Trade Compliance

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A Tale of Two Cities: Singapore and Free Trade

Posted November 14, 2014

In what appears to be yet another misguided effort to discredit the benefits of free trade, and one can assume by implication, raise doubts about the merits of the proposed Trans-Pacific Partnership agreement, the Huffington Post yesterday published a highly critical article by Chee Soon Juan that pours cold water on the success of Singapore’s 10 year-old free trade deal with the United States. In force since 2004, the US-Singapore Free Trade Agreement (USSFTA) demonstrates, according to Chee, a continuing disregard on the part of Western leaders for “the lack of democracy and the abuse of human rights in Singapore in favor of trade and commerce.” Singapore Skyline Leader of the liberal Singapore Democratic Party since 1996, Chee has had a colourful and somewhat checkered political career that  includes having been arrested and jailed several times in addition to also being sued successfully for defamation on multiple occasions for disparaging comments made about members of Singapore’s government. The 52 year-old former psychology professor has never won a seat in parliament – in fact, his party has failed to elect anyone at all to office since he took charge 17 years ago. Nonetheless, Chee is a tireless human rights campaigner and is also recognized as a “prisoner of conscience” by Amnesty International.

With regards to the USSFTA, Chee claims it has done little more than “help the business elite in the US and Singapore to exploit cheap labour” and to illustrate that being the case, he provides what is tantamount to a failing report card on economic conditions in the city-state.  He points to the fact that Singaporeans work more hours than in most countries, and, according to one study are the “unhappiest in the world.” Income inequality, he notes, is higher than that which exists in the U.S. and while Singapore has the highest proportion of millionaires in the world, nearly 5 percent of its workforce have an annual income of less than US$5,000. Other salient facts are that Singapore is the most expensive city in the world and yet there is no minimum wage law in the country. And so on. Chee concludes that, “clearly the benefits of the USSFTA have not accrued equitably.”

Well, there are a few seriously flawed premises with this analysis, foremost being that it is simply ludicrous to attribute all of the negative aspects about Singapore’s economy that Chee cites as being direct consequences of the USSFTA, which is just one of 20 free trade deals that Singapore currently maintains with countries around the world. In truth, although total trade between Singapore and the United States was over US$50 billion in 2013 – a 60 percent rise over the 10 year period, it should be noted – the U.S. still accounts for only 9 percent of Singapore’s imports and 5.5 percent of its exports. So clearly, it is not the most significant driving force in the economy. And while the U.S. is the largest foreign investor in Singapore with FDI at US$154 billion over the same period, this arguably has more to do with the country’s overall business-friendly climate than with the USSFTA. “U.S. firms are attracted by a strong and equitable legal system, stability and consistency across government, a strong, well-capitalized, and well-regulated banking and financial system, high intellectual property rights,” according to Greg Tirrell, executive director at Singapore’s American Chamber of Commerce.

As for cherry-picking certain facts about Singapore’s economy in order to portray it in a wholly negative light, it’s worth considering that when the country gained its independence nearly 50 years ago it was a relatively poor, colonial outpost in a dismal swampland completely lacking any natural resources. Since then, the country has gone from what the Dutch economic advisor Albert Winsemius described as “this poor little market in a dark corner of Asia” where the GDP per capita was just $511 (compared to $13,125 in America at the time) to one of the most prosperous countries in the world where the GDP per capita is now $78,762 (actually $25,761 more than in the U.S.). The reasons for Singapore’s remarkable economic success are many, but one of them unquestionably has been the city’s free trading culture, a characteristic derived from its earliest history. In a letter to local merchants in 1823, the British founder Sir Thomas Stamford Raffles confidently declared that, “Singapore will long and always remain a free Port, and that no taxes on trade or industry will be established to check its future rise and prosperity, I can have no doubt.”

Although Chee notes in passing that Singapore has the highest proportion of millionaires in the world (simply to draw the starkest possible contrast to the 5 percent making $5,000 per year), the fairly widespread nature of this wealth is truly astonishing. At more than 188,000, effectively one in every six Singapore households today has disposable private wealth of over US$1 million, excluding property, businesses and luxury goods. Compare that to Canada which has 350,000 such high net-worth individuals or 1 percent of the population (with 6 percent making $5,000 or less per year, according to government figures). While wealth disparity is certainly a troubling concern in Singapore – just as it is in the U.S. and also increasingly so in Canada and other western countries – there are numerous contributing factors driving the phenomenon, but little hard evidence to suggest that free trade is among them.