Mr Ravi Menon, Second Permanent Secretary, Ministry of Trade and Industry, at the Singapore Trade Policy Review in Geneva

SPEECH BY MR RAVI MENON, 2ND PERMANENT SECRETARY, MINISTRY OF TRADE AND INDUSTRY, AT SINGAPORE TRADE POLICY REVIEW, 14 - 16 JULY 2008, GENEVA, 14 JULY 2008, 4.00 PM

Chairperson, thank you for your kind introduction.

We are happy and privileged that Amb Shinichi Kitajima is leading the discussion for this Trade Policy Review..He knows Singapore well, having served in the Embassy of Japan to Singapore from 1981 to 1983.

We are also grateful to the WTO Secretariat for their thorough and excellent report.It provides a comprehensive review of Singapore’s trade policies and practices.

The Singapore Government’s response is set out in our statement, and I do not intend to go through it.Instead, I would like to focus on one of the key policy challenges or imperatives facing the Singapore economy over the medium-term:

• How can we address the downsides of globalisation while seizing its opportunities?

This question has a broader relevance in the current context – amidst the growing anxiety in many countries about globalisation and liberalisation, and the opportunity presented by the WTO Ministerial next week to turn back the rising threat of protectionism and build a firm consensus and commitment in favour of trade liberalisation.

Singapore is one of the most open and freest economies in the world.The ratio of trade to GDP is about 350%.Apart from six lines for alcoholic beverages, Singapore imposes zero tariffs.There are no export subsidies, import quotas, capital controls, or restrictions on foreign investment.Singapore has been ranked by Foreign Policy as the most globalised country in the world in four out of the last seven years.It has topped the Enabling Trade Index, a new global index compiled by the World Economic Forum to measure openness to international trade and investment.

As a small economy, Singapore has no other choice but to embrace globalisation, open up its markets, and foster competition.It is in Singapore’s vital interest to advance the global trade and investment liberalisation agenda and to ensure a strong rules-based multilateral trading system.Singapore has been a consistent champion of liberalisation on the multilateral, regional and bilateral fronts.

This is not to suggest that Singapore is immune to the challenges posed by globalisation and liberalisation.Let me cite three challenges of particular relevance to Singapore:

1. First, we face strong competition from low-cost producers.

2. Second, external demand and price shocks are quickly transmitted into the domestic economy.

3. Third, the international division of labour has meant increasing wage inequality within the workforce.

Our response has been to deal with these downsides squarely – not through protectionist policies but by seeking to enhance competitiveness, build new capabilities, and ensure opportunity for all segments of society.Let me briefly touch on our strategies.

First, promote a sound and conducive macroeconomic environment.To enhance competitiveness, the tax system has been restructured away from direct to indirect taxation, while maintaining fiscal prudence and sustainability.

Second, restructure the economy towards higher value-added, knowledge or technology intensive activities. These are less vulnerable to cost competition.In services, Singapore has been building on its existing strengths in financial and business services, transportation and logistics, and tourism, to position the economy as a services hub in Asia.In manufacturing, Singapore has been facilitating the market-led transition towards newer and higher value-added activities like biomedical sciences, chemicals, and clean energy, even as lower-cost manufacturing activities shift to cheaper locations in other parts of Asia.The government’s role in economic restructuring has been centred on encouraging investment in research and development, building supporting infrastructure, and addressing resource constraints.

Third, upgrade workers’ skills through retraining and continuing education programmes.This is to ensure that the workforce is able to support new activities and workers are able to improve their productivity and command healthy wages.Singapore has put in place a workforce skills qualification system to facilitate adult learning and provide career progression pathways.

Fourth, enhance the social security system to provide opportunity for all to strive and succeed.There has been increased government expenditure to ensure that basic healthcare and public housing remain affordable for most Singaporeans, with subsidies targeted at the lowest income groups.A wage supplementation programme has been put in place to help low-wage workers, and fiscal surpluses are re-distributed to Singaporeans with more going to the elderly and needy.These measures have helped to ameliorate the effects of wage dispersion.

Let me conclude. Singapore is acutely aware that its fortunes are tied to external developments.As a small economy, Singapore does not seek to determine these developments nor can it insulate itself from these developments.Rather, our response has been to adapt, adjust, restructure, and transform ourselves to make the best of these developments.Our experience in ameliorating the challenges of globalisation while seizing its opportunities will hopefully give others the confidence to do so too.

Trade liberalisation has raised living standards, reduced poverty, and provided opportunity for large segments of society, in many countries.This is why next week’s Ministerial is so important.Let us all work towards a successful conclusion of the Doha Round which promises benefits for all.

Thank you very much.