Forum: Professors neglected important point - tradable v non-tradable goods

In their appeal to the theory of comparative advantage, I believe Professor Hui Kai Lung and Professor Ivan Png have neglected an important point (How can S'pore reduce its reliance on foreign labour?, May 8).

Their premise was that Singapore does not have a comparative advantage in labour-intensive production.

This is probably true.

They then argue that by admitting large numbers of foreign workers, Singapore has "slipped" into labour-intensive production, thereby "distorting" economic fundamentals.

This would have made sense if we were talking about a tradable good. It is indeed pointless to take in foreign workers to produce T-shirts in Singapore, when those same workers can produce the T-shirts in their home countries and export them to us.

But the activities they mention - construction, landscaping and security - can be undertaken only domestically; you cannot import a building.

With that, the theory of comparative advantage predicts exactly the status quo: Low-wage countries export their labour to us since that is where their comparative advantage lies.

Samuel Lee Deyan

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