Economic Impact of the Withdrawal of the GSP on Singapore 9789814379212

Table of contents :
Contents
List of Tables
Acknowledgements
1. Introduction
2. Pre-Graduation Country Scenario
3. Post-Graduation Scenario
4. Policy and Business Level Options and Initiatives
5. Summary and Conclusions
Apppendices
Notes
Bibliography
THE AUTHORS

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Economic Impact of the Withdrawal of the GSP on Singapore

The ASEAN Economic Research Unit (AERU) is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. The day-today operations of the Unit are the responsibility of the Co-ordinator. A Regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit. The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the many-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer.

/SEAS Current Economic Affairs Series

Economic Impact of the Withdrawal of the GSP on Singapore TohMunHeng Linda Low National University of Singapore

I5ER5

ASEAN Economic Research Unit INSTITUTE OF SOUTHEAST ASIAN STUDiES

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Road Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 1991 Institute of Southeast Asian Studies

The responsihility.f(n'facts and opinions in this puhlication rests exc/usi\·e/v with the authors and their interpretations do not necessarily reflect the \'iews or the policy of' the Institute or its supporters.

Cataloguing in Publication Data Toh, Mun Heng. Economic impact of the withdrawal of the GSP on Singapore I by Toh Mun Heng and Linda Low. (ISEAS current economic affairs series) I. Tariff preferences--United States. 2. Singapore--Commerce--United States. 3. United States--Commerce--Singapore. 4. Tariff preferences--New Zealand. 5. Singapore--Commerce--New Zealand. 6. New Zealand--Commerce--Singapore. I. Low. Linda. II. Title. III. Series. 1991 HF1753 T64 sls91-142567 ISBN 981-3035-91-9 ISSN 0218-2114 - - - - -

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Typeset by International Typesetters Printed in Singapore by Prime Packaging Industries Pte. Ltd.

Contents

List ofTahles Acknowledgements

VI \'Ill

I. Introduction

2. Pre-Graduation Country Scenario Views on the U.S. General Review of the GSP Singapore's GSP Exports to the United States The New Zealand GSP Scheme

4 9

21 32

3. Post-Graduation Scenario

34

4. Policy and Business Level Options and Initiatives

45

5. Summary and Conclusions

47

Appendices Notes Bibliography Note about the Authors

49

59 61

63

List of Tables

Singapore: Total GSP Exports, 1972-86 Singapore's GSP Exports to the United States, 1984-88 Percentage Distribution of GSP Markets, 1972-86 GSP Exports as a Percentage of Non-Oil Domestic Exports to Major Markets, 1981-86 Major GSP Beneficiaries for Eleven OECD Schemes, 1980 5 GSP Imports of the OECD Countries from Selected Countries, 6 1976-80 The Top Ten GSP Exports from Singapore, 1975, 1976, and 7 1986 U.S. GSP Imports from Leading Beneficiaries, 1985 8 Imports Eligible for U.S. GSP of the East Asian NIEs After the 9 1985 General Review 10 Selected Major Imports from the United States, 1984, 1986, and 1989 Ranking of the United States as a Supplier of Major Imports 11 to Singapore, 1984, 1986, and 1989 12 Domestic Exports to the United States at the SITC One-Digit Level, 1984, 1986, and 1989 13 Selected Domestic Exports to the United States at the SITC Two-Digit Level, 1984, 1986, and 1989 14 Selected Domestic Exports to the United States at the SITC Three-Digit Level, 1984, 1986, and 1989 The Top Five GSP Items to the United States, 1984-88 15 16 The Top Ten GSP Items to the United States, 1984-88 17 The Top Twenty GSP Items to the United States, 1984-88 Summary of Values and Shares of the Top GSP Exports to 18 the United States, 1984-88 19 U.S. Imports from Singapore on Selected Items. 1985-88 20(a) U.S. GSP Utilization Rates by Country/Area, 1988 20(b) U.S. GSP Utilization Rates by Region, 1988 I

2 3 4

5 5 6 6 7 8 8 9 10 11 13 14 15 16 22 23 24 27 28 30 31

List of Tables

21 22 23 24

25

26

Welfare Losses of U.S. Imports from Singapore, 1986 Comparison of Export Values of the Top Twenty GSP Items to the United States in 1988 and Similar Exports in 1989 Comparison of Export Values of the Top Fifty GSP Items to the United States in 1988 and Similar Exports in 1989 The Possibility of Trade Diversion of the Top Twenty GSP Items to the United States in 1988 and Similar Exports to Japan and the EC in 1989 The Possibility of Trade Diversion of the Top Fifty GSP Items to the United States in 1988 and Similar Exports to Japan and the EC in 1989 Utilization Rates of the ASEAN Countries under U.S. GSP, 1988

vii

34 37 38

40

42 46

Acknowledgements

This study of the economic impact of the withdrawal of the Generalized System of Preferences (GSP) on Singapore is prepared as part of the activities under a regional project on GSP implemented by the Economic and Social Commission for Asia and the Pacific (ESCAP) in collaboration with the United Nations Conference on Trade and Development (UNCTAD) and funded by the United Nations Development Programme (UNDP). The objectives of the Singapore case-study include identifying the products affected by the GSP withdrawal and assessing how Singapore can regain its competitiveness, which may involve the restructuring of such industries and, if need be, also relocation of its industry. The lessons or experience from the graduated countries would be useful to other developing countries due for graduation. The study was commissioned by ESCAP and first discussed at the National Workshop on GSP on 9 November 1990 in Singapore, organized by the Institute of Southeast Asian Studies (ISEAS) and presented at the Final Workshop on GSP organized by ESCAP in co-operation with the UNDP at Kuala Lumpur on 21 February 1991. The authors are grateful for the assistance of UNCTAD, the U.S. Trade Representative in Washington, DC, the Singapore Trade Development Board (TDB) for assistance in providing the necessary data, and the participants for their comments at the National Workshop in Singapore and the Final Workshop in Kuala Lumpur. The opinions, figures, estimates, and conclusion set forth in this publication are the responsibility of the authors and should not necessarily be considered as reflecting the views or carrying the endorsement of the United Nations or ISEAS. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory. city or area. or of its authorities, or concerning the delimitation of its frontiers or boundaries.

