The role of trade agreements in ensuring continued globalisation during the pandemic
Enterprises and youths can benefit from greater access to supply chains with the support of a collective ASEAN region.
As countries grapple with the COVID-19 pandemic, the recent health crisis has led to global economies shifting into a state of protectionism and economic nationalism.
But amid the inward changes, Singapore has taken steps to ensure its trade line remains open and has enhanced its economic resilience by investing in local food production instead.
Similarly, it had also signed the world’s largest Free Trade Agreement (FTA) through the recent Regional Comprehensive Economic Partnership (RCEP) to ensure international trade flows remain open.
But what is the significance of such economic agreements and why is free trade in areas of goods and services important to youths and businesses?
These were some of the issues discussed at Trade and Agreements: Regional Partnerships and How They Affect You(th), on Friday (May 14).
The hour-long webinar is part of the Asia-Ready Exposure Programme organised by the National Youth Council, in collaboration with the Singapore Institute of International Affairs.
It was moderated by Ms Faridah Mohd Saad, deputy director at Agritech Enterprise Singapore, and attended by Minister of State for the Ministry of Community, Culture and Youth and Ministry of Trade and Industry Mr Alvin Tan, as well as Mr Raymond Yee, vice president for Customs and Regulatory Affairs at DHL Express.
“Trade is the lifeblood of the Singapore economy. FTAs ensure connectivity between countries and more importantly, it keeps the wheels of trade in motion.
“This is critical especially during the COVID-19 crisis where countries were seen to have turned inwards and stoked the flames of nationalism and protectionism. This is a very short term but dangerous and misleading view,” Mr Yee said.
He explained that globalisation and trade has brought significant improvements to economies which includes a better standard of living and technological advancements, among other things.
Singapore also plays a key role in the global trade network as a regional hub connecting to the Association of Southeast Asian Nations (ASEAN) and the world beyond.
“The issue with trade is just managing globalisation and not stemming it. Singapore has played a critical part in geopolitics and geoeconomics to ensure countries do not turn inwards and are not protectionist,” he said.
Complexities of free trade and securing a Free Trade Agreement
Securing a FTA is a complex and multi-year effort that requires comprehensive negotiation between countries.
When negotiating an FTA, there are several “trade chapters” to consider and agree upon, explained Mr Tan. These chapters include e-commerce chapters, investor disputes, rules of origins – where does goods and services come from – and intellectual property.
Changes in business, political environments and views on domestic issues are also factors that will affect negotiation terms between countries.
While such trade agreements have led to concerning disputes such as the China and United States trade war, Mr Yee explained that there are other root causes to look out for before determining the cause of such economic woes.
“If a sector or industry has been uncompetitive for a long time, it is easy to attribute the industry going because of an influx of imported goods. However, from a policy angle, this is misleading and there is a need to look at the root causes such as the structural weakness of the economy.
“Where there are structural impacts of trade – where they do impact sectors and companies – it is important for countries to put in place measures that ensure labour can be trained and placed into other available growing industries with new economic opportunities,” he explained.
Creating a vibrant market landscape for future economies
In response to a question on public sentiments surrounding the Comprehensive Economic Cooperation Agreement, Mr Tan explained that it is necessary for Singapore to keep its borders open for trade, investment and talents.
With the entry of large companies such as Facebook, Twitter and GlaxoSmithKline in Singapore, Mr Tan added that such movements can create more job opportunities, develop skills and increase both inward and outward-bound investments.
Similarly, enterprises can also benefit from the exposure to larger market sizes in member states, lowered transaction costs and potential revenue growth outside of Singapore through agreements such as RCEP.
With RCEP covering a population size five times that of the European Union – which has more than 700 million people – following the inclusion of several economic powerhouses like China, Mr Yee also expressed his optimism at the RCEP agreement coming into fruition.
A collective effort will allow companies to deal with one FTA in a “harmonised rule of origin” which allows them to comply with the various rules of origins required in their investments easily.
“For DHL, RCEP signals the commitment of companies to international trade especially in the middle of a pandemic. Its political and geopolitical significance is important especially during the pandemic when countries were putting up barriers to limit the access to essential items.
“RCEP helps to create a framework and signal to the world that Asia is in business instead of turning inwards,” he said, adding that RCEP also “captures important supply chains” in the electrical and machinery sectors for larger companies.
Seeking new opportunities in the global market
Free Trade Agreements allow market access and low cost entries into markets. Strategically, this allows countries to have access to free trade that can become part of their national policy and economic development, explained Mr Yee.
The growth of e-commerce has also presented opportunities for small and micro enterprises that are mostly run by youths to tap into larger markets.
“Selling stuff online on e-commerce helps to enhance profitability, reduces cost, increases customers’ share of wallet and provides valuable data for sellers to understand consumer behaviour through data collected from online sales,” he explained.
Responding to a question on how youths can seek partnerships in Asia and other markets, Mr Tan encouraged youths to be open to travelling once restrictions are lifted.
He said: “You need to go through the different roads and airports but also speak the language with the people.
“It is important to feel the entrepreneurial spirit of the markets as you learn the language, cultural context and forge partnerships with young entrepreneurs who are already creating interesting products on their own.”
Mr Yee also encouraged youths to take advantage of government training programmes and “be hungry and unafraid to fail”.
He also cited local companies such as MightyJaxx and BridgettBelle – companies who have successfully leveraged on e-commerce – as brands that youths can learn from.
He said: “It is important to find your strengths and find your niche as there are many opportunities out there. The ability to find ways to market the products even to the local language opens a significant area for businesses.
“For youths, the world is your oyster and building such partnerships through e-commerce is one of the key enablers for this.”
For more information about the Asia-Ready Exposure Programme, click here.