Mr Michael Lawrence, Chief Executive of Asia House,
Ambassadors and High Commissioners,
Ladies and Gentlemen,
1. A very good morning to all of you. Let me begin by thanking Asia House for the kind invitation to speak at this dialogue today.
2. This is the second run of the Asia House Global Trade Dialogue in Singapore, and I believe that dialogues like this make an important contribution to the global discourse on the evolving trade architecture and the need for us to keep abreast of compelling economic trends.
3. This is a vast topic, and I have chosen to keep my comments confined to one or two specific areas so that we can explore them further, and other areas of interests in the Q&A segment later. But let me start by observing that global trade has been the foundation of economic growth and development. If we consider developments from historical times, and even the post-World War II era, it is really trade and the institutions that have facilitated it, that has helped to catalyse the exchange of ideas, create new economic opportunities, and above all, lift hundreds of millions out of poverty.
4. Singapore’s own history is testament to this. 200 years ago, the British made Singapore a free port. That enabled a small fishing port to thrive as an open economy and global city. Because we understand its value and potential from experience, Singapore is a keen advocate for trade liberalisation, and a rules-based multilateral trading system.
A Disrupted World
5. The dialogue on global trade assumes even greater relevance in this digital era, with the advent of technologies like Artificial Intelligence (AI), Robotics and Big Data. In Southeast Asia alone, the digital economy is expected to treble in size to US$300 billion by 20251. And some think that it might be a conservative estimate.
6. But this digital transition, whilst creating opportunities, will also disrupt jobs, business models, industries and economies. McKinsey estimates that by 2030, some 14% of the global workforce - about 375 million workers - may have to find new occupations2. These concerns are exacerbated by current economic uncertainty due to trade tensions between the US and China, the preoccupation with Brexit in Europe, and the rise of populist sentiments against globalisation.
7. These challenges stem from the very real problems faced by local populations and industries in adapting to these forces of globalisation and technological change. But our response cannot be to retreat to protectionism, restrictions on trade, or beggar-thy-neighbour policies. As proven time and again, such policies ultimately result in a poorer outcome for all.
8. What then should underpin our trade and economic strategy in this era of digital transformation? Globalisation and technological change can create much value and opportunities, yet cause profound dislocations for workers and businesses. Unless there is a fair distribution of the larger benefits, the natural instinct is to push back against greater competition and disruptive change.
9. Our efforts to embrace technology and economic integration must therefore be matched by an equitable distribution of the benefits and the access of opportunities. In other words, our response to today’s economic challenges must be anchored by two key thrusts - staying open (so that we continue to be able to seize opportunities and grow the pie) and being inclusive (so that we are able to ensure those opportunities, and the access to them, are equitably distributed). Let me elaborate further from Singapore’s perspective.
10. First, staying open - which means a willingness to engage with the world, embrace novel ideas, venture into emerging markets and seize new opportunities while accepting the associated risks. Sustaining such a mindset is challenging in normal times, but especially so in times of economic uncertainty, when you have to stand on principle, conviction, and go against the grain and popular sentiments. That requires political will and strong leadership. Let me cite some examples from Singapore’s experience, where we have endeavoured to do the fundamentally right thing, even if it goes against the grain.
11. At our independence in 1965, separation from Malaysia meant the loss of a common market and hinterland. A few years later, the withdrawal of British troops also led to job losses. The Government of the day made two key decisions. The first was to shift away from import substitution to export-led industrialisation. The second was to attract global multinational corporations. Neither was the conventional wisdom of the times. Yet, these two critical decisions of our founding leaders, for which they vigorously canvassed and secured the support of our citizens, gave Singapore a competitive edge that enabled us to emerge as a newly industrialised economy.
12. Similarly, 20 years ago, we embarked on an external economic strategy that focused on forging bilateral trade agreements. We saw our bilateral Free Trade Agreements (FTAs) as a further expression of our commitment towards an open, connected, and globalised world. Yet, at that time, our bilateral FTA strategy was not orthodox thinking. Critics argued that such FTAs could “damage” free trade and the multilateral trading system. In contrast, today, they are accepted and seen as a constructive component of the global trade architecture. And our network of over 24 FTAs with 36 trading partners yields significant benefits for our businesses and our people.
13. We now need a similar open approach and a willingness to embrace the challenge and reap the benefits of the digital economy. For instance, data is a critical resource for the digital economy. The volume of cross-border data flows in 2017 was nearly 150 times that in 2005. Trade agreements that were conceived in a pre-digital era were not designed for these new economic realities and trade patterns. It is therefore in our collective interest to update global trade agreements, or strike new arrangements, to facilitate the flow of data and digital transactions.
14. That is why we have embarked on negotiations for Digital Economy Agreements (DEAs). These DEAs aim to establish clear and harmonised international rules that promote greater interoperability between digital frameworks, and allow data to flow freely between countries with appropriate safeguards. For a start, we are working with like-minded countries like Australia, New Zealand, and Chile. We have also worked on similar initiatives at the regional and multilateral levels through the ASEAN Cross-Border Data Flows Mechanism, the APEC Cross Border Privacy Rules (CBPR), and the Joint Statement Initiative on e-commerce at the World Trade Organisation (WTO).
