TRADE POLICY FRAMEWORK

Singapore, after Hong Kong, has the world's most liberal trade policies. It is a free port, with zero tariffs on 99.9 per cent of imports (tariffs being applied only on alcohol) and hardly any non-tariff barriers on trade in goods (Table I). There are no restrictions on FDI, with the exception of a few services sectors. Trade remedies (anti-dumping actions, countervailing duties, safeguards) have not been used in recent memory. Singapore is also an extremely globalized economy, with a trade-to-GDP ratio of 300 per cent and inward investment in manufacturing accounting for 70 per cent of total manufacturing investment. It thus conforms in some respects to the original brilliant vision of its founder, Stamford Raffles.

Since the mid-1980s, government policy has increasingly emphasized diversification into high-value services and life sciences. Unlike Hong Kong, a range of selective incentives is offered to multinational and domestic enterprises, but mostly in the frame of market-oriented policies. Singapore complies fully with the WTO's TRIMS agreement (on trade-related investment measures).

The Singapore Government has majority or minority shareholdings in a basket of prominent local enterprises (so-called Government Linked Companies or GLCs). Critics argue that their relations with the government, for example, fiscal and accounting procedures and inter-personal links, are less than transparent. They suggest that the GLCs exercise excessive market power at home, for example, through cross-subsidization, to the detriment of small and medium-sized enterprises in the private sector. The Singapore Government's extensive micro-intervention in the economy has hardly figured in trade negotiations as it does not involve formal, direct trade barriers. However, this could change if the WTO and FTAs go deeper into competition policy terrain that covers informal, indirect trade barriers embedded in domestic regulation. Indeed, recent bilateral FTA negotiations have begun to go over some of this ground. Singapore has no overarching competition legislation, preferring to deal with competition policy issues on a piecemeal, sector-by-sector basis (rather like Hong Kong). This is about to change.