7.6 GLOBALISA GLOBALIS ATION AND SINGAPORE 7.6.1 .6.1
Glob Globa alisa lisati tion on and and Sin Singa gapo porres es Patter ttern n o! o! Tr Trade
The underlying principle that determines the Pattern of Trade for an inter-industry inter-industry model is the Law of Comparative Advantage. Advantage. However, globaliation globaliation can affect or alter the underlying factors behind the Law of Comparative Advantage. 7.6.1.1 "o#position o! Trade Trade !lobalisation has impact on comparative advantage "gain#loss$ Loss in comparative advantage due to the emergence of new rivals Trade liberalisation in a globalised world has led to the emergence of new rivals "e.g. China#%ndia$ causing countries such as &ingapore to lose its comparative advantage advantage in the production of cheap, low-end and labour-intensive products e.g. soc's and sandals. (any (ulti-)ational Companies "()Cs$ have ta'en advantage of opportunities offered by globalisation to cut costs and increase productive efficiency by offshoring or outsourcing to cheaper production centres li'e China, %ndia or *ietnam. !ain in new comparative advantage due to greater mobility of resources#productive resources#productive factors (obility of resources or productive factors across national boundaries has enabled countries li'e &ingapore to ac+uire a new comparative advantage in producing high value-added, capital and 'nowledge-intensive 'nowledge-intensive products e.g. biomedical industry and aircraft engines. Capital mobility usually ta'es the form of oreign irect %nvestment "%$ inflows while labour mobility mobility ta'es the form of an influ of foreign talent#s'illed wor'ers. 7.6.1.$ Trade Partners %n &ingapore, globaliation has also altered the composition of our trade partners. Traditionally, ma/or advanced economies li'e 0& and 10 and regional economies li'e A&1A) have been our 'ey trade partners. Today, due to the growing networ' of TAs, trade has been etended to emerging economies li'e China and %ndia as well as non-traditional trade partners li'e Peru, Panama, 2ussia and some (iddle 1astern Countries li'e 3ordan. The forging of TAs has been prompted by the need to diversify our mar'ets "e.g. decoupling$ to cushion our economy against the threat of contagion and protectionism in a globalised world. 7.6. .6.$
Sing ingapor pores Pro%Globalisa isation ion Poli&'
4eing a small and open economy with no natural resources, &ingapore has much to gain from globalisation. %t has clearly served our economic interests, providing access to resources and global mar'ers which drive economic growth and development, thus overcoming our domestic constraints of a small population with no natural resources. However, globalisation has its costs or downsides. As a highly globalised economy, it is inevitable that from our economy occasionally occasionally suffers from eternal shoc's e.g. global financial crisis in 56675668. (oreover, &ingapore has to deal with rising protectionism whenever the world eperiences an economic downturn and countries scramble to protect their own domestic industries. %n recent times, the income gap has also widened to worrying levels. (oreover, wor'ers wor'ers continue to face the threat of structural unemployment unemployment due to outsourcing and off-shoring. off-shoring.
Policies to mitigate the downsides of globalisation "a$ (aintain ree Trade policy and pro-migration policy. &ingapore does not believe in retreating from globalisation and resorting to protectionist measures to save /obs, even in times of recession. The government also does not believe in closing our doors to the influ of foreign talent and foreign wor'ers. &uch protectionist measures are detrimental to the well-being of our economy in the long run. "b$ 4uild resiliency A 'ey policy is to build resiliency to enable our economy to stay afloat in turbulent times. &uch policies include9 iversifying our eport mar'ets to reduce dependence on ma/or :estern mar'ets such as 0&. This policy is sometimes called ;decoupling<. This is done by forging a networ' of TAs with other trade partners including those from non-traditional areas li'e (iddle 1ast and Central Asia. Continuous investment in training, retraining and s'ills upgrading for the wor'force. This enables the wor'force to be competitive and occupationally mobile so that wor'ers can find /obs in other sectors should they lose their /obs during a recession#as a result of structural unemployment. Provide :or'fare %ncome &upplement ":%&$ to low-wage earners to help cushion the impact of globalisation on their stagnating incomes. •
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%n summary, in a globalised world, &ingapore has to be resilient and adapt +uic'ly to eternal changes when met with challenges so as to stay competitive and relevant to the rest of the world.
"ON"L(SION It is
clear that while globaliation promotes growth and brings economic benefits to countries which have embraced it, there are also drawbac's and problems. Countries more open to the free flow of trade, capital and labour inevitably face greater ris' and uncertainties which might destabilie the economy. %f unresolved, these problems might threaten the very process of globaliation itself, ma'ing it unsustainable. or eample, countries might withdraw from free trade if they perceive themselves to be victims of unfair trade, or at the losing end. espite the downsides, the &ingapore economy is similar to the economies of China and %ndia, which have much to gain from globalisation. As a trade and resource-dependent economy, retreating from globalisation is simply not an option. The &ingapore government has been introducing policies to build resiliency into the economy so we can better withstand eternal shoc's. As a result, &ingapore has been able to leverage on globalisation to increase the free flow of trade, capital and labour to spur and sustain economic growth as well as improve the living standards of its residents. These results can be seen in the robust economic growth and relatively high standard of living en/oyed by &ingapore and other globalised economies in recent times.
