UNITED STATES WITHDRAWAL OF GSP STATUS FOR SINGAPORE

5.24 pm

Mr S. Chandra Das (Chong Boon): Sir, much has been said and written about the withdrawal of GSP status for Singapore by the US Administration over the last few weeks. I think it is important to establish certain basic points in this House. At the outset, I must state that I am well aware that the GSP status is a privilege given and not a right. In fact, Sir, we should be thankful for this privilege. Sir, the question that bothers me is: Why the sudden withdrawal?

We were told in this House that there was a linkage between the introduction of the Copyright Act and the granting of a new GSP package by the United States Government. This House, Sir, accordingly enacted one of the stiffest Copyright regulations in the world and undoubtedly one of the main beneficiaries was the United States.

In return, Sir, a new and favourable GSP package was given to Singapore in 1987. I am told this package, in fact, amounted to a 12% increase in monetary terms, compared to a 3% increase for Hong Kong. The improved package by the US Administration was because Singapore in good faith incorporated all the major US requests. Sir, I am also told that this package can normally be varied only on two grounds:

(1) If there is a possible product graduation for sensitive items, and,

(2) If Singapore surpasses the per capita income ceiling of US$8,500.

Sir, Singapore has not surpassed the US$8,500 per capita income ceiling and neither has there been selective product graduation.

Suddenly now the GSP status will be withdrawn with effect from 1st January 1989 for the four NICs to help invariably to reduce US trade deficit. Sir, if the target was really Taiwan and South Korea, then the US Administration should have just removed them. As someone said the other evening, if you just kill one person, then you have committed murder. But if you murder one and shoot three other persons at the same time, then the saying is either you have gone berserk or amok. Sir, the US Administration has chosen to lump us together with the other far more dominant NIC's. Not only were we ignored but apparently we were trampled as well.

Sir, I am not saying that Singapore should never be graduated. We all know sometime we must be graduated and we must assume our responsibilities. We have many things in common with the Americans. We both share certain com- mon political and economic values. We both believe in democracy and free enterprise economic system. Both countries believe in free and open trade policies. Singapore has always looked upon the US as the leader of the free world and a dependable partner for free and equal trade.

Of course, there are some among us who pontificate that if we are slapped on the right cheek we should offer the left. They advise us that we should not act rashly or hastily and descend at the same time to the same level of the Americans. They even suggested that the American word may not be good. But that does not mean that Singapore should do the same. Sir, to these pundits, I say they should be preaching this to the US and not to us. We are really the aggrieved party.

Sir, the removal of GSP status does not mean we are doomed. It means that, from 1st January 1989, US importers will have to pay a tariff of S$70 million or thereabouts for the same level of imports from Singapore. The bulk of these exports to the US under the GSP are parts and components, largely manufactured by US companies in Singapore. This will mean higher costs to US manufacturers and, I believe, will thus further reduce US export competitiveness. One then must ask the US Administration how this action against Singapore will help reduce trade deficit.

Mr Deputy Speaker, Sir, I am raising this subject in this House because I feel that we have been unjustly treated by the US Administration. What I cannot understand is that if there is an agreement or understanding between the US and Singapore about the linkage between a favourable GSP package and for the enactment of the Copyright Act, then surely it is not asking too much that such understanding be honoured. I hope, Sir, that the Singapore Government will make public whatever documents there are to tell our public and the world at large of the US breach of faith. It is important that this be made public in order to set the record straight.

Sir, I also call upon the Government at the same time to take all appropriate measures to put our case strongly to the US Administration. The mood in the US for the time being may not be right because of the impending US election. Nevertheless, Sir, we should not take this action lying down.

Mr Chew Heng Ching (Kaki Bukit): Mr Deputy Speaker, Sir, I share the view that the US move is a breach of faith as it had earlier promised to continue GSP privilege to Singapore in return for enacting the Copyright law. Till today, we are still puzzled as to why the US has chosen to withdraw GSP benefits from Singapore. If it is because of income, we have yet to hit the per capita GNP ceiling of US$8,500. Is it because the trade balance between the two countries is in our favour? But the US Government must remember that we have a trade deficit with them for many years. Only recently did we begin to enjoy a small trade surplus. Did we impose tariff barriers against US products recently? But we are a free port. Our relationship with the US on a government-to-government basis has never been better. What then are the reasons for graduating us? I urge our Government to seek from the US Government clear criteria for removing Singapore from the GSP list.