15. We complement these new digital agreement initiatives with a continuing emphasis on building on existing FTAs and forging new ones. In particular, we are working to conclude the EU-Singapore FTA and also the Regional Comprehensive Economic Partnership. Collectively, these - both the enhancement and development of existing FTAs and the initiatives on the new digital economy - are going to be important and undergirding global trade and prospects of growth.
16. Staying open to new ideas and innovative modes of engagement with the world has been key to Singapore’s progress, and indeed to that of many countries around the world. We are therefore committed to working with like-minded partners to support the growth of the digital economy, that in turn can yield significant benefits for the overall economy.
17. However, for this strategy to be sustainable, it is essential that the macro gains from trade and globalisation also translate into opportunities and benefits at the micro level, for individual workers and small businesses. In other words, our external strategy to trade and economic integration must be complemented by domestic strategy that allows the local constituencies – those stakeholders who are affected by these changes - to be able to respond to them and benefit from them.
Inclusive Growth for All
18. This brings me to the second thrust - being inclusive. Ultimately, the goal, and measure of success, of our economic strategy rests on how well it creates jobs for our people, and opportunities for our businesses. So it is imperative that governments mitigate the risk of dislocation posed by globalisation and technological advances, by helping businesses and individuals adapt and participate in the new opportunities that are being created. In other words, it is not just adopting a laissez faire approach, but taking a purposeful strategy that is focussed on this aspect. In particular, we must focus on the segments of our economy who may disproportionately bear the burden of adjustment, such as small and medium-sized enterprises (SMEs) and less skilled workers.
19. For enterprises, our aim must be to help deepen their capabilities and innovation capacity because that would help them to deal with all these emerging challenges. In Singapore, we do so through various initiatives, such as the SMEs Go Digital programme, which assists small businesses to adopt new technologies by pre-qualifying tech solutions and helping to defray part of the cost. We aid their innovation activities by granting favourable IP licensing terms and seconding scientists and researchers from our research institutes to work with these companies on their innovation blueprint.
20. We also help our SMEs venture abroad by harnessing the benefits of our FTAs. In partnership with trade associations and chambers, we inform our businesses of the benefits they can derive from our FTAs through regular education and outreach activities, training courses, and business missions. Our economic agency, Enterprise Singapore, has also developed a tariff search engine that companies can use to ascertain the preferential margins for specific products in each market, along with Rules of Origin criteria and documentation. In other words, helping especially small enterprises unpack what might otherwise seem to be complex trade agreements, and for them to understand how it is relevant for their businesses and to help them utilise those agreements to their benefit.
21. For workers, it is our national priority to nurture a culture of lifelong learning and skills upgrading. SkillsFuture, as we call it, is a broad-based national programme that embodies this goal by giving individuals the resources and guidance to take charge of their own learning. This is a broad programme to imbue this culture of lifelong learning and skills acquisition in all our citizens. More specifically, we have developed skills and training roadmaps for 23 industry verticals and sub-sectors which collectively account for about 80 to 85 per cent of our GDP, in partnership with industry and unions. The aim of these roadmaps is to guide both employees and workers in the sectors, and for the employers and companies in the sectors to understand the skills that are needed at every step of the workers’ journey, in order to attain higher skills levels and contribute higher value-add.
22. These are complemented by subsidised training programmes that help workers to acquire the higher skills within their own sectors, or new skills needed in other sectors, where jobs are being created. In Singapore for example, jobs are being created in the info-comm and media sector, in healthcare and also in education. So we need to be able to bridge people into these sectors, especially for those who may not have the requisite skills for it.
23. It is evident from this brief account I have outlined, that being inclusive cannot just be a broad statement of objective or strategy. That national level commitment is important, but it is not sufficient. To be truly effective, it must be detailed, and taken down to the level of individual industries, companies and individuals so as to address specific needs and challenges. That is why this effort of any government depends critically on its partnership with workers and employers; with workers taking ownership for their learning and skills development; and employers navigating their organisation’s digital transformation while supporting their workers’ skills transition. It is only through such a comprehensive and collaborative strategy that we can strive towards a truly inclusive economic outcome.
24. So while the dialogue today is about trade, trade on its own, without an effective complementary domestic strategy, will not achieve the desired outcomes and instead run into the headwinds of populist sentiments.
25. To recap, technological advances and the digital economy present significant new opportunities. They also pose profound disruptive threats to businesses, jobs and industries. To fully realise the benefits and seize the opportunities, we need to stay open - to new ideas and technologies, and new modes of engagement with emerging markets. To mitigate the risks of dislocation and ensure an equitable distribution of outcomes and the access to them, we must be inclusive in our approach - that means governments taking a detailed and comprehensive approach and collaborating with unions and industry to build workers’ skills and enterprises’ capabilities.
26. Staying open and being inclusive have underpinned the Singapore Story and our journey thus far. I believe these values will endure as our cardinal points as we work with our partners from around the world to navigate the path towards a digital future rich with opportunities and possibilities for our people.