[SINGAPORE] Singapore will expand trade ties, forge new alliances and push to reform the World Trade Organization (WTO) in response to escalating global trade tensions, said Deputy Prime Minister Gan Kim Yong at an event on Thursday (Apr 17).
Speaking at a DBS dialogue on the turmoil sparked by US President Donald Trump’s “reciprocal tariffs”, DPM Gan said the move has upended the cornerstone of the rules-based trading order – something especially vital to Singapore – and warned that the tariffs and reshoring efforts could undermine the Republic’s ability to attract investment and create good jobs.
“The US has stated plainly that these tariffs are meant to shore up domestic production in key industries, which it views as critical to its national and economic security,” he said.
He also noted that the US is the largest investor in both Singapore and Asean, and cautioned that a pullback in trade and investment would weigh on regional growth.
His remarks came a day after he unveiled details of the new Singapore Economic Resilience Taskforce, which he is chairing.
The task force includes five Cabinet ministers and was formed in response to the US tariffs and will focus on three areas: “sense-making” and communication, immediate support measures and longer-term strategies.
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As part of the task force’s ongoing dialogue with the business community, the event featured DBS chief executive Tan Su Shan, who spoke on how businesses can adapt, and a presentation by the bank’s chief economist Taimur Baig on “US Trade War and Asia’s Playbook”.
It concluded with a closed-door session between DPM Gan, Tan and DBS clients – many of whom are key business leaders – to exchange views on the challenges ahead.
Working with like-minded countries
Beyond the immediate effects, DPM Gan said on Thursday that Singapore must “prepare for a new economic and geopolitical environment that is more protectionist, arbitrary and dangerous”.
On the government’s part, he said Singapore will work with “like-minded countries” across three key focus areas.
The first is to expand its trade partnerships. He noted that Singapore already has a “comprehensive network” of 27 free trade agreements (FTAs) in force.
He added that the Pacific Alliance-Singapore FTA with Chile and Peru will come into effect in May, and that the government is working towards bringing the Mercosur-Singapore FTA into force.
Together, these FTAs are expected to strengthen economic ties between Singapore and eight Latin American countries, including Argentina, Brazil and Mexico.
The second focus area is to forge new alliances.
DPM Gan pointed to efforts such as working with Asean countries to explore opportunities with the Gulf Cooperation Council, which comprises Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.
Singapore is also looking to partner members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to build new links with the European Union, he said.
The final focus area is to reform the WTO and strengthen the multilateral trading system.
“The WTO is not perfect, but provides a basis for the rules-based order,” said DPM Gan, adding that Singapore wants to work with countries, including the US, to achieve this reform.
To illustrate this point, he said Singapore has been working with Australia, Japan and about 70 other nations to establish the Joint Statement Initiative on E-Commerce.
This initiative will allow those who are “willing and ready” to move forward on issues such as digital trade, without requiring those who are not ready to do so, said DPM Gan.
Together, he said these three moves will “open up new opportunities for businesses to explore new markets and strengthen their supply chains”.
Spiralling relationship
Beyond outlining how Singapore intends to respond to rising trade tensions, DPM Gan also spoke about the “significant risk” that US-China relations will be further destabilised.
“The brinksmanship between the US and China will impact not just the global economy, but also regional peace and stability,” he said.
He noted that tit-for-tat tariffs – with Chinese goods facing a 145 per cent tariff and US goods a 125 per cent tariff – threaten to choke off more than US$600 billion in annual trade.
While some consumer electronics have been exempted, these account for only 20 per cent of total imports, he said.
“This will have significant ramifications for the global economy, given how other countries around the world, including Singapore, are embedded in the production and supply chains of both the US and China,” said DPM Gan.
Although both the US and China are aware that the trade war will hurt their own businesses, workers and economies, he said “both sides are digging in, testing each other’s limits and hardening their positions”.
This fight over trade, he warned, could spiral further out of control, inflaming tensions in other areas of competition – and ultimately hindering global cooperation on issues such as climate change and future pandemics.
Despite the bleak outlook, DPM Gan ended his speech on a note of optimism, reminding the audience that Singapore has weathered past crises, such as the 1997 Asian financial crisis, 2003 Sars outbreak, 2008 global financial crisis, and most recently, the Covid-19 pandemic.
“Just as there are fresh challenges, there will also always be new opportunities,” he said. “We can still make a good living if we remain nimble and be ready to seize new opportunities.”
