Impact on Singapore of US Pull-out from Trans-Pacific Partnership

11 Mr Ang Wei Neng asked the Minister for Trade and Industry (Trade) what is the impact on Singapore's economy in the wake of the challenging global trade situation including the US' intention to pull out of the Trans-Pacific Partnership (TPP), the threat of a trade war between the US and China and increasing calls for protectionism by many developed countries.

12 Assoc Prof Randolph Tan asked the Minister for Trade and Industry (Trade) whether the Ministry has a strategy to deal with the potential impact on Singapore's trade from the decision by the new US administration to pull out of the Trans-Pacific Partnership.

13 Mr Pritam Singh asked the Minister for Trade and Industry (Trade) (a) whether the Government will continue to pursue the Trans-Pacific Partnership (TPP) with like-minded countries; and (b) what is the Government's assessment of the efficacy of TPP without the participation of the US.

The Minister for Trade and Industry (Trade) (Mr Lim Hng Kiang): Mdm Speaker, may I have your permission to answer Question Nos 11, 12 and 13 together?

Mdm Speaker: Yes, please.

Mr Lim Hng Kiang: Mdm Speaker, we are witnessing a rise in anti-globalisation sentiments in Europe and the US. If protectionist approaches become the norm or a trade war among major economies ensues, then global trade will be adversely affected, with knock-on effects on economic growth worldwide.

Small and open economies like Singapore are especially vulnerable. Protectionist barriers to trade would curtail Singapore's ability to tap on demand in export markets or serve as an intermediary for global trade flows. This would have an adverse impact on our economy, of which two-thirds of our gross domestic product (GDP) is driven by external demand.

On the other hand, our external linkages can also make us more resilient in facing these headwinds. Over the years, we have carefully built up our regional and global connectivity with multiple regions across the world. We have also developed an efficient, stable, pro-business environment, with effective and consistent business and investment frameworks. This allows us to tap on the growth opportunities in Asia and elsewhere, for mutual benefit with like-minded partners. Amidst the current rise of anti-trade sentiments, Singapore will stay the course to remain open and connected, to be an attractive global city that welcomes the best companies, talent and investments.

We remain firmly committed to pursuing a rules-based global trading system and achieving greater regional integration. We will do our part to ensure that markets remain open, so that companies in Singapore can continue to scale up and internationalise.

The agreement that the Trans-Pacific Partnership (TPP) parties negotiated was one of several such pathways to achieve stronger trade linkages that will promote growth opportunities and job creation in the member countries. With the US' withdrawal, the TPP agreement, as signed, cannot come into effect. This is a setback for the global trade liberalising agenda but need not be the ultimate outcome. Each TPP partner will now have to carefully study the new balance of benefits without the US' participation and consider the value of an agreement among the remaining 11 partners. In addition to consulting with other TPP partners to find a mutually beneficial pathway forward, Singapore is also actively engaged in other regional integration initiatives, such as the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Economic Community (AEC).

Mdm Speaker, we will also continue to work with like-minded partners at the World Trade Organization (WTO) as advocates of a rules-based multilateral trading system. On the bilateral front, Singapore has an existing network of 21 free trade agreements (FTAs) in force, including with the eight TPP countries and the US. These speak to our deep ties with key trading partners and will help us stay connected as the environment evolves. We will also actively pursue other forms of economic cooperation initiatives, including industrial parks and other projects in the region, to create more opportunities for our companies to collaborate and grow.

Mdm Speaker: Mr Ang Wei Neng.

Mr Ang Wei Neng (Jurong): Mdm Speaker, I thank the Minister for the comprehensive reply. Could the Minister give an update on the progress of RCEP and the proposal for the Free Trade Area of the Asia Pacific? I understand that the last round of negotiation of RCEP was held in Tianjin back in October 2016. What would be the next step?

Mr Lim Hng Kiang: RCEP is progressing a bit slowly. We were planning to complete it within a reasonable timeframe of about three to four years. It is going to take us a bit longer. The reason is because we are trying to put together the FTAs that ASEAN has with the various dialogue partners. So, the problem or challenge is not within ASEAN because we already have FTAs with our corresponding dialogue partners. The challenge is with the dialogue partners not having FTAs among themselves. For example, between China and India, they do not have an FTA. So, they are coming together for the first time. One can imagine, with two huge economies starting from scratch, that is a huge challenge.

On the FTA for the Asia Pacific, this is a process that is only beginning to take place. The original idea was to have several pathways, one of which was TPP, the second is RCEP, and then we will merge the various pathways to form the FTA for the Asia Pacific. Now, with the setback in the TPP, we have to find other pathways to reach our ultimate objective of an FTA for the Asia Pacific.

Mdm Speaker: Assoc Prof Randolph Tan.

Assoc Prof Randolph Tan (Nominated Member): I thank the Minister for his reply. I do not think it is an exaggeration to say that TPP is actually an agreement that is way ahead of its time. I think that could be one of the reasons for the obstacles that we are seeing now. I am also aware that a TPP agreement is no longer possible in its current form, but what about the TPP model? Is Singapore pursuing the TPP model with other like-minded countries? For instance, Australia and Japan actually ratified the agreement after it was made clear that the US' new administration would no longer go ahead. Is there a possibility that we can pursue the TPP model with these countries?