11 Introduction

The idea for the Generalized System of Preferences (GSP) was mooted in the first United Nations Conference on Trade and Development (UNCTAD) in 1964 but it was not until 1972 that the first GSP scheme under the European Community (EC) was implemented. The GSP is to give exports from developing countries (beneficiary) reduced or duty-free tariff rates in the markets of developed countries (preference-giving or donor countries). The difficult birth of the GSP reflects the controversy behind the effectiveness of such a scheme to attain the objective of accelerating industrial development among developing countries. Such GSP schemes violate the principles of free trade under the General Agreement on Tariffs and Trade (GATT) based on the most-favoured-nation (MFN) treatment and reciprocity. Since the exports of non-beneficiary countries would continue to attract MFN duties. the benefits of the GSP are twofold. First, it enables developing countries to compete on more equal terms with the domestic producers of preference-giving countries. Second, it gives producers from developing countries a price advantage over exporters from non-beneficiary countries. The objectives of the GSP, namely, to increase the export earnings of developing countries, promote their industrialization, and accelerate their rates of economic growth, were accepted at UNCT AD II in 1968. But it was very difficult to have one unified system under which identical concessions can be applied across the board. This is because donor countries have their own divergent interests. The issue was settled on the principle of equal burdensharing, with each donor country assuming obligations in keeping with their relative strengths. Thus, the GSP came to be understood as a system composed of individual national schemes each based on common goals and principles to provide developing countries with broadly equivalent opportunities for export expansion. In June 1971, the contracting parties of GATT approved a waiver on MFN treatment. This enabled the EC. followed by other members of the Organization of Economic Co-operation and Development (OECD), and the United States, to complete the GSP system. However. right from the beginning the GSPrepresented a delicate balance between contracting parties. Industrialized nations fear

2

Economic Impact ofGSP Withdrawal on Singapore

inflicting injuries on their own domestic industries, and continual improvement and modification to the GSP schemes become necessary as beneficiary countries press for more concessions and preference-giving countries have to safeguard their political and economic interests. Currently, sixteen separate GSP schemes are offered by twenty-seven preference-giving countries, which include twentytwo developed market economies, including all the EC countries and five socialist countries of Eastern Europe and the Soviet Union. 1 These schemes differ in product coverage, extent of tariff reduction or preference margins, safeguard measures, rules of origins, and lists of beneficiary countries. The needs of the least developed countries were looked into even as early as UNCT AD I. The number of developing countries identified was twentyfour in 1971; seven more were added between 1971 and 1981; and the list currently stands at forty-two. Within the GSP system, Norway was the first preference-giving country to grant special treatment to the least developed countries. 2 Besides the inherent complex equity issues given the different individual GSP schemes in response to the different needs of preference-giving and beneficiary countries, changes in industrial structure and the international economic environment are also putting strains on the GSP system. Most of the advanced industrial countries are also facing their own economic difficulties, ranging from trade deficits to budgetary deficits in the 1980s, and competition and protectionism seem to be their greater concern. Many have become more stringent in reviewing their GSP schemes and eligibility and more beneficiary countries have been graduated out of some GSP schemes. This study of the economic impact of the GSP on Singapore is part of an ESCAP/UNCT AD/UNDPregional project to analyse the effects of the withdrawal of the GSP on the Republic of Korea and Hong Kong as well. The objectives for the Singapore case-study are as follows: I. through identifying the products affected by the GSP withdrawal, to assess how Singapore can regain its competitiveness, which may involve the restructuring of such industries and, if need be, relocation as well; 2. to transfer any lessons or experience from graduated countries in coping with the withdrawal to other target countries due soon for graduation, namely, Indonesia, Malaysia, and Thailand; and 3. to promote regional co-operation by changing the lines of production of the affected products from one developing country to another, particularly the target countries. Strictly, the subject of graduation runs counter to one of the basic principles of the GSP, namely, non-discrimination. However, this can be justified if it helps strengthen the trends already taking place. The ostensible reason for graduation is that it helps to spread benefits by removing the more competitive countries such as the newly industrializing economies (NIEs) to make way for others lower

I. Introduction

3

down the line. But this will not just happen unless those lower down possess the supply capabilities to step into the vacuum. Otherwise, it could lead to trade diversion and non-beneficiary countries could step in to fill the place of graduated countries. In fact, with a host of factors at work since 1985 making for investment flows and the relocation of manufacturing industries, a question to be raised is whether the GSP is an added stimulus. The Singapore case-study will cover the withdrawal of the GSP scheme by the United States in 1989. While New Zealand withdrew its GSP scheme for Singapore earlier in 1985, the impact was insignificant compared with that of the United States. Some remarks on New Zealand's withdrawal are none the less attempted to complete the analysis. Following this introductory chapter, Chapter 2 will look into the pre-graduation country scenario, which analyses the economic impact in terms of composition and structure of GSP exports, GSP export growth, and market shares. The pre-graduation analysis covers overall GSP performance as well as GSP exports to the United States. Chapter 3 will attempt to look into the post-graduation country scenario. Policy implications and options at both the government and business sector levels will be assessed in Chapter 4, while Chapter 5 provides the conclusions of the study, which may be useful to the target countries. The success of a case-study of this nature is critically dependent on the availability of statistics on GSP exports. A major handicap for the Singapore team is precisely that which is expressed by the Singapore Trade Development Board (TDB), that such statistics cannot be supplied from the national source. The reason is that the TDB only provides certification for country of origin for exporters intending to export to GSP-donor countries. To the extent that not all the applications succeed in exporting their goods into these countries, the more accurate source of statistics would be from the import data of New Zealand and the United States, which have allowed in exports from Singapore on their GSP schemes. Efforts were made by both the Singapore team and the ESCAP/UNCTAD/ UNDP to obtain the necessary import data from these two countries. The information and statistics obtained have been as fully tapped and reflected upon as possible given the constraints of time and other resources for this report. It should be reiterated that the depth and quality of this study is constrained not only by data availability and time but also by technical difficulties, as specifications for the data on magnetic tapes were initially wrongly specified. Fortunately, the Office of the U.S. Trade Representative (USTR) was helpful in providing the necessary statistics.

