Another Blow to PAP’s Attempts to Game the System as Trump Lets Loose a Broadside Against the WTO
Yesterday Trump tweeted:
While the main aim of his broadside is China the list of other countries which are classified as developing includes Singapore, the United Arab Emirates and some of the very wealthy Gulf oil producers such as Kuwait and Qatar as well as middle-income countries like Turkey and Mexico.
Possessing developing country status allows China (and Singapore) to pass on opening up their markets to foreign competition in areas like e-commerce and to subsidise their exporters. It also gives a free pass to state ownership of most of the major companies, as is the case in both China and Singapore. During the Obama Presidency the WTO ruled against US attempts to clamp down on governments subsidising state-owned companies on the grounds that these companies were not performing any government function. While this case involved China it applies equally well to Singapore and our state investment firm, Temasek, which holds controlling stakes in most of Singapore Inc.
While outside the narrow coastal strip most of China is still very poor, it is difficult to see how Singapore can be classified as a developing country. The PAP are forever reminding Singaporeans that due to the genius of LKY and his son we are one of the richest countries in the world and have rigged the GDP per capita measurement (because of the huge foreign workforce) so that Singapore appears much richer than the US and on a par with Arab oil sheikdoms, Luxembourg and Norway. They even had Singapore excluded from a UBS report measuring the purchasing power of workers in global cities because it showed that Singaporeans were no better off than Muscovites or the residents of Kuala Lumpur.
The WSJ quotes a former official at the White House as saying that while any change in the rules would only affect “small stuff” in the short term, “This will really have an impact on those negotiations, where groups of countries are saying they shouldn’t have to take on the same level of obligations as the U.S., or the European Union” . “They’re saying they don’t have to cut subsidies as much, or as fast.”
Singapore’s Budget is always packed full of goodies for exporters such as subsidised and unconditional loans, the Market Readiness Assistance and the Global Company Partnership. The PAP, like the Germans, Japanese, Koreans and Chinese have always believed in the mercantilist mantra of exports =good, imports and domestic consumption=bad. They have done their best to build a structural and growing trade surplus through these measures, tax exemptions for MNC exporters and curbing domestic consumption through tying up a third of workers’ income in CPF as well as running an enormous government surplus. As a result of these measures Singapore has traditionally run a current account surplus of around 20% of GDP.
In addition to export subsidies and exemptions from market opening allowed under WTO rules as a “developing” country, Singapore also uses a spurious “developing” country status as an argument to reject admitting even one refugee. The PAP argue that we are far too poor to be able to take asylum seekers though they maintain a ludicrously low bar on the income level needed to get an Employment Pass.
Since the US started imposing tariffs on China and other countries, Singapore’s growth has already slumped close to zero. By contrast the US economy has continued to chug along at close to 3% p.a. The US has realised that the WTO has been gamed by China and that it has tilted the playing field in favour of state capitalist countries like China and Singapore. While the short-term effect of any reclassification or threatened US withdrawal from the WTO may be small in the longer term it will be significant. When will Singaporeans begin to realise that the PAP have no magic wand? When will they realise that they have surrendered their freedoms and given the Lees unfettered power to enrich themselves and got nothing in exchange?