ago, the British made Singapore a free port, doing away with hefty fees and duties on trade that were then commonplace at other ports. This was an unconventional idea, not an obviously profitable one, but it proved to be tremendously successful. Singapore quickly prospered and became the centre for trade and commerce in the region. Indeed, Singapore’s DNA and our instincts as a free trading nation have deep roots in our history.
Importance of free trade for Singapore
3. Today, free trade continues to undergird our economic growth and prosperity. Trade is our lifeblood, and we regard the world as our hinterland. Despite our size, we are the 9th largest exporter and 10th largest importer of goods in the world, accounting for almost 4% of the world’s total merchandise trade. The picture is similar for commercial services, where we are the 10th largest exporter and 9th largest importer, accounting for more than 6% of global services trade. So by any account, Singapore certainly punches above its weight in global trade.
4. It is manifestly in our interest to ensure an open and rules-based international trading environment for goods and services to flow freely. We are firm supporters of the multilateral trading system. We are a founding member of the World Trade Organization (WTO), where we actively participate in efforts to formulate rules that promote free trade. These rules ensure a level playing field for all countries, big and small, and promote deeper integration between trading partners. We are also actively involved in WTO reform discussions in order to ensure that the WTO stays relevant by continuing to meet the needs of the evolving modern economy.
Benefits of FTAs for Singapore
5. Our FTAs are a tangible expression of our commitment towards an open, connected, and globalised world. Our first FTA was with New Zealand (which took effect) in 2001; today, we have a network of over 24 FTAs with 36 trading partners. Our FTAs are with countries that collectively account for more than 85% of global GDP and more than 90% of Singapore’s trade.
6. These FTAs have gained our businesses access to millions of consumers in markets across the globe; preferential access to services sectors, expanded government procurement opportunities; and improved intellectual property protections. These FTAs also provide legal certainty and help to safeguard the interests of Singapore businesses in overseas markets.
7. Our diversified portfolio of FTAs also ensures that our businesses can capitalise on opportunities in diverse markets, wherever they may be. This is particularly important as rising trade tensions, weaker global demand, and slowing growth, can affect different markets differently. Hence, we continue to deepen and diversify our trade linkages through FTAs to maximise our businesses’ chances of success.
8. Ultimately, the success of our FTAs must be measured by the benefits that our businesses can derive from them. An MTI study estimates that on average, our businesses’ domestic exports of goods to an FTA partner increases by 18 per cent two years after its entry into force, and a further 16 per cent in the third year. So by Year 3, we would have seen a one-third increase in our exports to those markets. In 2016, FTAs collectively saved our businesses about S$720 million in tariffs, a substantial increase from the S$450 million enjoyed a decade before. Because of our FTAs, our companies can now operate in previously restricted services markets overseas including professional services, healthcare, logistics, maritime, environment, and education. When our companies enter these overseas markets, they are accorded the same treatment as domestic firms.
9. Further, in partnership with the SBF and other TACs and stakeholders, we have embarked on a systematic effort to inform and educate our businesses, especially our SMEs, on the details of our FTAs and how they can benefit from them. SBF and ESG regularly organises FTA education and outreach activities, training courses, and business missions. ESG has a tariff search engine that companies can use to find out the preferential margins for specific products in each market, along with Rules of Origin criteria and documentation. ESG also operates a dedicated online helpdesk for businesses with specific FTA queries. Since 2016, about 1,800 companies have benefitted each year from ESG’s efforts to build awareness of our network of trade agreements and its benefits.
FTAs and Multilateralism
10. When we first embarked on our FTA journey, it was neither orthodox thinking nor smooth sailing. We were one of the first countries to pursue bilateral FTAs, at a time when bilateral FTAs were contentious. Critics argued that FTAs could “damage” free trade by discriminating against non-member economies. This included leading trade negotiators from around the world.
11. But we took a different tack, in favour of a more pragmatic approach. We were clear then, as we are now, that our pursuit of FTAs could complement and not supplant multilateralism. Bilateral and plurilateral FTAs are a practical way for likeminded parties to work towards a more ambitious level of trade liberalisation. Multilateral negotiations will always remain the principal modality to promote global free trade, but is constrained by the sheer number of members and their diversity of interests, thereby often converging on the lowest common denominator. On the other hand, an FTA between two or more partners, allows us to seek out new areas and aspire towards higher standards.
12. This is why, across all our FTAs, we emphasise three core principles. Firstly, our FTAs must be WTO-consistent . Secondly, they must be WTO-plus, meaning they must go beyond the commitments we have made in the WTO. Thirdly, they must be open to accession by other countries who are willing and able to adopt the same high standards.