~ Pre-Graduation Country Scenario

Singapore's industrial development has witnessed a shift from that of an importoriented strategy in the early 1960s to an export-oriented one since it left Malaysia and the possibility of an enlarged common market in 1965. 3 It was eligible for GSP benefits from sixteen countries in 1985, namely, Australia, Austria, Bulgaria, Canada, Czechoslovakia, the EC, Poland, Hungary, Japan, New Zealand, Norway, Finland, the Soviet Union, Sweden, Switzerland, and the United States (see UNCTAD, Handbooks on the schemes of various countries). In 1985, when Singapore's per capita income reached 70 per cent of New Zealand's, the latter removed Singapore from its GSP list. Australia revised its entire GSP scheme and reduced preferential margins to only 5 per cent for all products. Under the EC GSP scheme, only a total of thirty-seven items were of interest to Singapore in 1986. Table 1 shows the value of total GSP exports to all donor countries since 1972. While it appears to have grown significantly by some forty-six-fold, from S$70.8 million in 1972 to S$3,269.9 million in 1986, as a percentage of total exports from Singapore, GSP exports over the period averaged only 4.6 per cent, ranging from 1.2 per cent in 1972 to 7.2 per cent in 1984. The negative growth rates of GSP exports in 1985 and 1986 reflect the severe depression of 1985. Table 2 shows GSP exports from Singapore to the United States over the period 1984-88. Exports which are GSP-free formed less than one-third of total exports (GSP-free plus dutiable items) to the United States in 1984 and 1985. This increased to 50.5 per cent in 1986 and over two-thirds (64.1 per cent) in 1988. The average growth rate of GSP exports over the period was 30.4 per cent compared with 18.5 per cent for total exports over the period 1984-88. On the average, GSP exports accounted for4.6 per cent of total exports over the period 1972-86 (the average of the last column in Table I ). 4 However, when deflated for price changes and using only data from 1978 onwards, this figure is 6 per cent (Soon 1987). The GSP seems to be of minimal importance in the total export picture. However, this view could still be misleading for two reasons. First, the rules of origin specify that preferential treatment is only granted to goods that have undergone substantial transformation in the beneficiary country.

2. Pre-Graduation Coullfrv Scenario

5

TABLE 1 Singapore: Total GSP Exports, 1972-86 GSP Export Growth - · - - - - - -

Year

%

S$ Million - - -

- - - - -

70.8 212.1 344.7 480.9 728.0 853.6 1,031.4 1,389.4 1,793.9 2,210.5 2,306.3 2,854.2 3,683.7 3,475.0 3,269.9

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

199.7 62.6 39.5 51.4 17.3 20.8 34.7 29.1 23.2 4.3 23.8 29.1 -5.7 -5.9

Total Exports (S$ m) ----·----

GSP as% of Total - - - - -

6,149.4 8,906.8 14,154.6 12,757.9 16,265.9 20,090.3 22,985.5 30,940.1 41,452.3 44,290.8 44,472.8 46,154.0 51,340.0 50,178.8 48,985.5

1.15 2.38 2.44 3.77 4.48 4.25 4.49 4.49 4.33 4.99 5.19 6.18 7.18 6.93 6.68

NoTE: An attempt to update this table was unsuccessful. SouRCE: Annual reports of the Department of Trade and Trade Development Board.

TABLE 2 Singapore· s GSP Exports to the United States, 1984-88 GSP Exports (S$ million) (A)

Year -

--

1984 1985 1986 1987 1988

Total Exports (S$ million) (B)

----- --

(A)/(B) '!c

--

626.6 674.6 730.2 1,296.9 1.309.3

2,058.3 2,088.4 1,444.7 2.072.3 2,821.7

30.4 32.3 50.5 62.6 64.1

30.4

18.5

n.a.

Average growth rate ('/c) SocRcE: U.S. import data.

Economic Impact ()/"GSP Withdrawal on Singapore

6

About 35 per cent of Singapore's total exports are re-exports that do not qualify for GSP treatment. Second, more than 40 per cent of Singapore's domestic exports are oil and oil-related products, which are generally not covered by the GSP. Therefore, when the value of GSP exports is compared with that of total domestic exports, the figure is about I 0 per cent over the period 1978-86. When compared with non-oil domestic exports, the ratio increases to almost 20 per cent over the period 1978-86. The major markets for Singapore's GSP exports are shown in Table 3. The EC had dropped in importance as the major GSP market, with the United States being the leading market in 1986. In comparison, New Zealand is of little significance as a market for Singapore's GSP exports. Table 4 shows Singapore's GSP exports as a percentage of non-oil domestic exports to major markets over the period 1981-86. On the average, the United States accounted for 20 per cent of Singapore's non-oil GSP domestic exports over the period compared with 31 per cent for the EC, 48 per cent for Japan, and 52 per cent for Canada. For Japan, if GSP exports are compared with total domestic exports, the figure is only 15 per cent, reflecting the fact that the bulk of Singapore's exports to Japan was oil and oil-related products, which are

TABLE 3 Percentage Distribution of GSP Markets, 1972-86 (In percentages) -----

Year

U.S.

EC

Japan

Others

1972 1976 1980 1986

0 20 33 42

67 50 40 29

30 20 19 20

3 10 8 9

SouRcE: Soon ( 1987), fig. 4.2, p. 40.

TABLE4 GSP Exports as a Percentage of Non-Oil Domestic Exports to Major Markets, 1981-86 (In percentages) Market

1981

1982

1983

1984

1985

1986

Average

U.S. EC Japan Canada

21.7 25.8 47.5 45.9

23.0 26.4 43.9 53.5

19.1 33.9 41.7 54.8

21.5 36.4 48.7 41.7

21.2 33.7 49.9 67.8

16.0 29.1 53.7 49.5

20.4 30.9 47.6 52.2

--------~

SouRCE: Soon ( 1987), table 4.3, p. 41.

2. Pre-Graduation Country Scenario

7

generally not covered under the GSP scheme. Based on the information in 1980, Table 5 shows that Singapore is not a very large beneficiary of eleven OECD GSP schemes. For the U.S. scheme in particular, Singapore was only the sixth largest beneficiary, after Taiwan, Hong Kong, the Republic of Korea, Mexico, and Brazil. In 1980 it was the fifth and seventh largest beneficiary of the Japanese and EC schemes, respectively. In 1982, Singapore ranked as the sixth largest beneficiary under the U.S. GSP scheme. In 1984 it was the seventh largest beneficiary under the Japanese and eleventh under the EC GSP schemes. To give us an idea of Singapore's GSP benefits compared with those of the other Asian NIEs and the other ASEAN countries, Table 6 shows the GSP imports of all the OECD countries from these countries. Singapore appears to have exported far less than the other Asian NIEs under the GSP. This could be due to the fact that Singapore's overall exports is significantly smaller than those of the other Asian countries. But compared with the other ASEAN countries, Singapore tops in GSP exports to the OECD countries. From 1975 to 1979, five of the top ten products exported from Singapore

TABLE 5 Major GSP Beneficiaries for Eleven OECD Schemes, 1980 (Import values in million US$) Largest Beneficiary

U.S.

