4 myths about Trans-Pacific Partnership busted

The Trans-Pacific Partnership (TPP) was borne out of a belief that free trade benefits the participating countries' economies. Yet there is skepticism and distrust among various parties on the effectiveness and consequences of signing the TPP. We explore four arguments against the TPP and how it affects Singapore.

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Myth 1: Singapore is a pawn without power in TPP negotiations.

Fact: Singapore was actually among the first four nations of pre-TPP talks, which eventually morphed into TPP negotiations encompassing 12 countries

The origins of TPP started from a "Pacific Four" or P4 agreement among four nations: Singapore, New Zealand, Brunei Darussalam, and Chile. The P4 wanted to create a larger economic free trade area with other APEC countries to expand their small economies, but were disappointed when APEC talks foundered.

The P4 decided to continue talks among themselves anyway, and almost completed negotiations in 2008 when the United States decided to join in, because senior Bush administration officials from the Republican Party were concerned that the US would be left out of new trade agreements in APEC. Once the US joined, Australia and the other TPP countries followed suit.

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The advantage of any country participating in the initial negotiations (including Singapore) was that it could negotiate the TPP terms to its benefit, instead of joining late after negotiations were already completed (which would be very painful should the country fall short of any terms).

Singapore could also leverage on one group FTA to expand trading with any other participating country, instead of negotiating 11 FTAs with 11 other countries. Eventually, the TPP may grow to include more APEC countries, which Singapore cannot simply execute with a single FTA.

Myth 2: TPP will kill off Singapore's Small- and medium-sized enterprises (SMEs)

Fact: TPP makes it easier for SMEs to access export markets

TPP countries account for 30% of Singapore’s trade, 20% of our overseas investments, and 30% of our foreign direct investments.

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Many local SMEs dream of exporting their products and services overseas as the Singapore market may not be big enough to achieve economies of scale. However, a 2007 OECD-APEC study found the following 10 barriers to SME internationalisation.

The three major benefits the TPP brings to SMEs are:

- Strengthening regional production and supply chains by lowering tariffs
(Helps SMEs to match competitors' prices)

- Having greater coherence and transparency to trade-related regulations
(Gives SMEs better information to analyse markets)

- Establishing a new regional standard for future trade agreements
(SMEs can focus on doing business, and not grapple with obstacles to internalisation)

SMEs which previously missed out on export opportunities can tap on user-friendly websites, which TPP countries will set up specifically for SMEs.

Regulations and procedures concerning intellectual property rights, foreign investment regulations, business registration procedures, employment regulations, and tax information will be included.

Myth 3: TPP will take away jobs from Singaporeans

Fact: TPP aims to increase Singapore's competitiveness which will contribute to more quality jobs for Singaporeans

Singapore has already seen a rising spate of retrenchments as companies restructure, close operations, and discontinue product lines.

The cost of labour has increased, with the median gross monthly income rising to S$3,949 and foreign worker levies imposed on companies. Singaporeans have already lost jobs due to an economic slowdown and eroding competitiveness against cheaper goods and services produced by other countries.

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The TPP aims to create and support quality jobs in all 12 countries, and eliminate or reduce trade tariffs and restrictive policies to give each TPP country's goods and services preferential access to the other 11 countries.

For example, the US will eliminate tariffs on 96% of Singapore exports, hence our exports will be more affordable and accessible to US customers. Singapore businesses can also bid for government procurement projects in parties such as Malaysia, Mexico, and Vietnam, which were previously closed to foreign bidders.

If Singapore businesses can enlarge their overseas markets and prosper, they have more resources to hire more Singaporeans and invest in Singapore's human capital.

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In reply to calls from the National Trades Union Congress (NTUC), Singapore's Ministry of Manpower (MOM) has also announced its intention to continue moderating the intake of foreign manpower and focus on building a strong Singaporean core, complemented by a foreign workforce who can contribute to strengthen the competitiveness of Singapore's workforce.

Myth 4: Businesses will prosper at the expense of workers

Fact: TPP has a Labour Provision to protect workers

TPP’s Labour Provision states that TPP parties:

- adopt and maintain in their laws and practices the fundamental labour rights as recognised in the ILO 1998 Declaration, namely

• freedom of association and the right to collective bargaining
• elimination of forced labour
• abolition of child labour and a prohibition on the worst forms of child labour
• elimination of discrimination in employment

- agree to have laws governing minimum wages, hours of work, and occupational safety and health

There is a dispute settlement mechanism where parties can be taken to task for failing to comply with the TPP agreement, with suspension of trade benefits (which will affect businesses in the culprit country) as a deterrent.

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In the case of Singapore, we already have laws on:

- Freedom of association with trade unions
- Prohibition of slavery and forced labour
- Progressive Wage Model mandating basic wages for low wage sectors of cleaning, security, and landscape
- Overtime hours and pay in the Employment Act
- Workplace Safety and Health

So if businesses prosper at the expense of workers, they will have their TPP preferential access rights revoked.
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The TPP is just one of the first steps to a larger free trade agreement amongst the Pacific nations. Singapore's role in the TPP is one way to ensure our tiny nation stays relevant to other countries as we depend heavily on external trade for our survival.