Mr Lim Hng Kiang at the Asia Pacific Council of American Chambers of Commerce (APCAC) Spring Conference 2009

SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT THE ASIA PACIFIC COUNCIL OF AMERICAN CHAMBERS OF COMMERCE (APCAC) SPRING CONFERENCE 2009 20 MARCH 2009, 9.45 AM MANDARIN ORIENTAL HOTEL

Distinguished Guests,

Ladies and Gentleman,

A very good morning to all.

Introduction

It is my pleasure to be here today at the Asia Pacific Council of American Chambers of Commerce or APCAC Spring Conference 2009, to speak about the US’ partnership with Asia. Singapore is pleased to host this year’s APCAC. This meeting is particularly significant because we have a new US administration in place, and we are all facing a global economic crisis together. The Conference’s key purpose of bringing together business and political leaders from the US and the Asia Pacific to put together thoughts about the US’ place in Asia takes on greater importance.

I understand that the American Chamber of Commerce in Singapore has worked very hard to have this Conference held here. I applaud the Chambers for its efforts and good work in organizing this Conference. I note that the Chambers will be putting together the key ideas raised in this Conference into a white paper for presentation to the new US administration. I look forward to the opportunity of contributing my thoughts and ideas to this white paper.

The Role Of US Leadership In Trade And Investment Liberalisation

Much has been said about the continued relevance of free trade to the US economy during the US presidential elections and over the last few months as the US, along with most other economies the world over, grapple for solutions to address the current economic turmoil. We have been told that trade may not feature as a prominent item on the US government’s agenda this year against the backdrop of pressing domestic concerns. Yet, it is precisely at this moment and given these circumstances that the US should not neglect trade, but rather set its sights on crafting a robust free trade agenda that will not only benefit the world but also US farmers, businessmen and workers.

History has shown that the US’ growth in exports has not only helped to strengthen the American economy but also provided opportunities for the expansion for American companies. American companies and jobs depend on free trade for growth. The share of trade in the US economy has tripled to over 30% of GDP over the past 40 years[1]. Exports support 20% of US manufacturing jobs. This means that 31 million American workers depend on trade for their livelihoods[2]. Without international trade, these American jobs may be lost.

As the world’s largest economy, the US has a special role, indeed the responsibility, to lead the movement in creating a global environment of free trade and investments. The US’ leadership in global trade and investment liberalization has been critical in fostering unprecedented growth and prosperity in the post-war world. Given the manifold advantages of an open environment in trade and investment, trade policy should be an essential component of the US’ response to its economic problems.

As the anchor of the free market economy of the world, the US’ actions set the tone for others to follow. It is critical for the US to resist the temptation of protectionism even as we recognize the US’ domestic difficulties. The US and the world’s best chance of a global economic recovery is a strong, self-assured United States leading the world through example.

The Need For The US To Remain Engaged With Asia

The Asia-Pacific has always been important to the US. The region contains the US’ most important economic partners, including its top four export destinations – Canada, Mexico, China and Japan. Going forward, Asia’s economic and strategic weight will continue to grow as the world emerges from the current economic turmoil.

Within Asia, many know about the rising potential of China and India. However, not many know that Southeast Asia will also be an important area of growth. The two-way trade between the US and Southeast Asia currently exceeds US trade with Latin America. The US exports twice as much to Southeast Asia as it does to China[3].

The Asian countries will continue to accelerate their economic linkages and integration with each other to drive growth and development. However, this economic integration should not be pursued at the expense of economic linkages with the US. It is important that US investors and businesses should not be left out of the game and be disadvantaged in Asia.

It is here that the US urgently needs to recognize both the promise of participation and the stakes of exclusion, and work hard to deepen its economic engagement not just with China and Japan but also with the rest of Asia. In practical terms, that has to translate to active participation in APEC, and pursuing meaningful and comprehensive trade agreements such as the Trans-Pacific Strategic Economic Partnership or TPP in short.

APEC is the only regional platform at the Leaders’ level which involves the US. The US chairmanship of APEC in 2011 presents a key opportunity to reinforce the US’ commitment to the Asia-Pacific and to ensure that APEC remains strong and relevant.

The TPP presents another equally important vehicle for the US to give a boost to economic integration across the Pacific. The TPP started out as the P4 agreement with Brunei, Chile, New Zealand and Singapore. It was conceived as a high quality and comprehensive building block for a future Free Trade Agreement of the Asia-Pacific, or FTAAP in short.

The US decision to participate in TPP in September 2008 was a strategic move that escalated the interest of many APEC member economies. Just two months after the US announced the launch of negotiations to join the TPP, Australia and Peru announced their intention to join. The P4, as the TPP was initially termed, has now grown to P8 with the recent addition of Vietnam as an observer. When the negotiations are completed, this will be the world’s third largest FTA in terms of GDP[4]. A study from a leading American academic institution, the Brookings Institute, indicates that the US will reap welfare gains of US$156 billion under an FTAAP[5].In terms of one of the US’ main concerns, its trade deficit with China, an FTAAP can curb or even reduce US trade deficit with China. Total US exports to China will grow more than three times its imports from China under an FTAAP, compared to a similar agreement where the US is excluded. An FTAAP without the US may lead to even greater trade deficit for the US due to a more than 50% reduction in its exports to China. In this regard, the TPP is on track to be the most promising building block to our vision of a free trade community within the region.