214.0 385.1 118.7 142.5 1,204.2 113.2 347.1 204.7 933.3 16.7

(6)

Others

EC

Total

Brazil China Hong Kong India ROK" Mexico Philippines Singapore Taiwan Yugoslavia

441.7 0.0 803.5 139.1 775.7 509.1 135.8 300.5 1,835.4 176.8

Total

5,117.6

3,679.5

5,540.1

2,698.0

17,035.2

69.9

73.8

59.3

0.0

66.1

As a o/c of GSP"

(5) (10) (2) (8) (3) (4) (9) (6)

Japan

(I)

(7)

(3)

(8) (7) (I)

(9) (4) (5) (2) (10)

825.6 432.4 984.5 817.6 855.3 233.4 350.8 390.6 0.0 649.9

(3) (6) (I) (4) (2) (9) (8) (7) (10) (5)

225.3 248.9 548.0 172.6 492.8 87.3 96.3 311.8 317.7 197.3

(6) (5) (1) (8) (2) (10) (9) (4) (3) (7)

1,706.6 I ,066.4 2.454.7 1,271.8 3,328.0 943.0 930.0 1,207.6 3,086.4 I ,040.7

NoTE: Figures within parentheses denote rank of beneficiary country/area. " Republic of Korea. "As a percentage of total GSP benefits accorded. SouRcE: OECD ( 1985, table II, p. 90).

(4) (7) (3) (5) (l)

(9) (10) (6) (2) (8)

Economic Impact ofGSP Withdrawal on Singapore

8

under the GSP remained the same while from 1979 to 1986, four remained the same but were in different positions. Table 7 shows the top ten GSP exports from Singapore for selected years, mainly in electronic products, precision equipment, and precision products. By 1986, items such as plywood has dropped out of the top ten list while chemicals and data-processing machines gained in importance. However, the items are still dominated by electronic products, precision equipment, and precision products. The implication is that despite the rapid industrial changes in the composition

TABLE 6 GSP Imports of the OECD Countries from Selected Countries, 1976-80

Beneficiary CountryI Area

Ave. Annual Import Growth, 1976-80 (%)

Total OECD Imports, 1980 (US$ million)

Total

GSP

Ratio of GSP to Total Imports, 1980 (%)

25.3 29.5 26.2 25.6 36.1 13.3 31.4 28.3

30.1 31.2 20.5 16.7 18.3 9.7 15.0 1.8

-----

ROK* Taiwan Hong Kong Singapore Philippines Malaysia Thailand Indonesia

3,328.0 3.086.4 2,454.7 1,207.6 930.0 873.4 582.5 375.6

17.5 24.8 20.6 29.2 23.8 26.0 22.6 32.9

* Republic of Korea. SocRcE: Soon ( 1987). table 4.4, p. 42.

TABLE 7 The Top Ten GSP Exports from Singapore, 1975, 1976, and 1986 1975 Calculators Plywood Antibiotics Watches Cameras Compressors Transistor radios Projectors Diodes Toys

1976

1986

Plywood Radios and TV s Antibiotics Domestic electrical appliances Motors Circuit breakers Toys Cameras Calculators Furniture

Toys Circuit breakers Nucleic acid Hydrocarbon solvents Radios and TV s Data-processing machines Motors Ball bearings Compressors Sound recorders

SouRcE: Soon ( 1987). table 4.5. p. 43.

2. Pre-Graduation Country Scenario

9

of Singapore's manufactured exports, the diversification for its GSP exports has been less so. With the exception of data-processing machines, most of the products at the top of the list exported under the GSP are not high-technology electrical products. In 1986 computers and computer peripherals included under data-processing machines in the GSP scheme was the sixth most important item. as can be seen in Table 7. But by 1987. the GSP benefits for data-processing machines are no longer that significant as computer components were MFN duty-free and the duties for computer peripherals were only 3.7 per cent.

Views on the U.S. General Review of the GSP The positions for beneficiaries of the U.S. GSP scheme had not altered much in 1985 (Table i\) compared with 1980 (Table 5). except for the Republic of Korea taking over the second position from Hong Kong, as shown in Table 8. Singapore remained in the sixth place. accounting for 4.8 per cent of total preferential imports entering the United States. However, the most distinctive feature in Table 8 is that Singapore's per capita GNP in 1985 was the highest of the ten countries shown. being more than twice that of the largest beneficiary, Taiwan. Table 9 ~hows the imports eligible for U.S. GSP of the East Asian NIEs after the 1985 General Review of the U.S. GSP scheme. Only the two bigger NIEs experienced significant declines in their import levels after the Review, while Singapore's imports increased by 12 per cent. Under the U.S. country graduation programme, all GSPbenefits are removed once a beneficiary country achieves a specified level of per capita GNP (see

TABLE 8 U.S. GSP Imports from Leading Beneficiaries. 1985

Country/ Area

GSP Imports (US$ million)

'lr Share in Total Preferential Imports

1985 per Capita GNP (US$)

2.981 1.524 1.102 725 633 512 474 386 239 225

27.7 14.1 10.2 6.7 5.9 4.8 4.4 2.4 2.2 2.1

3.144 2.150 6,230 2.080 1.640 7.420 4.990 580 3.080 2.130

Taiwan ROK* Hong Kong Mexico Brazil Singapore brae! Philippines Vene7uela Argentina ----------------

''' Republic of Korea. S01 'RCE: Soon ( 1987 ). table 4.8. p. 56.

----------

-------

Economic Impact ofGSP Withdrawal on Singapore

10

TABLE9 Imports Eligible for U.S. GSP of the East Asian NIEs After the 1985 General Review -~

--~--~~-----

Country/Area

Level Before Review (US$ million)

Level After Review (US$ million)

Change

3.20 1.65 1.21 0.67

2.00 1.25 1.25 0.76

-37.5 -24.2 3.3 12.0

Taiwan ROK* Hong Kong Singapore

%

* Republic of Korea. SouRCE: Business Times. 3 January 1987.

