LOSS OF U.S. GSP BENEFITS

Mrs Yu-Foo Yee Shoon asked the Minister for Trade and Industry what are the likely effects of the withdrawal of the Generalised System of Preferences by the United States on the Singapore economy.

BG Lee Hsien Loong: In 1987, out of the 3,000 products under the US GSP programme, Singapore exported slightly more than 700 items valued at about S$3.5 bn (US$1.7 billion) to the US. However, 40% of this trade failed to qualify for GSP because of insufficient domestic content, other GSP rules, or administrative reasons. As a result, only S$2.5 billion of our domestic exports to the US actually enjoyed duty-free treatment under the GSP programme. This is about 20% of our exports to the US, and 9% of our total non-oil domestic exports. With an average duty of about 5%, our exporters will have to pay some S$125 million more in duties without the GSP benefits.

Graduation of Singapore from the US GSP programme on 2 January 1989 will undoubtedly affect our competitiveness in the US market. Fortunately our major competitors, Hong Kong, Taiwan and Korea will also be graduated at the same time. For items where we are competing mainly with these countries, like radio cassette recorders, toys, motors, computer equipment and telecommunication equipment, the impact will therefore be less severe.

A significant proportion of our GSP exports to the US are manufactured by US MNCs here. The removal of the GSP benefits will hurt the competitiveness of industries in the US which depend on these imports as industrial inputs.

Loss of GSP benefits will also affect many Singapore industries. Industries can no longer afford to depend solely on GSP markets. They will have to find ways to cut costs and improve their productivity. They must compete not only in price but also in product design and quality. Singapore must work harder to attract new investments. We will have to improve the quality and efficiency of our infrastructure and skilled manpower. If we can do this, our economy will weather this untimely graduation and continue to develop and prosper. paragraph 3 of Annex A (Cols. 603 - 604) Annex B (Cols. 605 - 608) paragraph 3 also of Annex C (Cols. 609 - 610)