Mr Lim Hng Kiang: The TPP initiative put together three separate objectives. One is market access, which is the typical objective of an FTA. The second objective is to put in place rules that are more relevant to commerce in the 21st century, and I think this is what is very innovative about TPP. The third is, of course, the geo-strategic objective of putting economies across the Pacific and integrate them together.

So, I agree with the Member that TPP was a very ambitious undertaking and it took us nearly six years to cobble it together. First, to find a balance of benefits that people can live with in providing market access but, more importantly, to sit down and set out the rules for commerce in the 21st century ‒ rules for intellectual property, environment, labour, e-commerce, and many of these rules. Third, of course, is the strategic objective of putting economies across the Pacific and integrate them.

So, to find a new set of countries with similar ambitions is not easy. Whether we can proceed with TPP-11, as I mentioned, depends on the assessment of the benefits that the 11 countries will now have to calculate without the US as the major market. TPP was negotiated with market access of all the countries but, of course, with the US as a major market for which many countries want additional market access. Now, with that market access no longer available, the set of benefits will change for each country. So, everyone will have to make their new calculations.

Mdm Speaker: Mr Pritam Singh.

Mr Pritam Singh (Aljunied): I thank the Minister for his reply. I just have one question and it relates to a Channel NewsAsia article that appeared after Prime Minister Lee's meeting with the leaders of the Pacific Rim countries. The headline was "Singapore to amend legislation to bring TPP into effect by next year".

Can I just clarify, for the TPP-11 countries, is there any timeline for them to come to an agreement whether they want to proceed with an agreement which takes the shape or form of the TPP or not?

Mr Lim Hng Kiang: The original agreement was that we will all try and get our ratification process done within two years of the signing of the Agreement, which was 5 or 6 February last year. So, that was the original target. It is in line with that original target that we said that we would be among the first few countries that would ratify the TPP in line with the other countries.

And now, with the US' withdrawal, countries would have to recalculate. One possible pathway is for countries, the TPP-11, to continue their ratification process and wait until the US is ready or changes its mind, then they will join. That is one possible pathway. The second is, of course, to have a bilateral agreement with the US, as the US now wishes to embark on more bilateral agreements rather than plurilateral agreements. The third is, of course, the option of a TPP-11. So, it depends on the perspective of individual countries.

For some of the TPP countries, for example, Singapore and Australia, we already have bilateral FTA agreements with US, so the TPP is incremental and gives us an incremental market access. Our main bilateral trade in goods and services and investments are covered by the bilateral FTAs that we have. So, every country will have to reassess its situation.

Mdm Speaker: Mr Liang Eng Hwa.

Mr Liang Eng Hwa (Holland-Bukit Timah): Madam, my follow-up question is on bilateral trade agreements. Given that multilateral trade agreements are so difficult to stitch and ratify with many varying political interests, political cycles and not to mention, the long-drawn process, would the Ministry now take a different strategy or perhaps a separate strategy to pursue more bilateral trade agreements with countries, especially those economies that could be potentially our new markets, like South America, Latin America and Africa, for example? Would there be a separate track or effort to do that as well?

Mr Lim Hng Kiang: We have always taken both bilateral, plurilateral as well as multilateral positions, especially with WTO. On bilateral, we have, as I mentioned just now, 21 FTAs, and these cover all our major trading partners. We have one current bilateral FTA that we are negotiating with Sri Lanka. We continue to do bilateral FTAs and to pursue new markets.

We also work on plurilateral tracks, for example, the RCEP. In the ASEAN+1 FTA with the six dialogue partners, we are trying to cobble these together into a bigger plurilateral FTA called the RCEP so as to try and harmonise the rules and try to make it less of a "spaghetti bowl" of FTAs, to make the processes more business-friendly to our companies. So, we take all three approaches, as well as work actively with WTO for multilateral tracks, particularly in trade facilitations.

Mdm Speaker: Mr Patrick Tay.

Mr Patrick Tay Teck Guan (West Coast): Mdm Speaker, I would like to ask the Minister, in light of the US' withdrawal from the TPP, what is the impact to workers and unions in Singapore?

Mr Lim Hng Kiang: Mdm Speaker, as I mentioned just now, what we forgo in not continuing with the TPP is the incremental benefits that we would have achieved in the TPP over-and-above the existing benefits that we have with the bilateral FTAs with the nine other countries within the TPP group.

I think as far as the workers are concerned, what is more important for them is to understand the environment that we are facing, the headwinds, and work together with the Government, employers and companies to deal with these headwinds. The approach that we have taken through our Industry Transformation Maps, through the 23 sectoral plans, these are concrete ways in which all three parties can work together and still continue to provide good jobs for our workers.

Mdm Speaker: Mr Leon Perera.

Mr Leon Perera (Non-Constituency Member): Madam, just one supplementary question: does the withdrawal of the US from TPP set back any prospect of reviving the Doha Round of WTO negotiations? How does the Minister assess any prospect of advancing the Doha Round in the current context?

Mr Lim Hng Kiang: We are making modest headway through the Doha process by taking subsets of the Doha agenda and seeing whether we can proceed successfully on the subsets. For example, in 2013, we got together and agreed on the trade facilitation agreements, and I think we are quite close to ratifying it. We should be able to ratify it by this year. Similarly, we are taking other subset agendas to try to see if we can cobble it into an agreement. So, that continues. What the US brings to WTO in terms of leadership, I think that has yet to be demonstrated.