In addition to new market access, the TPP will establish a climate of cooperation and certainty for US companies doing business in the region. It is important that the US continues to participate actively in the TPP. This will signal the US’ continued commitment to the region, maintain the US presence in Asia and retain mindshare for US products and investors.

Singapore As The US' Partner In Asia

Singapore is well placed to help further US’ interests in Asia, both at the business and the government-to-government level. Singapore’s location and unparalleled connectivity to the rest of Asia have already made it an important hub for US businesses. Our reputation for good governance, strong regulatory and legal framework as well as stable pro-business policies has made Singapore an attractive and competitive location for US investments. In October last year, the US’ leading oil and gas company, Halliburton, opened a Manufacturing and Technology facility in Singapore. This center will be Halliburton’s first facility outside of the US that is able to manufacture sophisticated mechanical and electronic oil and gas tools. In addition, Abbott Nutrition opened its largest nutrition facility worldwide in Singapore in order to serve key Asian markets. Recognizing the conducive intellectual property rights regime in Singapore, Abbott had also established a nutrition science R&D center in Singapore that will develop products tailored to the Asian diet.

Singapore and the US share robust government-to-government relations underpinned by a common belief in free trade and market openness. This bond was strengthened by the successful signing of the USSFTA, the first free trade agreement between the US and an Asian nation, in 2003. With the help of our visionary FTA, bilateral trade has increased by 37%, while Singapore’s exports to the US have grown by 18% between 2004 and 2007. Strategically, the USSFTA sent a strong signal of our nations’ deep ties and of the US’ standing as a partner of Singapore and of Asia.

Singapore’s chairmanship of APEC this year represents the starting-point of a multi-year work plan that continues to Japan’s chairmanship in 2010 and leads up to US' chairmanship of APEC in 2011. It is important that the US make full use of this three-year window of opportunity to engage the Asia Pacific region and to deepen its economic relations with Asia Pacific.

Conclusion

In conclusion, the growth story of Asia is largely intact. That story has a Regional Economic Integration Chapter that strengthens the main story line. A regional economic framework within the Asia Pacific is evolving, one that would harness its economic potential and position it for growth and recovery in the post-crisis order. The US’ participation in this new Asia Pacific agenda presents a challenge and an opportunity for the new administration to further the cultivation of the region’s economies. In these challenging times, the TPP provides a blueprint that articulates the goal of bringing our economies closer and presents a road map for the US’ partnership with the region. As the TPP gains strength from new members such as the US, the US would have harnessed the economic prospects of regional economic integration. It would have also secured markets and opportunities for its own economic recovery and development after the shroud of the current crisis is lifted.

In recognition of our shared vision, Singapore welcomes the US’ contribution to APEC this year and looks forward to its continued active participation to establish a robust TPP.

As key stakeholders in the growth of the US economy, you as US business and government leaders have a significant role to play. At a time when protectionist pressures are rising around the world, you can strengthen your leaders’ resolve to liberalize trade and strengthen economic linkages with US partners in the Asia-Pacific. Through your practical knowledge of the Asia Pacific region’s business opportunities and economic landscape, you can register the relevance of the US’ participation in APEC and the TPP with greater clarity and resonance. The feedback you channel to the new administration will go a long way towards realizing our shared vision for a free trade area in the Asia Pacific.

Thank you.

[1]

“Trading Up to Global Recovery” by Charlene Barshefsky, former US Trade Representative under the Clinton Administration, 10 March 2009, Washington Post.

[2]

“Business Roundtable Statement on US-Colombia Trade Promotion Agreement”, Business Roundtable, 7 Apr 2008,

http://trade.businessroundtable.org/news/2008_04_07_colombia.html

[3]

China’s “Soft Power” in Southeast Asia, Congressional Report Service.http://www.fas.org/sgp/crs/row/RL34310.pdf.

[4]

Behind EU and NAFTA. By total trade, the FTAAP will be behind EU-27, ASEAN+6, ASEAN+3 and NAFTA[4]. US merchandise exports to NZ will rise by 25%. [Source: Study by Fred Bergsten and Robert Scollay on the effects of a bilateral US-NZ FTA, 2003.]

[5]

Source: Brookings Institute paper, “What does a Free Trade Area of the Asia-Pacific Mean to China”, 2008, which measures economic impact from 2007 to 2056 and assumes the following timeline:

EAFTA: goods: 2015, services: 2017, investment: 2020

FTAAP: goods: 2025, services: 2027, investment: 2030