It is estimated that about $1.5 billion worth of exports to USA will be affected by the move next year. As a result, we are likely to lose something like $50 million worth of benefits. This impact may not appear great but it would be if other countries, such as Japan and the European Community, were to follow the US footsteps to remove Singapore from the GSP list. The overall impact on the economy, including job losses, will be significant.

The removal of Singapore from the US GSP list from January next year appears to come at the wrong time for us, especially when economists and businessmen have forecasted that there could be a slowdown in our economy in the next one to two years, including the possibility of another economic recession. This would be a double blow to our Singapore companies, coming at a time when they have just emerged from the recession and implemented drastic measures to become more competitive. I hope the US Government would review its decision, conduct a more careful study of Singapore's situation and consider deferring the withdrawal of GSP benefits from Singapore by a few more years.

I support the suggestion by the Member for Chong Boon that our Government should continue to take up the matter of GSP benefits with the US Government. I would also like to ask the Minister for Trade and Industry whether he has plans or measures to prevent other countries, such as Japan and the European Community, from following the US footsteps to prematurely withdraw Singapore from the GSP list.

This recent development of US GSP has once again confirmed our vulnerability as a very small nation. The move also sends a strong signal to our local businessmen that we cannot remain complacent but to continue to upgrade and be productive, to improve our international competitiveness and to diversify our markets. Perhaps it is appropriate at this juncture for our local businessmen to seriously consider joining forces, merging and forming what we call Singapore MNCs to compete overseas. Only by investing and operating in overseas markets can our businessmen overcome protective trade barriers. I hope this development will help accelerate the process of formation of Singapore MNCs.

Mr Chng Hee Kok (Radin Mas): Mr Deputy Speaker, Sir, I am obliged to you for letting me join in this discussion.

The crux of the matter is whether we have infringed any of the established rules of the US GSP to warrant the action of the US Government. Although the GSP, as we know, is a privilege and not a right, there are nonetheless very clear rules. The US Secretary of State, Mr George Shultz, has stated that the US plays by the rules. Unless Mr Shultz is referring to another set of rules the reality is that Singapore is the party that has played by the US rules.

In a mandatory General Review which was completed on 4th January 1987, the US set a ceiling of US$8,500 per capita GNP to define the upper limit income of a developing country. My colleague has already indicated that we are within that limit. There are six other factors which I would like to go over in some detail.

First, whether the US has equitable and reasonable access to our market. The evidence is overwhelmingly in favour of the US. Almost all US goods come into Singapore duty-free. Next year, less than half of Singapore's exports to the US will not attract duty. Another important consideration is that our imports up to now from the US are mainly equipment and machinery. This means long term dependence on spare parts and long-term imports. Our exports to the US have no such long-term implications.

Second, whether there are any unreasonable export practices. Our record is clean.

Third, trade distorting investment practices and policies. Singapore has no such investment practices and policies.

Fourth, whether we remove barriers to trade. We are one of the greatest exponents of free trade.

Fifth, whether we accord to workers internationally recognized worker rights. Our record of the NTUC speaks for itself.

Lastly, whether we provide adequate and effective protection of US intellectual property rights. We met this condition at the instigation of the US in passing the Copyright Act last year. There is no question that we have played by the US rules and that the absence of the Copyright Act was our only deficiency under the GSP scheme.

As the Copyright Act was tied in to the US GSP issue, I think the linkage is very clear. My reaction then at that time, on 29th January, was to support the call for the suspension of the Copyright Act. However, a suspension will gain us little and will alienate friends who have supported our stand on this issue.