13. So, rather than inhibit multilateralism, our FTAs have helped to sustain the momentum of free trade by demonstrating what is possible, and serving as building blocks towards greater regional or international trade liberalisation. The record speaks for itself. The 11-party CPTPP, which originally comprised a group of small countries, Brunei, Chile, New Zealand, and Singaporeis one example. And today it counts larger economies like Japan as its partners. And following the pathfinder EU-Singapore FTA, the EU has also secured an FTA with Vietnam, with the ultimate goal of attaining an EU-ASEAN FTA. In other words, our efforts at building bilateral or small plurilateral agreements helps engender confidence and a greater understanding of the benefits in order for other countries to come together and build multilateral rules and networks.
14. Ultimately, we believe that FTAs and the WTO are complementary and mutually reinforcing, and can help create a positive dynamic of competitive liberalisation.
15. Our FTAs also serve a strategic purpose, being a tangible demonstration of our partners’ interest to engage with Singapore and the region. We have secured FTAs with all our major trading partners, including the US, China, Japan, India, ASEAN, and the EU. Our FTAs with these important global players give them a stake in the stability and prosperity of our region.
New Digital FTAs
16. Looking ahead, we must stay nimble in our international trade strategy. The substance and modality of trade is constantly evolving. New business models are ascendant, industries across the board are being disrupted by technology and digitalisation. Likewise, consumer behaviour is changing rapidly with the rise of e-commerce.
17. Digital is the future. The cross-border movement of bits and bytes is growing exponentially. According to McKinsey, the amount of data crossing borders in 2017 is 148 times larger than in 2005. And Alibaba’s AliResearch projects that cross-border B2C e-commerce sales will reach approximately US$1 trillion by 2020, while B2B e-commerce could be five or six times as large. In ASEAN alone, the digital economy is estimated to grow to US$300 billion by 2025, three times its annual size.
18. Current trade rules and policies do not adequately address the needs of the digital economy. Many of our existing trade agreements were designed for 20th century trade in physical goods and services, but are less suited for 21st century digital transactions.
19. Therefore, in the same pioneering spirit as when we embarked on our first FTA two decades ago, we now seek to shape a new digital trade architecture. Singapore has started work on new forms of partnerships called Digital Economy Agreements (or DEAs). These DEAs aim to put in place clear and harmonised international rules as well as collaboration mechanisms that promote greater interoperability between digital frameworks, and guard against digital and data barriers. This is an area of work that the Ministry of Trade and Industry and the Ministry of Communications and Information in Singapore are partnering together on.
20. The DEAs will address emerging areas such as Artificial Intelligence (AI) and digital identities. For example, in AI, we will foster information sharing and cross-border collaboration on the development and promotion of ethical AI governance frameworks, as well as the use of data to support AI development.
21. For a start, we are working with like-minded and progressive countries like Australia, New Zealand, and Chile. Our DEA negotiations with these countries are progressing well, and we hope to have some positive news to share with you soon.
22. We are also leading digital trade efforts at the WTO. Singapore, together with Australia and Japan, are co-convenors of ongoing negotiations on e-commerce at the WTO. This so-called Joint Statement Initiative on E-Commerce (or JSI) will support the development of baseline rules on digital trade, and act as a bulwark against digital fragmentation. More than 80 WTO members are involved in JSI negotiations, including major players like the US, China, and the EU. Collectively, JSI participants account for over 90% of global trade. We are encouraged by the strong interest in the JSI, and hope to secure a high standard and commercially meaningful outcome.
23. Before I conclude, I would also like to emphasise that while Singapore’s trade strategy is necessary, it is not sufficient for our progress as a nation. Free and open trade fosters economic growth, but it does not always generate equitable outcomes. In other words there will always be winners and losers. In fact, without complementary domestic policies and programmes, it can exacerbate inequalities. This is why, in Singapore we invest heavily in the training and retraining our workers for an ever-changing job landscape; help our businesses and industries transform and adapt to a digital age; and where necessary make government transfers to ensure that we share the benefits across society and uplift the most vulnerable. These measures help to ensure that the benefits of free trade are more equitably distributed, and that we progress as one cohesive society.
24. What I have sketched out for you today are the fundamental principles that have underpinned Singapore’s FTA strategy and the policy considerations that drive our endeavour, our approach to trade in the new era, and complementary domestic policies. Later today, you will hear more about the ways in which you can derive the full benefits of our FTAs for your business. You will also hear more about how to navigate the digital marketplace, and the DEAs. I hope you find these sessions useful.
25. Finally, I would like to say a word of thanks and pay tribute to our trade negotiators, past and present, for their diligence and commitment to expanding Singapore’s economic space and flying our flag high. Singapore’s hard-earned reputation as a credible and constructive member of the international trade community is due in no small measure to the professionalism and capabilities of our officers. I also want to thank SBF and ESG for their work in promoting these FTAs and for helping businesses understand and use them more effectively. I urge all our businesses to fully benefit from the many FTA-related initiatives and resources available from SBF and ESG.
26. Thank you once again for joining us today. I wish you a productive day ahead.