Future of Trade

NTU runs a Centre for Trade and Negotiations, with some articles available at

http://www.tfctn.org.sg/newsroom.htm

While many articles provide familiar background expositions, the most interesting is probably “Tackling the challenges to Trade” by Barry Desker / Deborah Kay Elms, which seeks to link Climate Change with Trade. They write: shifts in patterns of trade could come from (1) climate change impacts farmers in developing world disproportionately (2) firms relocate to states with lax environmental policies (3) environmental negotiations tied with trade negotiations, thereby altering cost/benefit calculus in trade policy.

There’s this interesting article referenced from http://zerohedge.blogspot.com/2009/06/goldman-sachs-engineering-every-major.html, which pinned all the major market bubbles and busts to a major two-named investment bank, Goldman Sachs. It may somewhat exaggerate the role of Goldman Sachs, but it highlights the ways by which large financial institutions, or big entities for the matter, can manoeuvre itself to exploit/plunder by creating opportunities to do so or by taking advantage of current circumstances.

Now, the question is whether there really are some unnoticed, unknown and hidden manipulations of the economy that are taking place right now or will/can take place in the future, that will affect not just trade but also anything else that links to the economy… (essentially everything, I mean).

Just a quick thought since I have no “uncomfortable” articles to share yet..

In our first meeting, we explored the possibility of global trade falling off the cliff. We talked about how a protectionist world could become reality. We stretched our imagination by wondering what happens if Singapore’s total trade volume falls by two-thirds as a result of this protectionist world.

But that was assuming that the decision to stop/lower trade was forced upon us.

What if (and this is a big IF) it is Singapore who chooses to stop trading? What if, for some out-of-the-box circumstances, it is better (for economic/security/social considerations) for Singapore to stop trading?

I came to this thought after pondering about terrorism and its associated risks on global trade. When 9/11 happened, airports were closed – temporarily. Could something big happen, so much so that trading nodes have to be closed on a longer-than-temporary, or -horror- permanent basis?

Beyond terrorism, there are also other non-trade-related threats that could completely disrupt trade. Perhaps widespread smuggling of radioactive materials? How about the restriction on movement of people (considered as a form of trade in services) across borders because of life-threatening viruses?

I’m sure there are many other scenarios that we can think of. I just wanted to introduce a new angle for us to think about, since we are more conditioned to think that we are at the mercy of external forces. And it is not completely unimaginable for Singapore to take a tough stance when the health and security of our people are threatened – we are taking one of the toughest measures among all countries in the current H1N1 episode.

So the big question is: What does it mean to Singapore if we are forced not to trade? How will a Singapore like that look like?

“We might be able to stimulate our way back to stability, but we can only invent our way back to prosperity. We need everyone at every level to get smarter.”

“Sometimes, I worry, though, that what oil money is to Russia, our ability to print money is to America. Look at the billions we just printed to bail out two dinosaurs: General Motors and Chrysler.”

Tom Friedman’s op-ed in the NYTimes. Innovation clusters are hard to shift, but so far no one has been able to replicate the Si Valley code despite East Asian governments pouring lots of money into infra. What is trade like in a world of L-shape growth for SGP?

Dani Rodrik suggests that “the best way to save globalization is to not push it too far.” A lack of global leadership, the tendency for globalization to produce macroeconomic imbalances, and impending stagnation in the G3 economies, suggest that openness in trade and finance will continue to be limited. Trying too hard may back-fire.

http://www.koreatimes.co.kr/www/news/opinon/2009/06/137_46778.html

In reading his (rather linear) piece though, I’m reminded of the quote that “we always over-estimate the changes that may occur in the short run, but under-estimate what may happen in the long run.”

Two articles on China – The first centres around China’s apparent protectionism, while the second talks about China’s strategy of regional integration as the new engine of growth.

Just a quick note that the term “protectionist” is taken by different people to mean very different things – i.e. when denying accusations of ‘protectionism’, the Chinese mean to say that they are not creating any unfair advantage for its domestic exporters, merely developing its domestic industries.  That’s quite different from popular interpretations that may say that the Chinese consciously implement or endorse protectionist measures.

And when people accuse the Chinese of being protectionist, most of the time, they are really saying that the Chinese is not doing anything to correct the imbalances in the global economy.  Every economy is protectionist to some extent, even the US.  So, you would expect parties who are really concerned about the correction of these imbalances like the US to be most vocal about China being protectionist.

The Arctic is melting much faster than anticipated, so what’s the impact of sustained shipping from Northern Europe/USA to North Asia via the Arctic instead of Singapore? Peter Schwartz doesn’t think it would impact Singapore that much because it’s only seasonal shipping when we last asked him, but what do you think? The actual slideshare is here.

You may all have seen this, but here is a compilation of short essays mostly revolving around trade and global trade governance.

I haven’t read them all, and some of the ones I’ve read haven’t resonated that much with me, but there are some useful insights sprinkled in there.  One of my favourite essays is this one, which builds into the meta-question we talked about yesterday – the one that challenges the primacy of trade, our “trade-above-all” position.

The point that Tandon makes about the salience of power and how the West has been able to define the terms with which we view trade is interesting in the possibilities it throws up.  Perhaps one of the issues we ought to look at is the definition of tradable commodities and this idea of the value chain.  Who decides what gets commoditised and what is a “higher value-add” product or service? This has historically been defined by the West and the theory of comparative advantage.  Is this landscape going to shift in the future? Certainly the fallout from any food crisis would be instructive here.

Thoughts welcomed.

Hi everyone,

My first post centres around Linda Lim’s article on Singapore’s economic growth model. I chose this article because I think it should be one of those pieces that make us feel uncomfortable.

Basically, she argues that our growth model has been premised on “doing more of the same” government policies, which may be losing relevance or are no longer able to bring about the kind of growth that Singapore has been experiencing. For example, in light of the current global economic crisis and the mounting public debts that countries such as the US have to support in light of massive stimulus packages, Singapore’s EDB model of attracting MNCs to locate here through tax incentives here may no longer work because those countries will want to minimise any unnecessary leakages from their respective economies. Already, we have seen the US and OECD countries trying to “clamp down” on “tax havens” like Singapore.

In addition, she also uses the logic of comparative advantage and competitive advantage to demonstrate why a resource-constrained city-state like Singapore cannot “too many things at the same time” because that will just result in inflation and thereby an erosion of the economic advantages we have managed to carve out in the first place.

While these issues may not be all so directly related to trade in terms of the actual flow of goods and services, the assumptions that she questions are related nevertheless and have interesting implications for us to consider. For example, can Singapore really “go local” and be less reliant on trade? If so, to what extent and what can we do to make that happen?

The two questions that she has left me pondering, amongst other things, are these:

(i) Given the increased complexity of the global economy (compared to say 10 – 20 years ago), should Government regulate and manage the economy more or less (bearing in mind the rise of a possibly more politicised global economy)? Assumption here being that less Government control means more a responsive economy.

(ii) If Singapore had to adopt a different economic growth model, what would that model look like? How different or in what ways would it be different from the present? Assumption here being that ‘different’ means we “go local”.

You thoughts pls.

Full article can be downloaded here: http://www.fas.nus.edu.sg/ecs/scape/doc/24Oct08/Linda%20Lim.pdf

Hi everyone, it was nice meeting up today and let’s just kickstart it with posting and sharing articles, videos etc related to future of trade. I love Zhi Jia saying “It must make us uncomfortable!” and that’s the spirit of enquiry that’s very beneficial in pushing the boundaries beyond the known unknowns to the unknown unknowns for this topic. Gambatte!

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