Speech by Minister S Iswaran at the Dentons Rodyk Dialogue 2018

OPENING ADDRESS BY MINISTER FOR COMMUNICATIONS AND INFORMATION AND MINISTER-IN-CHARGE OF TRADE RELATIONS MR S ISWARAN AT THE DENTONS RODYK DIALOGUE 2018 ON TUESDAY, 8 MAY 2018, 10.10AM AT THE SINGAPORE MANAGEMENT UNIVERSITY

Professor Arnoud de Meyer, President, Singapore Management University,

Mr Philip Jeyaretnam, Regional CEO and Global Vice-Chair, Dentons Rodyk,

Distinguished Guests Ladies and Gentlemen,

Introduction

1.             It is my pleasure to join you this morning at the Dentons Rodyk Dialogue 2018.  I congratulate SMU and Dentons Rodyk on organising this forum which brings together thought leaders to think about the issues that affect Asia’s legal, business, cultural and economic landscape.  In particular, this year’s theme, with its focus on international trade and its implications for the region, should resonate with businessmen, academics, government leaders and officials all of whom seek to navigate today’s complex and volatile economic landscape.

2.             Today, international trade and global economic cooperation are poised at a crossroads.  The choice before us is stark.  Economies have always competed but also collaborated with one another.  Hitherto, there has been a healthy tension, rather than a tense standoff, between these countervailing instincts to compete and collaborate.  This constructive balance has supported the development of international supply chains that have harnessed competitive advantages and grew the aggregate economic pie for the benefit of all nations.  In more recent times, this equilibrium has come under strain, but not because the economic opportunities are suddenly shrinking or that the gains from cross-border trade has reached a cap.  Rather, profound and wide-ranging transformation brought about by technological advances which have disrupted business models and jobs while creating new industries and enterprises.  In other words, there are winners and losers in this process.  This sometimes sharp contrast in economic outcomes, caused by the confluence of globalisation and technology trends, has led to domestic political pressures, calls to protect jobs, a rise in nativism, and greater trade friction. 

3.             We need strong political leadership, informed by sound economic analysis, for governments to collectively choose the correct path at this juncture, and to persuade their people of its merits.  This will determine whether unilateralism and zero-sum thinking will prevail; or whether countries remain open and connected even as they work together to address the deficiencies in today’s global trading system. 

4.             An open, rules-based international order and multilateral trading system has been the key catalyst for growth by fostering economic cooperation and greater interdependence between Asia, the United States, Europe and the rest of the world.  And I want to make three points that undergird Singapore’s position in support of free and open markets, supported by a rules-based multilateral trading system. 

5.             First, both developed and developing countries, large and small economies, are beneficiaries of trade and open and connected markets.  It engenders interdependence and cooperation between countries generating benefits that start in the economic sphere, but also extend to the social and cultural realms, and definitely, ultimately yield long term strategic dividends.

6.             History attests to this.  The post-WWII era has been marked by steady economic growth as trade and investments have steadily contributed to increasing productivity, greater innovation, and integrated and efficient international supply chains.  The certainty that is supported by trade rules and disciplines, including sanctioned safeguards and dispute resolution mechanisms, have been underpinned by global institutions such as the World Trade Organisation (WTO), and the commitments in bilateral and plurilateral agreements.  The consequential boost to incomes and rise in living standards are empirical facts.

7.             In both developed and developing economies, studies have shown that trade has resulted in significant productivity gains.  In developed economies, trade has been estimated to reduce the price of the household consumption basket of low-income households by two-thirds, while helping to advance other social objectives.[1]  In ASEAN, we have experienced at first-hand how regional integration initiatives have lowered trade costs, expanded sourcing of input materials, increased choice for manufacturers, and enhanced opportunities for businesses in an integrated regional market.  This has helped ASEAN’s economy grow five-fold in the last two decades to become the 6th largest economy in the world[2].

8.             An open, rules-based international order and multilateral trading system has helped to foster greater inter- and intra- regional interdependence.  Consumer welfare has been enhanced through a greater variety of goods and services.  In short, the impact of trade is multi-faceted, with positive externalities that extend well beyond the economic realm, nurturing shared interests that transcend the size, stage of development or the geographical location of countries.

9.             What then can we do to ensure free and open markets in the current international environment?  Against the backdrop of anti-globalisation rhetoric and rising trade tensions, we believe like-minded nations must stand together and serve as an important counterpoint by persevering with efforts to deepen economic connectivity. By preserving and embracing an open stance towards trade and investment, so as to create more opportunities for our businesses and people. 

10.          The recent signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a tangible demonstration of the signatories’ commitment to the collective goals of greater trade liberalisation and regional integration.  Even without US participation, the economic and strategic imperative for the CPTPP is no less compelling.  It establishes a common understanding among treaty countries of trade disciplines in key areas, while signalling a commitment to shared prosperity, leaning against the winds of anti-globalisation and protectionist sentiments.

11.          The Agreement will enhance trade among countries in the Asia-Pacific, resulting in an easier flow of goods, services.  Companies will be better placed to tap on growth opportunities and increased market access in the region.  The CPTPP, together with the Regional Comprehensive Economic Partnership (RCEP), also present complementary pathways towards achieving a Free Trade Area in the Asia Pacific – a fast-growing region with significant opportunities.

