11 June 2019
Tuesday, 11 June 2019
Pan Pacific Hotel, Singapore
Ladies and Gentlemen,
It is my honour today to address the tenth Parliamentarian Workshop on International Trade co-hosted by the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, and the World Trade Organisation (WTO). On behalf of my fellow Members of Parliament (MPs) in Singapore, I wish our Parliamentary colleagues from across the Asia-Pacific a warm welcome.
2. The year 2009 was a significant one. Not only was this Workshop series launched then, but it also marked the first year after the Global Financial Crisis (GFC) and heralded the transition to a new normal in the global economy. Ten years on, it is heartening to see not only that the global economy has rebounded, slowly but surely, but also that the Asia-Pacific, including Southeast Asia, continues to be a dynamic region critical to the health of the world economy.
3. The factors responsible for this laudable growth are the same ones that have bolstered the region’s economic resilience. For the Asia-Pacific, development rode on the back of not only an embrace of economic openness, but an embrace of free trade — one enabled by the multilateral trading architecture and in turn, the various regional trading agreements (RTAs) built upon that essential, solid foundation.
4. This was particularly true for Southeast Asia in 1997, when the Association of Southeast Asian Nations (ASEAN) turned to trade as a way to bounce back from the Asian Financial Crisis. It launched the ASEAN Free Trade Area in December, followed by the ASEAN Framework Agreement on Services two years later. It also held true during the GFC, when Asian exports outperformed global trade from as early as the first quarter of 2009. Complemented by strong macroeconomic fundamentals, moreover, ASEAN intra-regional trade was instrumental to Southeast Asia’s swift recovery.
5. To this day, openness and trade continue to drive growth within the region. In 2017, ASEAN’s GDP stood at USD 2.8 trillion while its total trade was worth USD 2.6 trillion, making it the fourth largest trading economy globally. The continued implementation of the ASEAN Economic Community, a single market and production base aiming to facilitate greater economic integration in Southeast Asia; ongoing negotiations for the Regional Comprehensive Economic Partnership (RCEP), a mega-regional trade pact covering nearly a third of global GDP and half the world’s population; and the now-active Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which several ASEAN members including Singapore are participating in, further reflect regional states’ commitment to maintain an open system and free trade. Their lawmakers continue to believe in the significant potential both trade and economic reforms hold for generating greater prosperity.
6. Nonetheless, despite such potential, it must be remembered that trade is neither inherently good nor bad. Rather, trade is a tool— one that must be wielded with care. History has shown that trade is capable of doing great things: generating waves of economic development, lifting countless millions out of poverty and improving quality of life, as well as sheltering myriad vulnerable economies from perfect economic storms.
7. However, trade can also create tensions. While its benefits are diffused, the costs of trade are often concentrated among some of the most vulnerable sections of society. An open system, for instance, allows firms to relocate their production facilities to places where labour costs are relatively low. Jobs thus move to other countries and unemployment results. Coupled with issues such as rising inequality and hindered socioeconomic mobility, which openness and trade have at times become scapegoats for, it is not surprising that anti-trade sentiments and bottom-up calls for protectionism have proliferated around the world. Moreover, trade has become a source of international conflicts, leading to top-down support for economic decoupling by some governments. These discontents send a loud and clear signal to lawmakers that going forward, trade must be used more effectively to deliver inclusive growth and sustainable development for all.
8. While constructive discussions for fairer trade are welcome, trade cannot be an effective tool if the rules-based multilateral trading system is, as of late, under siege from protectionist sentiments and obstructed by geopolitical tensions. The uses of sanctions and tariffs on the grounds of national security have sparked copycat and tit-for-tat protectionism. Meanwhile, the WTO’s Appellate Body is in crisis. Barring the appointment of new judges by December 2019, the WTO’s dispute settlement mechanism will be largely paralysed, heightening uncertainty for global trade at best and risking a descent into lawlessness at worst.
9. Moreover, while RTAs can fill in some gaps, these are supplements rather than substitutes to the multilateral trading system. First, RTAs are deemed second best due to their limited coverage. Second, despite the mushrooming of dispute settlement mechanisms in RTAs, many, if not all, trading nations continue to look to the WTO as their first choice for dispute resolution.
10. Given the complex interdependence binding our economies together, whether in the Asia-Pacific or beyond, it is clear that abuse and neglect of the multilateral trading system will benefit few. For example, the World Bank slashed global and Asia-Pacific growth prospects in 2019 to 2.9% and 6% respectively, due in part to percolating trade tensions and protectionism. Additionally, the WTO projects lower world merchandise trade growth at 2.6% in 2019 compared to 3.9% last year.
11. Small and open markets such as Singapore, whose trade dependency stood at 322% of GDP in 2017, have thus far thrived thanks to the rules-based multilateral trading system. Even our foreign policy has benefited from a diverse array of global trading partnerships, which have enabled us to punch above our weight in the international order. For economies considering greater trade-based growth, a deteriorating rules-based order obstructs their path to greater economic development and a stronger voice on the global stage. Instead, it fosters an unpredictable business environment where exchanges of trade, finance, innovation, talent, and ideas cannot fully thrive. It also raises inter-state tensions and hinders cooperation for prosperity and peace.
12. Against this backdrop, strong and consistent commitment to the multilateral trading system has become more important than ever. For Singapore, it is heartening to see that we, along with our neighbours in ASEAN, are not alone in underscoring this message. The uptick in protectionist and inward-looking sentiments has been matched by galvanised interest in and support for the WTO and the broader multilateral rules-based order among policymakers, businesses, and society alike.
13. Governments remain driven in seeking improved and optimised performance within the WTO, even if they do not always see eye-to-eye on what shape or form these reforms should take. However, this process must be inclusive to ensure the WTO continues to benefit all. We must persist in our support for updating the multilateral rulebook , as new growth frontiers such as trade in services continue to expand and economies increasingly transition to a digital age. Beyond the Trade Facilitation Agreement implemented two years ago, 77 WTO members agreed to launch e-commerce negotiations in February this year. Members continue to engage the WTO, trying to break the impasse by balancing ambition and inclusivity, because one truth is clear: beneath the sheer complexity of the rules-based trading order lies the simple fact that the multilateral trading system remains a critical tool for our shared prosperity.
14. Ultimately, the multilateral trading system comprises its member economies. As such, their behaviour and actions matter. I am positive that the excellent group of speakers and experts we have gathered for this workshop will provide useful insights on how the rules-based multilateral trading system, along with our member economies within it, can operate more effectively while navigating the pressing political challenges and economic issues of our time. As ideas and experiences are exchanged, I hope that the lessons gleaned from this workshop will serve your economies well and enable all of us, as Parliamentarians, to better represent our populations in the multilateral trading system as well as communicate the workings and benefits of trade.
15. On that note, I wish you all a productive day and a pleasant stay in Singapore.
Last updated on 02/07/2019