This morning an American businessman told me that nine out of 10 US businessmen support us in this matter. As a small country, we have few bargaining chips. Therefore, the Copyright Act should be retained so that we can use this as a preamble in all future negotiations and dealings with the US. Nothing is more honourable than to speak with conviction and strength that we have kept our side of the bargain. By all means, diversify our market dependence, increase trade with those who are supportive of us and even use administrative measures to redress the imbalance which will be in favour of the US next year. But I say let us stay on a high moral ground and leave the Copyright Act alone.

Besides the apprehension raised by my colleague from Kaki Bukit, the other repercussion is that this may affect our efforts in attracting new investments into Singapore. The access to the US market through the GSP is a very important investment tool. Of the some 50 or so major exporters to the US under the GSP, about 70% are foreign-owned, mainly from the US, the European Community and Japan. Their export value is much higher than 70%. With the loss of this important investment tool, we will have to work much harder to be ahead of other developing countries. This is assuming that we are already not doing our utmost.

This blunting of our competitive edge as an investment centre means that the Government must do all it can to convince the next US Administration to re-admit us into the scheme. As this is election year and is probably the main motivator of this GSP move, our chances of a good argument carrying weight are almost nil.

The Minister for Trade and Industry (BG Lee Hsien Loong): Mr Deputy Speaker, Sir, on the question of the withdrawal of our GSP rights by the United States, we should see the dispute in context. The US is a strategic ally of Singapore. We have many interests in common. This dispute is not with an enemy but with a friend. And despite the dispute, he is still a friend, and that determines how we should react and what actions we should take in response.

The Member for Chong Boon briefly outlined the terms and conditions of the GSP (Generalized System of Preferences), a unilateral grant by some developed countries of privileges to developing countries. In America, it comes under the 1984 US Trade and Tariff Act which states quite clearly that these are privileges which will cease when the following takes place. Either we hit US$8,500 per capita GNP, which we have not, or the law is changed by the US Congress, which has not happened either, or the law expires, which takes place in 1993. This is 1988. So according to the established criteria, we were not due to be graduated.

We have made the point that there is a linkage between GSP and Copyright. Some doubt has been cast as to the nature of this linkage. The Member for Chong Boon asked just now: what is it? The linkage occurs like this. I propose to provide the full chronology and the documents to prove it.

In 1985, the US Trade Representative's Office's conducted a GSP General Review. It is a mid-term review to decide what changes are needed in the scheme until it runs to completion. It was to decide which countries should continue to enjoy GSP privileges and, if so, to what extent. The Member for Radin Mas gave a list of the criteria:

(1) Access to Singapore markets for US goods and services,

(2) Export practices. That means do we give unfair subsidies to our exporters.

(3) Protection of US intellectual property rights. That means tapes, discs, computer programmes, software.

(4) Trade distorting investment practices and policies,

(5) barriers to trade and goods and services and then

(6) internationally recognized workers' rights. Do we have a union movement? Are our workers' interests protected by law?

Six items. The US told us in our discussions that, as far as Singapore is concerned, only one was of interest and, that is, intellectual property rights. On the rest, we were as clean as we could be.

Our first bilateral consultations took place on 13th November 1985. The US expressed the hope that Singapore would pass a new copyright law before the end of the GSP General Review. We responded that positive steps were being taken towards enacting a new law.

Second bilateral consultations, 6th May 1986. The US said they could not commit the Singapore request for competitive need limit (CNL) waivers, ie how much of each type of item we are allowed to send to US under GSP tariff-free. They could not commit. In other words, bargaining: the US would not tell Singapore first, but if Singapore were to respond favourably to US concerns on copyright protection, then it would be possible to exercise greater flexibility on Singapore's waiver requests. We cannot commit, but if you improve copyright protection, we can show greater flexibility.

Third bilateral consultations, 22nd to 23rd September 1986. We showed the US our draft copyright legislation and pointed out that we had expedited our legislation, brought it forward and speeded it up because of the US GSP General Review. Secondly, that we had incorporated specific provisions which the US side had requested. The US studied this. They made further specific requests for changes. We took note. The US stated at this third consultation that, in view of Singapore's action on copyright, the US Trade Representative's Office could defend a GSP package "plus side of net neutral" for Singapore: something slightly more than nothing. And then the GSP package for Singapore would be better than that offered to the other advanced developing countries - Korea, Taiwan, Hong Kong. We recorded this in a Record of Understanding, agreed by the two sides. I am releasing the Record of Understanding to the press. Let me quote here just two sub-paragraphs from (ii) and (iii):

'The US delegation stressed that it would recommend a favourable GSP package described below if the new Copyright Act were passed with the changes described below and protection granted to US works by the end of 1986.'

