Toespraak Europese commissaris voor handel over handelsrelatie met Singapore (en)

Karel De Gucht i  European Commissioner for Trade

Europe and Singapore: partners in trade, partners for growth

Lee Kuan Yew School of Public Policy

Singapore, 3 March 2010

Dear Mr. Mahbubani,

Excellencies,

Ladies and Gentlemen,

It is a great pleasure to be here today at Asia's premier public policy institute and to have a chance to address this eminent audience.

It's only been 18 months since I last visited Singapore in my previous capacity as Belgium's Foreign Minister - I have found that, if you stay away longer than that, you hardly recognise the city - and I am particularly pleased to be here again, as I realise that on a number of global issues, we share a similar outlook. Importantly, both Europe and Singapore see trade and investment as a crucial element in the global recovery, which is a necessary condition for resuming our own growth.

As public policy specialists you will know as well as I do that economists often disagree on what caused the financial crisis, but they do see eye-to-eye on one point: that free trade makes the world better off. Yet, in spite of its benefits, trade is often an extremely contentious political issue, both domestically and between governments.

The British historian Thomas Macaulay was thinking of this paradox when he said that “Free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular.”

That was back in 1824, yet today it still rings true. Open markets are still under pressure; international competition is still seen as a source of unemployment and impoverishment; and trade in itself is still all too often seen as unfair. The challenge for us, policy makers, is therefore clear: at a time when trade is often seen as one of the things that got us into a crisis, we have to turn around this idea and support international trade to get out of it.

Today's launch of free trade negotiations between the European Union and Singapore should be viewed in that perspective. It shows that not only do we agree on the principles, we are willing and able to put them in practice as well. The proposed free-trade agreement marks a new beginning in our bilateral relations. It will strengthen economic ties between Singapore and the EU, provide new opportunities for traders and consumers alike, and contribute to generating growth in our economies. For Europe, it will also mark an important stepping stone in the EU's engagement with the ASEAN region.

Trade policy context

To underline the importance of these negotiations, let us briefly recall the events of the last year.

When you celebrated the arrival of the Year of the Ox twelve months ago, global economic confidence was at its lowest in the wake of the Lehman Brothers collapse and its aftershocks. Financial markets had plummeted, sending shockwaves through many of our largest banks and causing some of them to crumble. The financial crisis then took a heavy toll on the real economy, setting off a chain of job losses. International trade drives economic growth, but it also suffers heavily in recession, and we saw a drop of around ten percent in world trade in 2009.

One year on, as the year of the Tiger dawns, we may not be out of the woods yet but things look decidedly better. I believe this is in good part the result of a determined response from many governments.

Europe has played a key part in stimulating the global recovery. It is estimated that the EU is spending some 5% of its GDP on fiscal measures, including automatic stabilisers such as unemployment benefits and other social security payments. A large part of these funds are, at any rate, earmarked for future-oriented spending, for instance broadband infrastructure and green technologies. The EU has also been at the forefront of global efforts over the past year to avert the risks of a protectionist spiral, both by what we did and by what we didn't do:

Thanks to the strength of our internal market discipline, our borders have been kept open for business and foreign investment kept flowing. Europe has not wavered on its commitment to free trade - and will not do so in the future.

We have also supported the excellent monitoring work of the WTO in preparing the regular reports on protectionist measures. We have always advocated that transparency is a crucial element for building confidence among the trading community - and confidence was exactly what was missing in the past year.

We have argued for and obtained strong political statements by the G20 against protectionism and in favour of completing the DDA - stressing its potential value as the best single way of addressing protectionist risks at the global level.

And we have exercised restraint domestically, even in difficult economic and political circumstances.

Globally, WTO rules have provided insurance against a protectionist race to the bottom. And it is no coincidence that it is in the area of government procurement - where WTO rules are not universal - where we have seen some protectionist slippage.

On balance it is fair to say that the multilateral rules-based system has passed its worst stress-test yet. Given our economic openness, it is not surprising that Singapore and the EU remain fully committed to the WTO and in particular to completing the Doha round of trade talks. We work together in the WTO to secure a balanced and comprehensive Doha deal which would not only favour a quick and smooth recovery by injecting a significant boost to the global economy but would address longstanding concerns of developing countries, notably on agriculture.

However, the current deadlock on Doha should not put our wider vision on hold. The free trade negotiations that we envisage are part of an effort to boost our economies by freeing up trade and investment in areas that are currently beyond the reach of the World Trade Organisation.

They are part of an effort to make trade work for our economies at a time when they need the boost. And they are also part of an effort to make trade be seen to work for the benefit of our citizens, whose faith in open markets is dwindling.

"It takes confidence to open up to international competition," a professor you all know very well once remarked, and "diminishing confidence in the West results in less openness" .

I am sure P rofessor Mahbubani will agree with me on this, that the negotiations we are launching today are a step in restoring that confidence, based on a firmly held conviction that international trade and global competition are not a zero-sum game .

It is in this spirit that we are negotiating with a view to establishing a forward-looking free trade agreement between two like-minded partners - convinced that both stand to win as a result of it.

Bilateral trade and FTA

The objective of our FTA negotiations is simple: we wish to create new opportunities for businesses from both sides. Companies wishing to sell goods or offering services between the two sides should enjoy preferential treatment. And consumers should get access to a wider variety of products at better prices.

The economic foundations for further strengthening our trade ties are strong. Today the European Union is Singapore's largest trading partner and foreign investor. Bilateral trade in goods and services exceeded €55 billion in 2008. Singapore is the EU's foremost trading partner among the Southeast Asian countries: about one third of EU-ASEAN trade is with Singapore.

