This op-ed originally appeared in The Straits Times on May 13.
As the United States and Singapore mark the 20th anniversary of the highly successful US-Singapore Free Trade Agreement (FTA) this year, it is worth considering the diverging trade policies of the two countries.
Singapore, like most of its neighbors, views trade as an urgent national imperative and has placed itself at the center of an expanding web of trade agreements with partners in Asia and globally. The reality, logic, and accepted common sense in Southeast Asia is that trade is inseparable from geopolitical strategy. Hence, the participation in agreements such as the CPTPP, RCEP, the various “Asean +” agreements, and individual Asean countries’ bilateral agreements with myriad partners.
By contrast, current US trade policy rejects new market-opening trade agreements. Market access, which was the whole point of previous trade agreements, has been eschewed; officials say trade agreements “pit” one sector against another, even though US industry, agriculture, and service providers have all benefited handsomely: manufacturing wages and output are up, and inequality and unemployment are down.
Instead, the U.S. has focused on frameworks and dialogues. Those aren’t bad things in and of themselves, but they do not constitute trade policy. They do not open markets for U.S. producers; they help U.S. companies participate in Southeast Asia’s rapidly growing economies only at the margin; they do not set rules of the road in the way that previous FTAs did; and they do not send the message to South-east Asian friends, partners, and allies that the US is serious about being a participant in the region’s economic growth.
Looking forward through the rearview mirror
The US-Singapore FTA was a groundbreaking achievement. It not only eliminated tariffs but opened up trade in a broad range of services, provided strong intellectual property protections, increased government procurement opportunities, included enforceable labour provisions and provided for unprecedented cooperation and enforcement in promoting environmental protection.
But the FTA represented more than its specific legal obligations, important as these were; rather, it was about US economic leadership in the region and America’s commitment to long-term and meaningful economic engagement. That kind of leadership gives confidence to allies and partners in Southeast Asia. It promotes stability, predictability, and the rule of law; it serves our mutual interests; and the region wants it. We should, too.
As Singapore Prime Minister Lee Hsien Loong said on the sidelines of last November’s Apec meetings in San Francisco, “Today, amidst a more complex global environment, strategic and security concerns are increasingly overriding free trade and considerations of economic welfare. But we are hopeful that despite this trend, America will maintain and even strengthen its relationship with Asia and the rest of the world.”
During a panel discussion in Washington last October, Deputy Prime Minister Lawrence Wong said: “Singapore appreciates and values America’s important and constructive presence in the Asia-Pacific. America has been in the region for nearly 80 years. You have many strategic interests; you have many friends in the region; and we would all like you to continue to stay actively and consistently engaged in this part of the world.”
That advice is sound, and the United States should heed it.
Trade agreements and U.S. politics
So, how to meaningfully deepen economic engagement – particularly via high-standard trade agreements – when such agreements seem out of reach? Many individual lawmakers have long been calling for a more robust trade agenda. And US public opinion is nowhere near as hostile to trade as some of the lawmakers who represent that public. Therefore, the question might be answered with another question: Is the conventional wisdom that the American political system cannot stomach trade agreements actually true?
Consider: in 2007, the US House of Representatives approved the US-Peru Trade Promotion Agreement by a vote of 285-132, and the Senate by a vote of 77-18. In 2011, the House approved the US-Korea Free Trade Agreement 278-151, and the Senate 83-15. A similar agreement with Colombia passed the House 262-167 and the Senate 66-33. The numbers were even more decisive for a trade deal with Panama. The Singapore FTA, as well as those with Australia and Chile, also enjoyed broad margins of approval.
Most recently, the House passed the United States-Mexico-Canada Agreement (USMCA) 385-41 in December 2019, and the Senate by a margin of 89-10 in January 2020. In fact, the only exception among all these agreements was the US-Central America-Dominican Republic Free Trade Agreement (DR-CAFTA), which squeaked by with a two-vote margin in the House and 10 votes in the Senate back in 2005.
After the US withdrew from the TPP in 2017, critics harrumphed that the deal could have never gotten through Congress anyway. Perhaps, but the historical record shows that leaders who make the case for their policy proposals can carry the day.
Consider the USMCA. It has the furthest-reaching labor and environmental provisions in any trade deal to date. It incorporates best-in-class provisions in areas such as digital trade, financial services, and telecommunications. Through innovative new chapters, it helps integrate small and medium enterprises into international trade networks, promotes competition, and contributes to the fight against corruption.
As the United States promotes a worker-centric trade policy, we should recall that more than 41 million American jobs are related to international trade, accounting for roughly one-third of private-sector employment. Jobs supported by exports pay, on average, 16 percent more than other jobs, underlining the economic benefits of international trade.
Nearly half of all US goods exports are sent to the 20 countries with which we have FTAs, even though those markets account for only six percent of the world’s population. On a per capita basis, the citizens of those 20 countries bought nearly 14 times the volume of American-made goods as other economies.
Since 95 percent of the world’s consumers do not live in the United States, if American workers, farmers, and entrepreneurs are to thrive, they need the ability to sell to foreign customers.
Conclusion
The U.S.-Singapore FTA has been a success; the two countries had US$82 billion (S$111.2 billion) in two-way goods trade last year, more than triple the figure at the time that the FTA was first signed, on top of an additional US$45 billion in services trade, more than quadruple the figure from 2004. The FTA incorporated innovations that reflected the changing challenges around international trade. Both the United States and Singapore have benefitted as a result.
Singapore plays an outsized and vital role in the regional and global operations of US companies. There is more US investment in Singapore than there is in China, Japan, and Korea combined. Singapore has, over the decades, been a forward-leaning and consistently reliable US partner, and the two countries have shared interests across a broad range of economic and strategic challenges.
As Trade and Industry Minister Gan Kim Yong told the US Chamber of Commerce recently: “The US-Singapore Free Trade Agreement (USSFTA) is a bridge that was built 20 years ago at the right place, at the right time.”
On its 20th anniversary, the US-Singapore Free Trade Agreement is a milestone worth celebrating. The United States can honor that legacy and advance its own interests by deepening its economic engagement in Southeast Asia, including by signing similar agreements with other vital partners in the region.
About the authors
John Goyer
John Goyer is executive director of Southeast Asia at the U.S. Chamber of Commerce. Goyer focuses on issues of market access, investment barriers, regulatory and other issues that pose challenges for U.S. business in Southeast Asia.