12.          The second point I wish to make is that the global trade architecture must adapt to changes in the economic environment and not remain static.  The strength of the global trade architecture lies in the certainty it provides as a forum to formulate rules and resolve disputes.  But trade arrangements must also evolve to accommodate new disciplines and constructive rules to seize emerging areas of opportunity.    

13.          Indeed, many trade agreements today are incorporating what is sometimes described as “modern trade issues” in the areas of climate change, intellectual property (IP), flow of data and the digital economy.  Areas such as IP protection and digital trade facilitation will increase in significance as cross border transactions involving technology and intangibles become prevalent. 

14.          The structure and content of global and regional economic architecture must evolve to take into account these new dimensions to trade, such as the digital economy which has given rise to electronic commerce and e-fulfilment services including digital payments and logistics.  The digital economy can unleash the potential of millions of small businesses by giving them relatively easier and lower cost access to distant markets and support services, which were previously only available to large enterprises. 

15.          Trade agreements must also address the exponential growth in cross-border data flows which has surpassed global goods trade[3].  The recently signed CPTPP, for example, embodies rules which help businesses transfer data across borders, particularly those that are operating in more innovative, data-driven sectors.

16.          In ASEAN, we are also pursuing efforts to build a competitive, resilient and innovative region, to secure our relevance in the global economy.  The ASEAN Economic Community Blueprint 2025 envisages a deepening of regional integration, especially in the areas of innovation and the digital economy.  With Singapore’s Chairmanship of ASEAN this year, we are pursuing specific initiatives to boost the region’s digital economy.  This includes developing trade rules in e-commerce, lowering businesses’ operating barriers to entry, and building up greater digital connectivity, to facilitate e-commerce flows in the region.  The Regional Comprehensive Economic Partnership (RCEP) also aims to create an open and transparent environment for businesses to harness the potential of regional supply chains and e-commerce.

17.          Let me now turn to my final point - International Trade and globalisation must be complemented by domestic policies for the economic dividends to be equitably distributed.  Such domestic policies include schemes to deepen the capabilities of businesses, enhance the knowledge and skills of the workforce, and redistribute through government transfers.  The judicious and systematic application of such measures can help individuals and companies adapt to the changes brought by globalisation and technology trends.  It can also help cushion the disruptive impact of restructuring on specific industries, geographical areas or segments of the population. 

18.          Of late, it has become more common to blame globalisation and trade for various economic ills and job losses.  This had led some nations to look inwards, erect barriers and protect industries and jobs.  But this is not a sustainable solution.  In many instances, the cause is technological trends and changing consumer preferences and industry patterns.  Hence, the solution lies, not in trade barriers, but rather in the harder but ultimately more promising route – where trade policies are balanced with complementary domestic policies.  This recognises that while trade enlarges the overall economic pie, the distribution of its benefits can be uneven.  Hence, we need policies that allow more to access the gains from trade, and mitigate the “winner takes all” effect.  This means undertaking sustainable fiscal transfers, investment in industry capacity building, and social policies including education and training and retraining of the workforce, to enable workers to participate in growth sectors.

19.          SkillsFuture and the Industry Transformation Maps which many Singaporeans are familiar with, are twin engines that serve this important purpose in our context.  We have invested significantly in the SkillsFuture movement which helps workers regularly upgrade themselves and acquire the skills needed for the jobs of the future – including data analytics, cybersecurity and advanced manufacturing and engineering technologies.  The Professional Conversion Programmes also help workers pick up new skills to make the transition to adjacent growth industries.  

20.          We have also rolled out ITMs in 23 sectors.  The aim is to support our firms in their efforts to deepen capabilities and adapt their business models through the four pillars of productivity, jobs & skills, innovation and internationalisation.  The ultimate objective of these two core programmes and many others, is to provide holistic support at the level of the worker, the enterprise and the industry, as they adapt to the changes brought about by globalisation and technology.   

Conclusion

21.          To conclude, I would like to reiterate my three points.  First - all countries, regardless of size or stage of development, stand to gain from international trade.  Hence, it is incumbent on like-minded nations to countervail anti-globalisation instincts by continuing to forge a viable path forward for economic integration.  

22.          Second – to stay relevant, the global trade architecture must adapt to accommodate new disciplines to seize emerging opportunities such as the digital economy.  Finally – international trade initiatives must be complemented by domestic policies that enable enterprises and individuals to adapt to the needs of a changing economy, and access the gains from globalisation and greater economic connectivity. 

23.          Notwithstanding the current backdrop of uncertainty in global trade, Singapore will strive to build stronger links and closer ties with our trading partners, stay open as an economy and society, and welcome talent, ideas and innovation.  We believe this is the most durable strategy for Singapore and our partners to tap on growth opportunities in Asia and the rest of the world, and create better opportunities for our enterprises and our people.  Thank you.

[1] Source: Making Trade and Engine of Growth for All, IMF, World Bank and WTO, 2017.

[2] Source: ASEAN: A Community of Opportunities, ASEAN Secretariat, 2017. The ASEAN economy has grown from US$577 million in 1999 to US$2.55 billion in 2016

[3] Source: Digital Globalisation: The New Era of Global Flows, McKinsey Global Institute, March 2016.

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