Mr Lim Hng Kiang at the US National Centre for APEC Annual Luncheon

KEYNOTE ADDRESS BY MR LIM HNG KIANG MINISTER FOR TRADE AND INDUSTRY, SINGAPORE AT THE US NATIONAL CENTRE FOR APEC ANNUAL LUNCHEON THURSDAY, 20 NOVEMBER 2008, 1239 HRS IN LIMA, PERU

Accelerating Regional Economic Integration: The Way Out Of The Downturn

Ladies and Gentlemen,

Thank you for inviting me here to share Singapore’s ideas for APEC 2009.

Challenging Global Environment

As you all know, the world is facing an unprecedented economic crisis. Stabilising the financial markets is an immediate priority. However, the impact on our real economy is just beginning to be felt and it will be a long haul before we see the bottom.

The economic slowdown which began in North America and Europe has spread to emerging developing economies.According to the World Bank, global trade volumes are likely to fall next year – the first decrease since 1982. Trade may contract as much as 2 per cent, in contrast to annual growth rates of 5 to 10 per cent over the last decade, so it’s a very sharp change. This will hurt growth and worsen the prospects for vulnerable segments of our society.

The key to recovery is governments’ ability to create conditions for trade and investment flows. One of the biggest risks we face is that countries may restrict markets in a misguided attempt to mitigate their pain. This might be a tempting response. But, of course, it will only deepen and prolong the global recession. We should not repeat the mistakes of the 1930s.

Need to Sustain Growth

Supporting Doha

APEC economies have a crucial role to play at this critical juncture. The over-riding priority must be a decisive and expeditious outcome to the Doha Round.Securing a global deal will deliver new trade flows. But far more importantly, a successful Doha Round will serve as the best possible firewall against protectionist pressures in the coming years by locking in current levels of market access in trade and investment.

Accelerating Regional Economic Integration

Beyond supporting Doha, APEC can set the pace for even faster trade and investment liberalisation. We need a “stimulus package” for trade. Accelerating regional economic integration will provide the stimulus to sustain growth in the Asia-Pacific.

There are three things that APEC can do to accelerate regional economic integration, which Singapore will focus on during our chairmanship next year.

First, we will put in place building blocks for a possible Free Trade Area of the Asia Pacific (or FTAAP).

In 2006, APEC Leaders identified FTAAP as a possible long-term goal. Since then, APEC has been studying various options for achieving a FTAAP. Realistically, we do not expect all 21 member economies of APEC to sit down together and negotiate a new FTA from scratch. APEC economies already have over 30 FTAs amongst ourselves. With that as a foundation, there are more practical approaches to achieving an FTAAP.

We will look into streamlining the rules of origin amongst existing FTAs to minimize the “spaghetti bowl” effect, reduce compliance costs and increase FTA utilization rates. This will ensure that the FTAs so painstakingly negotiated actually translate into actual benefits for business.

Next, we will look into docking, merging or enlarging some of these FTAs so that they form a larger regional FTA over time. These are the building blocks we can put in place so that we take practical steps towards achieving an FTAAP.

The Trans-Pacific Strategic Economic Partnership (or more commonly known as the P4 or the TPP) is one such potential building block. Singapore, Brunei, Chile and New Zealand signed the P4 agreement in 2005.In September this year, the United States announced its decision to join. This morning, Australia and Peru have announced that they are coming onboard too.The first round of negotiations among the P7 of TPP economies is scheduled to take place in March 2009 in Singapore.

The second thing we will do is to accelerate regional economic integration by going beyond trade liberalization at the border to reforms behind the border. We can improve the ease of doing business by simplifying business regulations, as part of APEC’s larger structural reform agenda.

The World Bank publishes an annual Ease of Doing Business survey that outlines how easy or how difficult it is to undertake 10 key processes, such as starting a business, getting credit, trading across borders, and so on. It calculates the time, the cost and the number of procedures needed for these processes. APEC will use this Ease of Doing Business survey as a tangible framework for action, and strive to make it easier, faster and cheaper for companies to do what they need to do in order to get trade and investment flowing. This is a concrete way in which APEC can deliver tangible benefits and practical help for business, especially during these current economic difficulties.

The third thing we will focus on in 2009 is to push APEC to move faster to improve logistics and transport networks, so as to enhance physical connectivity across the border.

This has great potential to increase trade flows.One study showed that each day a product is delayed prior to shipment, trade is reduced by 1%. Hence, a one-day reduction in time taken to move cargo from a US warehouse to the port will increase total trade for the US by $29 billion a year. Indeed, measures that enhance physical connectivity can deliver greater benefits for trade than tariff reductions.

APEC is already ahead of the rest of the world in its work on trade facilitation, which aims to streamline the customs procedures involved in moving goods across borders.We will build on this work to develop a comprehensive framework of initiatives that could further reduce the time, the cost and the uncertainty involved in moving goods along the whole supply chain.

These are some of the ideas that Singapore has for next year. We need to hear from the APEC business community what we can do to make a difference to business, and to make the Asia-Pacific an attractive place to trade and to invest. Tell us how we can help you to cut cost and improve efficiency.We welcome your feedback, suggestions and active participation in this process.

Conclusion: US needs to stay engaged in APEC

We look forward to working closely with the other APEC members during the term of our APEC chairmanship. This includes in particular the United States, which has for decades provided strong leadership in the region as the vanguard of free trade. The Bush administration has been a strong supporter of APEC. It has put its weight behind FTAAP, and now the P4 too, as a building block towards FTAAP.

The new Obama administration is coming in at a difficult time. Understandably, its priority will be to resolve the domestic difficulties first. But the long-term prosperity of the United States depends on open global markets. The Asia-Pacific region contains the US’ most important economic partners, including its top four export destinations, i.e. Canada, Mexico, China and Japan. APEC provides a platform for the US to engage the region and to build linkages across the Pacific, even as Asian countries are accelerating the linkages amongst ourselves through the ASEAN, the ASEAN+3 and the East Asia Summit processes. The US will chair APEC in 2011. It can use its chairmanship to renew its commitment to the Asia-Pacific region and to give a big push to regional economic integration.

It is in the US’ long term interest to stay connected and engaged in our region. The US business community can play an important role in this effort and your support will be crucial in making this case.