Besides trade, our bilateral investment ties are robust. We have invested a total of €100 billion in each others' economies over the years. Our investment relationship is a two-way street: today, dockers in the port of Antwerp benefit from Singaporean investments, just as Singaporeans working in the pharma business, maintaining aircraft or selling financial services benefit from the presence of European investors in Singapore, where some 3400 EU companies have set up subsidiaries.

I am keen to further promote the EU to investors of Singapore, including its Sovereign Wealth Funds. I explicitly wish to acknowledge the progress made over the past years in response to calls for enhanced transparency and accountability.

For the EU, Singapore represents a growing market for exports and investments, as well as a crucial link to the wider ASEAN region. European companies who are thinking about setting up shop in one of the ASEAN countries may well be encouraged by the FTA do so in Singapore. FTAs in many cases promote bilateral investment.

Likewise, it makes eminent sense for Singapore to get preferential access to the EU, the world's largest market. The EU with its half a billion of largely prosperous consumers is without doubt an attractive destination for Singaporean exports.

ASEAN and EU cooperation

I think it's fitting that my first official trip outside Europe as Commissioner for Trade has taken me to Asia - Vietnam, Singapore and India — a region which accounts for an increasing share of the EU's trade. To put it in perspective, our total trade with Asia last year amounted to €730 billion, compared with €426 for the combined NAFTA countries.

On many issues, Asia and Europe are natural partners. We have common interests on a range of issues, be it maintaining an open trading system, tackling environmental challenges, deepening regional integration, or reducing imbalances in the global economy. We realise we have to work on these together - and we do.

The launch of FTA negotiations with Singapore, for us, marks the beginning of a deeper engagement with Asia, and in particular in our relations with the ASEAN region.

Although Singapore is the "first one in", our door remains open for other ASEAN countries interested in negotiating a comprehensive free trade agreement with us. We are not available to do shallow FTAs, but we will be mindful of differences in levels of development. I feel encouraged by the signals I am getting from certain ASEAN capitals.

The EU also remains interested in further strengthening ties with the ASEAN group beyond free tr ade agreement negotiations.

This is not only because we have a soft spot for regional integration processes elsewhere. It is also because ASEAN has the potential to play an increasingly important role on the global scene. With the ASEAN Charter and the ASEAN Economic Community Blueprint, ASEAN has set itself ambitious goals.

The EU has been a long-time supporter of this process, we will continue to do so, and as a regional group you can always count on a sympathetic ear in Brussels. Nobody else knows and understands the challenges of regional integration as well as we do. This is as much a political as it is a technical process.

Granted, all regional integration processes are different, and lessons from one process cannot automatically be applied to a different context.

But I think that there is case for comparing notes, for sharing experiences and discussing best practices, for example on regulatory matters. This is our daily bread in the EU. I would be happy to explore with my counterparts here in the region whether there is interest in sharing our respective experiences in a more structured manner.

Conclusion

Ladies and gentlemen,

Asia's re-emergence has rightly captured the world's attention. Tectonic power shifts are taking place right before our eyes, and you are well placed here in Singapore - at the heart of ASEAN— to benefit from these changes.

The success of many Southeast Asian economies is an example of how development based on opening one's doors to foreign trade and investment can lead to prosperity.

I have heard that Deng Xiaoping, the architect of China's economic reforms, preferred the advice of Minister Mentor Lee Kuan Yew to that of his own officials, who told him reform and opening up would never work in China. Small wonder the Lee Kuan Yew School of Public Policy has started a course to train Chinese public service officials!

Now China - but also India and other ASEAN countries— is catching up fast.

Notwithstanding Asia's growing economic success, today, Europe has a predominant role in the world economy. Out of a world GDP worth €41 trillion, the EU's €12.5 trillion economy (compared with China's €3 trillion) is the world's largest. We are also the biggest importer and exporter, as well as the main source and destination of foreign direct investment.

So Europe will remain an attractive partner for Asia.

Over the last twenty years Europeans created a Single Market, a common currency and a border-free travelling area. We swiftly integrated 12 mostly former communist economies, bringing the EU's total population to 500 million, a similar proportion to ASEAN. Now we are tackling the next big projects.

As a matter of fact, as we speak the Commission is issuing its Communication on the Europe 2020 strategy laying out its vision on how the EU can achieve a more sustainable, smarter and greener economy in the next 10 years. In particular, I want to stress that this vision includes openness and growth. Europe 2020 is about an open Europe in a globalized world, where a rules-based international framework is the best way to exploit growth and employment opportunities.

Of course Europe 2020 goes well beyond trade but at the same time it sets out the broader framework for a European trade strategy that the Commission wil l draw up in the coming months.

Asia has benefitted greatly from Europe's success, especially in the trade and economic sphere. Last year, we demonstrated our commitment to Asia by initialling an ambitious free trade agreement with Korea. That agreement has set a new benchmark. I am optimistic that the future EU-Singapore free trade agreement will match that benchmark - even surpass it.

Today Minister Lim and I have opened a new chapter in our relations.

In my view, establishing a free-trade agreement is a means to an end. That end is encouraging more - and more beneficial — economic partnerships and forging closer people-to-people links. Ordinary European and Singaporean citizens should be the ultimate beneficiaries of the decision taken today to deepen our bilateral relations.

I trust they will enjoy soon the fruits of our labour.

Thank you very much.