Appendix 1 for an understanding ofthe U.S. GSP scheme). The normal product graduation constitutes a continuation of the U.S. "competitive needs criteria" (CNC). Under the CNC, when more than a certain amount of a product is imported from a particular beneficiary country into the United States in a given year, that country becomes ineligible for GSP treatment with respect to that product in the following year. The CNC limit is defined in either of two ways: a maximum value is established, varying in proportion to the U.S. GNP, 5 or when more than 50 per cent of U.S. imports of the product in any year comes from a particular beneficiary (unless the product is not produced in the United States). Although these quantitative limits are basically applied automatically, the U.S. President has discretionary powers to withdraw, suspend, or limit duty-free treatment. An annual congressional review on the GSP also provides for public hearings and consultation with interested parties. When the Office of the USTR solicited comments regarding the practices of beneficiary countries relevant to the General Review of the GSP (notification from the federal register on 13 February 1985 and announcement of public hearings on 8 May 1985), the Singapore Government submitted a memorandum. It was clearly anxious that it would be significantly affected by the General Review. Singapore stated its position on each of the items on market access, unfair export and trade-distorting investment practices, protection of intellectual property rights, trade in services, international workers' rights under the General Review. On market access, the Singapore Government maintained that it practises a liberal trade policy and that it is committed to free trade and open market access. In 1976, when the U.S. GSP scheme was introduced, importers had to pay duty on only II per cent of goods brought into Singapore. Between 1976 and 1984, Singapore further opened its markets, lowering duties on 57 4 items and abolished tariffs for 313 items. In 1984, 93 per cent of goods from all countries entered Singapore duty-free. For the United States alone, this figure was 96 per cent or

2. Pre-Graduation Country Scenario

II

at least US$3.9 billion. A large part of the remaining 4 per cent was in the category of goods meant for raising revenue, and these imported products were imposed exactly the same dues as similar domestic products.ln contrast, only 25 per cent or US$989 million of Singapore's exports to the United States entered duty-free in 1984. While the United States has been losing its total world market exports for much of the last twenty-five years, its share of Singapore's total imports increased by almost four times from 3.8 percent in 1960 to 14.6 percent in 1984, amounting to US$70.9 million and US$4 billion, respectively. The United States is an important supplier of major categories of equipment and high-technology products, meat products, and fruits, and others. Table 10 shows these statistics for 1984, 1986, and 1989. On the whole, the share of U.S. exports to Singapore as a percentage of the world's exports to Singapore for most items had decreased over the period. This possibly partly reflects the U.S. loss in competitiveness in these products as well as Singapore's diversification in sourcing away from the United States on a least-cost importing strategy. The largest import item from the United States is aircraft, which accounted for 81.0 percentofSingapore's total purchases in 1984, dropping to 75.4 percent in 1989,

TABLEIO

Selected Major Imports from the United States, 1984, 1986, and 1989 (In thousandS$, c.i.f.) 1984

Code 011 057 122 514 582 583 598 641 695 713 714 723 728 741 742 743 744 749

Total Imports 76,064 100,808 121,972 59,507 71,906 82,199 235,099 57,390 84,622 217,174 139,463 322,513 117,394 87,299 80.893 80,960 83,281 271,073

1986

As% from the World 32.5 25.0 66.0 47.8 26.3 16.5 55.8 12.0 33.2 41.9 85.4 47.8 20.4 22.5 38.2 27.3 20.3 31.1

Total Imports 76,064 97,727 145,713 55,894 57,767 68,168 204,962 62,448 54,326 191,341 251,443 248,984 128,517 47,142 61,810 63,876 28,282 179,723

1989

As%from the World 36.7 24.0 54.9 39.6 19.6 13.4 48.9 12.7 24.2 40.6 73.0 53.1 22.2 15.2 34.0 21.7 12.0 19.8

Total Imports 11,035 112,881 279,623 88,996 67,991 5,360 999,469 121,196 91,455 475,916 449,981 388,690 231,355 134,567 97,607 199,287 81,919 40,589

Aso/cfrom the World 13.6 23.3 50.2 41.7 12.8 15.3 54.9 14.5 24.2 44.5 81.4 43.8 16.3 17.2 30.3 28.0 14.8 12.8

Economic Impact ofGSP Withdrawal on Singapore

12 752 759 764 772 773 776 778 792 874 898 931

342,856 529,524 167.362 266,317 74,459 1,273,294 97,066 1,303,744 286,430 68,874 198,026

52,2 52.6 16.7 25.9 20.9 33.8 15.4 81.0 48.6 21.0 29.0

304,132 527,331 161,400 281,823 54,726 I ,484,811 96,451 869,316 308,628 252.217 287,382

43,5 43.8 12.4 21.4 12.1 33.4 12.2 87.9 44.4 51.6 35.8

885,340 1,233,506 322,014 334,668 85,100 I ,854,091 236,717 1,850,721 544,226 774,985 434,793

39.2 35.3 9.3 15.4 12.4 24.4 15.2 75.4 46.0 67.5 35.6

Total

7,112,329

33.3

6,811,898

30.1

12,598,592

29.3

NOTES

011 057 122 334 514 582 583 598 641 695 713 714 723 728 741 742 743 744 749 752 759 764 772 773 776 778 792 874 898 931

Meat, fresh, chilled. frozen Fruits and nuts, fresh, chilled Tobacco manufactures Petroleum products, refined Nitrogen-function compounds Plastic materials condensation Plastic materials polymerization Chemical products n.e.s. Paper and paperboard Hand tools Piston machines Engines and motors, non-electric Civil engineering equipment parts Specialized machinery n.e.s. Heating and cooling equipment Pumps for liquids Pumps n.e.s. Mechanical handling equipment Non-electric machinery parts n.e.s. Data-processing machines Parts for headings 751 and 752 Telecommunication equipment Electrical circuit apparatus Electricity distribution equipment Electronic valves Electrical machinery n.e.s. Aircraft Measuring instruments Musical instruments and parts Special transactions

SouRcE: Department of Statistics, and Trade Development Board, Singapore (various years).

2. Pre-Graduation Country Scenario

13

valued at S$1 ,850,721. For engines and motors, non-electric products, the U.S. share declined from 85.4 per cent in 1984 to 81.4 per cent in I 989. Out of the eighteen items shown in Table 10, the United States was the top supplier to Singapore in all three years from 1984 to 1989 for fourteen products, as shown in Table II. Inevitably, its position was either usurped by Japan or it followed Japan as the major supplier. The importance of the United States as a major supplier of high-technology products to Singapore is obvious and the United States faces no difficulties in market access. Table 12 shows Singapore's domestic exports to the United States at the SITC one-digit level. For machinery and transport equipment (code 7), Singapore exported S$5,932.5 million or 53.9 per cent of its total domestic exports to the United States in 1984, increasing to S$7 ,004.1 million or 55.6 per cent of total domestic exports in 1986, and to S$13,425.7 million in 1986, though the percentage share fell to 46.0 per cent. The other domestic export highly dependent on the U.S. market comprised miscellaneous manufactured articles (code 8 ), which accounted for 46.4 per cent of the total in 1984, 50.5 per cent in 1986, and 41.3 per cent in 1989. TABLE II Ranking of the United States as a Supplier of Major Imports to Singapore, I 984, 1986, and 1989 --.

---

---

1984 -

Code

Ranking

--

---

'7r Share

Country

·---

Country

- - -

011 057 122 514 598 695 713 714 723 742 749 752 759 776 792 874 898 931

U.S. U.S. U.S. U.S. U.S. U.S. U.S U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Japan U.S.

---·

---·-----

1986

32.5 25.0 66.2 47.8 55.8 33.2 41.9 85.4 47.8 38.2 31.1 52.2 52.6 33.8 81.0 48.6 63.7 29.0 --

NoTES and SmrRcE: As for Table 10.

-·

1989

- - - ·

%Share

- - -

U.S. U.S U.S. U.S. U.S. Japan U.S. U.S. U.S. U.S. Japan U.S. U.S. U.S. U.S. U.S. U.S. U.S.

Country · - - -

36.7 24.0 54.9 39.6 48.9 30.1 40.6 73.0 53.1 34.0 32.7 43.5 43.8 33.4 87.9 44.4 51.6 35.8

N.Z. U.S. U.S. U.S. U.S. Japan U.S. U.S. U.S. U.S. Japan U.S. U.S. Japan U.S.

u.s. U.S. U.S.

%Share ----·-

32.9 23.3 50.2 41.7 54.9 25.7 44.5 81.4 43.8 30.3 57.1 39.2 35.3 31.2 75.4 46.0 67.5 35.6

Economic Impact ofGSP Withdrawal on Singapore

14

TABLE12 Domestic Exports to the United States at the SITC One-Digit Level, 1984, 1986, and 1989 (In thousandS$, f.o.b.) 1984

1986

1989

Total to the U.S.

As% to the World

Total to the U.S.

As% to the World

Total to the U.S.

As% to the World

0 I 2 3 4 5 6 7 8 9

60,491 2,994 31.158 687,576 1,256 32,932 96,375 5,932,537 1,057,868 103,138

11.7 2.9 7.6 5.4 0.2 2.4 8.0 53.9 46.4 3.2

78,062 6,092 10,804 548,337 4,422 259,901 160,748 7,004,103 I ,352,289 69,973

13.0 5.0 4.4 5.6 0.7 14.6 14.1 55.6 50.5 2.8

118,349 9,529 8,497 432,172 2,070 407,296 169,053 13,425,705 1,945,761 16,308

11.4 3.0 1.6 3.3 0.3 12.1 9.1 46.0 41.3 6.3

Total

8,006,326

23.9

9,494,731

29.6

16,534,743

29.9

1-Digit Code

NoTEs 0 Food I Beverages and tobacco 2 Crude materials 3 Mineral fuels 4 Animal and vegetable oils and fats 5 Chemicals 6 Manufactured goods by material 7 Machinery and transport equipment 8 Miscellaneous manufactured articles 9 Miscellaneous transactions n.e.s. SouRCE: As for Table 10.

Tables 13 and 14 show selected domestic exports to the United States at the SITC two- and three-digit levels, respectively. Significant increases are observed for organic chemicals (code 51) and iron and steel (code 67), where the percentage shares rose by tenfold between 1984 and 1986. For the three largest items, namely, office and data machines (code 75), telecommunication equipment (code 76), and electrical machinery n.e.s. (code 77), the shares to the United States of total domestic exports have dropped from 73.5 to 60.5 percent, 52.7 to 40.2 per cent, and 51.7 to 31.0 per cent, respectively between 1984 and 1989. As can be seen in Table 14, anumberofGSPexports to the United States have decreased drastically in value overthe period 1986-89, including crude materials (codes 29 I and 292), cocoa (code 072), nitrogen inorganic compounds (code

2. Pre-Graduation Country Scenario

15

TABLE13 Selected Domestic Exports to the United States at the SITC Two-Digit Level, 1984, 1986, and 1989 (In thousandS$, f.o.b.) 1984 2-Digit Code

Total to the U.S.

1989

As% to the World

Total to the U.S.

As%to the World

Total to the U.S.

As% to the World

20.8 23.7 25.8 4.0 4.5 17.4 57.5 5.8 27.5 31.9 73.5 52.7 51.7 59.7 41.5 63.3 70.1 58.9 20.1 22.4 3.2

39,538 35,253 9,121 239,587 59,393 55,140 133,468

29.5 16.5 13.1 40.1 40.1 15.8 52.5 5.6 31.9 28.3 73.7 48.8 51.4 38.6 43.7 62.2 74.8 61.2 19.9 26.5 2.9

73,162 36,534 6,343 362,295 30,783 65,947 125,365 43,076 54,752 721,529 7,142,530 2,766,372 2,324,590 59,711 187,781 100,494 1,259,003 !68,606 35,781 378,155 7,540

33.3 12.4 6.3 30.7 21.4 10.5 25.5 13.5 33.5 46.5 60.5 40.2 31.0 29.2 66.3 32.9 69.3 33.2 12.3 22.5 11.0

23,413 34,542 19,509 20,628 4,265 50,566 112,068 9,401 19,516 180,435 1,594,942 1,208,709 2,499,879 33,264 274,322 97,321 624,392 118,982 38,324 172,750 97,344

03 07 29 51 67 69 71 72 73 74 75 76 77 78 79 82 84 87 88 89 93

1986

10,206

22,032 192,907 2,878,825 1,230,233 2,441,923 25,530 68,978 93,833 801,776 166,717 37,980 249,502 65,988

-- --·- --·- -------------------------

NOTES

03 07 29 33 51 67 69 71 72 73 74 75

Fish and fish preparations Coffee etc. and spices Crude materials n.e.s. Petroleum and its products Organic chemicals Iron and steel Metal manufactures Power-generating machinery Industrial machinery Metalworking machinery General industrial machinery Office and data machines

SouRcE: As for Table I 0.

76 77 78 79 82 84 87 88 89

Telecommunication equipment Electrical machinery n.e.s. Road vehicles Transport equipment Furniture Clothing Scientific instruments Photographic apparatus Miscellaneous manufactured articles n.e.s. 93 Special transactions

Economic Impact of' GSP Withdrawal on Singapore

16

TABLE\4 Selected Domestic Exports to the United States at the S!TC Three-Digit Level, l9R4. 19R6, and 19))9 (In thousandS$, f.o.b.) 1984

3-Digit Code 034 036 072 291 292 334 514 515 634 635 651 695 699 713 716 723 728 736 743 745 749 751 752 759 761 762 763 764 771 772 775 776 77S 784 792 793 821

1989

l9R6

Total Dm11estic Exports

As 'lr to the World

Total Domestic Exports

As 'lr to the World

Total Domestic Exports

As 'k to the World

10.090 12.912 33,922 11.728 7.781 643,953 10.744 6.959 8.909 8.595 5.318 27.898 16.515 39.082 72.693 4.812 3.866 19.499 87.795 10.935 75.280 \27.110 936.146 531.686 81.265 447.608 109.775 570.060 62.599 761.598 287.700 1.342.929 42.060 29.6-+7 19.449 254.836 97.321

18.2 24.9 38.2 38.4 17.3 5.2 43.8 1.8 4.2 21.5 8.8 43.7 15.9 82.6 49.6 5.9 6.9 28.3 42.1 70.9 30.3 56.6 83.6 71.3 \9.8 49.3 6-U 70.9 44.6 73.0 70.8 46.7 12.9 X1.9 69.3 99.2 6.U

19.015 18.505 34.789 2.572 6.549 539)\81 10.416 226.871 11.168 4.031 6.166 I 0.904 21.959 50,656 R2,748 2.387 7.596 21.73)) 44.453 9.512 110.664 63.\36 2.()10.493 805.196 193,285 356.286 \ 11.667 568.996 30.2 \ 3 9.37.61'\7 257,314 1.168.396 40.313 20.619 43.156 25JQ2 93.833

23.1 45.6 21.7 8.8 16.3 5.7 27.7 59.8 7.7 16.3 12.2 20.9 15.1 80.9 43.2 2.8 12.7 34.2 19.2 71.9 34.0 41.9 75.5 73.5 29.5 39.2 70.0 71.2 21.0 71.9 68.2 46.2 12.1 46.7 88.7 23.7 62.2

25,505 43.183 35.374 691 5.651 432,172 9,322 347.740 20.559 5.R94 9.077 16.716 29.02\ 13.509 111.766 7.381 8.302 15.592 198.712 3.354 27.()48 257.689 5,501.078 U83,763 268,324 720.882 293.553 \.483.612 76)\96 \96,974 242.344 1.696.087 90.626 45.212 37.578 150.203 100.494

21.5 57.2 18.6 2.7 7.5 3.4 15.9 48.1 15.8 7.6 13.4 22.5 \0.7 39.5 25.0 7.5 7.5 31.2 38.8 8.3 30.3 56.8 63.4 51.8 20.8 35.3 37.4 53.5 27.3 19.3 46.4 35.4 13.5 54.4 71.5 65.1 32.9

2. Pre-Graduation Countrv Scenario

892 893

81,993 146.588 55,725 241.843 96.285 73.137 32.107 24,099 12.357 19.790 20.001

894

51,288

895

17.294 4,357 57.887

842 843 844 845 l-\46 872 874 884 885

897

898

59.2 65.7 59.4 83.6 70.2 83.7 33.4 59.4 9.3 16.5 15.5 27.7 66.4 3.2 44.0

NoTES 034 Fish. fresh. chilled. froLen 036 Crustaceans etc .. fresh, chilled 072 Cocoa 291 Crude animal materials 292 Crude vegetable materials n.e.s. 334 Petroleum products. refined 514 Nitrogen inorganic compounds 515 Organo-inorganic compounds 634 Veneers and plywood 635 Wood manufactures n.e.s. 651 Textile yarn thread 695 Hand tools 699 Metal manufactures n.e.s. 713 Piston engines 716 Electric plant and parts n.e.s. 723 Civil engineering equipment parts 728 Specialized machinery n.e.s. 736 Machine-tools metalworking 743 Pumps n.e.s. 745 Other non-elcctnc machinery. tools and mechanical apparatus. and parb thereof n.c.s. 749 Non-electric parts and accessories of machinery n.e.s. 751 Office machines 752 Data-processing machines 759 Parts for headings 751 and 752 761 TV receivers Sot'RCF: A-; for Table 10.

17 X5.54X 170,309 90,754 401,139 51,063 99.500 56,899 30.624 5.466 33.864 27.317 102.601 35.072 23,720 22.046

762 763 764 771 772 775 776 778 784 792 793 81' ~1 l-\42 843 l-\44 845 l-\46

872 874 Xl-\4 885 892 l-\93 894 895 l-\97 X9X

59.2 63.X 71.7 83.0 63.0 86.9 40.8 60.0 5.3 18.0 17.7 39.7 68.7 19.4 18.6

234,714 137,677 266,481 327,639 2,777 IOl-\.172 45,425 27,574 2,039 90.618 46.772 123,221 53.892 20.465 39,675

76.7 66.8 82.4 61.5 30.1 68.5 15.5

38.2 1.3 23.9 13.4 32.3 55.4 10.4 20.1

Radio broadcast receivers Gramophones Telecommunication equipment Electrical power machinery Electrical circuit apparatus Household goods Electronic valves Electrical machinery n.e.s. Parts for headings 722, 781-783 Aircraft Ships and boats Furniture Outer garments (men's) Outer garments (ladies') Undergarments Outer garments. knitted and articles Undergarments. knitted Medical apparatus Measuring instruments Optical goods n.e.s. Watches and clocks Printed matter Articles of plastic Toys. games etc. Office supplies n.e.s. Jewellery etc. Musical instruments and parts

18

Economic Impact ofGSP Withdrawal on Singapore

514), wood manufactures (code 514), hand tools (code 695), piston engines (code 713), and electric plants and parts n.e.s. (code 716). On the other hand, organo-inorganic compounds (code 515) rose from 1.8 per cent in 1986 to 48.1 per cent in 1989. Unlike many other countries, Singapore's public agencies and governmentowned companies have very open procurement policies. Between 197 4 and 1984, Singapore Airlines (SIA) purchased US$2,410 million worth of aircraft, of which 81 percent or US$1,942 million were from the United States. The Mass Rapid Transit (MRT) project awarded US$1.2 billion in contracts and tenders, all of which were to foreign or foreign-local ventures. The Ministry of Defence has also procured substantial amounts of military equipment from the United States. The market opportunities for U.S. companies provided by Singapore's liberal trade policies are not reflected by statistics alone. The use of Singapore as a regional marketing, warehousing, and technical services base by U.S. companies has opened new markets for U.S. goods and services in the AsiaPacific region. On unfair export and trade-distorting investment practices, the fundamental philosophy of the Singapore Government is not to provide subsidies. Instead, a liberal investment environment which encourages continuing investment in efficient plant and equipment, with minimum intervention in industry, is maintained. This is complemented with a liberal trade regime which permits full competition between imports and domestic production. Neither can evidence be found for trade-distorting investment practices, as confirmed by the U.S. Department of Trade's investigations in the case of countervailing duties against textile products and apparel from Singapore. Recognizing that problems exist with respect to copyright protection, the move to enact a new copyright law to provide enhanced protection to existing copyright works, including literary, dramatic, musical, and artistic work, as well as new forms such as microfilms, computer software, and broadcasts, began as early as 1985. The new copyright law, enacted in March 1987, was as much to provide a conducive environment for local and foreign printing and publishing companies as to attract computer companies to build up a strong computer software and services industry in Singapore. While not explicitly stated, this new copyright law appears to be drawn up in the hope that the United States would continue extending Singapore its GSP benefits on a gentleman's agreement. Singapore has minimal, if any, restrictions on the import of services and the establishment of companies in the service sector. 6 For example, of the 130 banks operating in Singapore in 1985, 117 were foreign ones, of which twenty were U.S.-based. Of the fifty-five merchant banks, fifty were foreign, and ten of these were from the United States. Of the seventy-nine insurance companies, sixtytwo were foreign, ten of these being from the United States. In the advertising industry, of the top sixteen advertising agencies in order of gross income, fifteen

2. Pre-Graduation Country Scenario

19

were either U.S. companies or U.S. joint ventures. In the accounting industry, six of the twelve leading international accounting firms in 1985 were U.S. companies. Similarly, several leading international firms were in the engineering service industry, hotels, department stores, and fast food chains. As for international workers' right, employment and labour legislations in Singapore protect and regulate workers' rights in respect of basic rights and duties of employers and employees, conditions of work, compensation, safety and health regulations, and the settlement of disputes. Singapore has ratified several International Labour Organization (ILO) conventions pertaining to the abolition afforced labour, the freedom of collective bargaining, and the right of workers to organize themselves as a unit in negotiations with their employers. There is a strong tradition and practice of tripartite consultations and negotiations among the government, employers, and trade unions in peaceful wage settlements, industrial relations, and the overall improvement in workers' standard of living. There is concerted government effort in social security provisions through the mandatory Central Provident Fund (CPF) contributions and provisions for public housing, education, and medical facilities. In anticipation of arguments that Singapore's level of economic development is above average, the government also noted that Singapore is a unique economy. Its smaJI size, its very open state, and the lack of a viable domestic sector have a number of implications. First, they constrain the development of indigenous industries in contrast to the experiences of the other NIEs. This lack of an indigenous industrial base and technology also meant dependence on foreign investment for industrial growth and expansion. The opportunistic approach to the promotion of foreign investment also resulted in the lack of an integrated industrial base and few linkages among industries. Isolated and independent niches of industries have developed and many industrial intermediates have to be imported. Singapore is dependent on exports ranging from food and water to labour, besides raw materials for its industries. While Singapore's ranking by per capita income is impressive, per capita income is a misleading indicator of comparative development status given its urban state, open policy towards foreign investment, and an economic structure which is far less developed than many of the other NIEs. Intensified lobbying by the government continued in 1987 and 1988 and an A SEAN stand was also incorporated. 7 The case of Singapore also disproves the notion that the "four tigers in Asia", namely, the NIEs which are singled out for graduation by the United States, are alike.x As the world's fastest-growing economies. they share several similarities: they have been very successful in expanding their manufacturing sectors, and are very dependent on the U.S. market for their exports; in 1986 they registered a trade surplus with the United States as well as enjoyed a current account surplus. However, these similarities obscure their differences. First, their size and capacity range from the Republic of Korea's population of 4 I miJiion with a

20

Economic Impact ofGSP Withdrawal on Singapore

gross domestic product (GDP) of US$83 billion to Singapore's population of2.6 million with a GDP of US$18 billion in 1986. Second, while Hong Kong and Singapore have a free-port status, the other two tigers have a relatively higher degree of import protection. The third is the great variation in their percentage of manufacturing exports to the United States, which are mainly produced by U.S.-based multinational corporations. This was as high as 52.0 per cent in Singapore compared with 7.5 percent in Hong Kong, 7.0 percent in Taiwan, and 5.2 per cent in the Republic of Korea in 1986. To counter the tendency to group all the four tigers in the "Japan bashing" syndrome, it has been pointed out that the free-port status of both Hong Kong and Singapore is an antithesis to Japan's highly protectionistic regime. Neither can the economic power of the four tigers be compared with that of Japan, whether by population, GDP, or level of technology. Yet, the four tigers have been the subjects of increasing action to remove their advantage in trade. These are oftwo kinds. namely, administrative and legislative. Between 1984 and 191\6, eighteen anti-dumping and countervailing duty cases were initiated against Taiwan and the Republic of Korea. four against Singapore, and one against Hong Kong. In many cases, the countries were exonerated at the end of the process though it is time-consuming, expensive, and if abused, constitutes a form of trade harassment. The government considered the petition by the American Federation ofLabor and the Congress oflndustrial Organizations (AFL-CIO) in 1987 against the Republic of Korea, