S’pore can help pave way for more inclusive trade in Asean; locals, businesses poised to benefit

Singapore has a role to play in helping South-east Asia’s poorer economies improve their participation in regional trade and is leading negotiations in two key agreements that will enhance trade in the digital realm.

In doing so, the Republic would stand to benefit from a more inclusive region, which can lead to further market expansion and increased demand for Singapore goods and services, Mr Jose-Antonio Monteiro, coordinator of the World Trade Organisation’s (WTO) 2024 World Trade Report, told The Straits Times.

“A more prosperous region drives demand for higher-quality products, which Singapore specialises in. In addition, economic convergence in the region reduces risks associated with economic volatility, allowing for sustained growth and investment,” he said.

While average incomes in poorer economies have nearly tripled and caught up with richer ones as global trade has expanded over the past 30 years, some low-income countries have nonetheless been left behind.

Despite lower barriers to trade, one-third of low- and middle-income economies, representing 13 per cent of the global population, grew slower than the average high-income economy in per capita terms.

In South-east Asia, these economies include Myanmar and Laos.

For trade to be more inclusive and beneficial, these lagging economies must also have policies that integrate open trade and international cooperation.

These were among the main findings of the report, launched on Sept 9 by the WTO at its annual public forum in Geneva.

WTO chief economist Ralph Ossa said one way to better include poorer economies in international trade is by improving digital avenues that enable cross-border commerce to take place.

With around 90 per cent of Asean micro, small and medium-sized enterprises using social media channels to do business and more than a third having online stores, according to consultancy Nextrade, this would open up new opportunities for businesses as well as women to participate in trade.

It could also encourage investments in areas such as digital education and infrastructure, Mr Ossa said.

Asean is, in fact, in the process of negotiating the world’s first regional Digital Economy Framework Agreement (Defa). This is expected to set a pathway towards an inclusive, integrated regional digital economy that is based on a coherent and harmonised set of rules.

The Asean Defa was launched in September 2023, with negotiations currently targeted for conclusion in 2025, a spokesman for Singapore’s Ministry of Trade and Industry told ST.

“Singapore hopes to work together with Asean member states to develop an Asean Defa that is comprehensive and forward-looking, with high-quality commitments that will help our peoples and businesses seize emerging opportunities in the digital economy,” the spokesman said.

In a September White Paper for the Hinrich Foundation, Nextrade chief executive Kati Suominen noted that the Defa, if successful, can generate new trade and investment opportunities by addressing policy frictions hindering cross-border digital payments, among other things.

“These issues raise costs for firms in regional supply chains and curtail SMEs’ cross-border e-commerce,” Dr Suominen said in her paper.

She added that the Defa can pioneer common artificial intelligence (AI) standards and pro-trade AI policies among Asean economies, which is crucial to enable development and scalability of AI applications in the region.

Singapore is among the conveners leading negotiations between like-minded WTO members to establish a set of international rules for e-commerce.

In July, the conveners announced that the 91 members of the Joint Statement Initiative (JSI) on e-commerce had agreed on the core content and language of draft digital rules to facilitate global e-commerce growth, enable digital trade opportunities, and build trust and confidence in online transactions.

The agreement, which has taken five years to negotiate, “represents the first time the WTO has managed to draft digital rules” and “profoundly matters” given digital’s importance to trade, said Hinrich Foundation’s head of trade policy Deborah Elms.

She added that although it does not include the US, the JSI members involved in negotiating for a single set of international digital trade rules included both advanced economies and the least developed economies.

The draft rules are acceptable to heavyweight WTO members like China and the EU, as well as smaller ones like Benin and Laos.

Speaking on a panel at the WTO forum on Sept 13, Singapore permanent representative to the WTO Tan Hung Seng said participants are currently proceeding with domestic consultations, with a view to integrating the outcome of negotiations into the global body’s legal framework.

Mr Tan said the final set of rules must be commercially meaningful to JSI members and add value to digital trade, such as by improving interoperability between payment systems, cyber security and accessibility of government data.

“The agreement will include a ban on Customs duties on electronic transmissions, which is essential for businesses to trade confidently without worrying about additional costs on digitally delivered products and services,” he said.

Mr Tan added that being able to reach a final agreement on a set of digital rules with a large group of partners “can translate into a quantum jump in how developing members can integrate themselves into the global digital trade system”.