In other words, improve copyright, better GSP package, terms spelt out, particular items. Paragraph 3:

'Based on paragraph 2 above, the US delegation would recommend a favourable package for Singapore under the US GSP General Review.'

It is quite unambiguous.

In November I met the US Assistant Secretary of State, Mr John Monjo. He was visiting in Singapore. There was some delay in our Copyright legislation because the Select Committee received more sub- missions than we had anticipated. The Committee had to go through them and hear all the representors, and we could not meet the December deadline. So I informed Mr John Monjo that the Copyright Bill passage might be delayed for a few months. The Singapore Government fully intended to proceed with it, but it was just harder to do than we expected. The US officials were greatly alarmed. They thought we were reneging, cheating. They expressed extreme concern, because the GSP General Review had to be completed by January 1987. In other words, stick to the deadline; if we did not stick to the deadline, the deal was off. And to make quite sure we understood, they later handed us a "non-paper". A non-paper is a document with no date, no signatures, no attributions. This one presented the US position, stressing the linkage between copyright protection and GSP. I quote from the non-paper:

'Both the timing and the quality of copyright protection were key in justifying the recommendation of such a favourable GSP package for Singapore. Deterioration in quality and/or timing of copyright protection will result in the GSP Committee recommending a less favourable GSP package for Singapore.'

Then, finally, the punchline:

'Our principals have asked that the Government of Singapore inform the Embassy by December 5 whether it will carry out the terms of the Record of Understanding or, alternatively, whether the Government of Singapore wishes to reopen the GSP package agreed upon in September.'

In other words there was a package which was sealed, please stick to it.

We satisfied the Americans that the delay was not a malicious one and was in good faith. In January 1987, the US Administration affirmed Singapore's GSP status and granted us a favourable package, as you have heard, better than the other countries.

In April 1987, Parliament passed the Copyright Bill. In May 1987, one month later, Singapore entered into a bilateral agreement with the US on copyright protection. This was necessary because the Copyright Bill only protects works of Singapore writers and works published in Singapore. To protect works published elsewhere, like in America, a bilateral agreement was necessary. Framework was provided, but the agreement was signed in May. On 1st July 1987, a new GSP package came into effect. Nearly two years after the negotiations started, in July 87, we started to enjoy the enhanced privileges.

The linkage between GSP and copyright is therefore quite clear. It is hard to understand how now, barely six months after the new package became effective, the US can argue that, notwithstanding the agreement, it is entitled to graduate Singapore unilaterally at any time it likes. At the least, such an interpretation must make it harder for the US to persuade other countries to improve the protection they give to US intellectual property. We are an example and the lesson will not be missed.

The Member for Chong Boon asked that we put our arguments strongly to the US side. This we have done, and we will continue to do. In fact, we have formally asked the US to confirm three things:

First, that the facts, as I have just presented them, are correct.

Secondly, that the US, and particularly the US Trade Representative's Office, did make a clear and explicit linkage between Singapore's GSP status and the timing and the substance of the Copyright Bill which was passed in Parliament; and

Thirdly, that having met US concerns on copyright protection, Singapore should have been able to enjoy the benefit of the GSP package as provided for under the 1984 Trade and Tariff Act of the United States.

We are now waiting a US reply.

How do we respond? The Member for Chong Boon says, "Please don't just turn the other cheek." I think we respond not meekly but in a measured, commensurate way. The Government is still considering the alternatives. We are studying the possible appropriate means to register our protest and we will act in due course.

Question put, and agreed to.

Resolved,

That Parliament do now adjourn.

Adjourned accordingly at Nine minutes to Six o'clock pm to Friday, 4th March 1988.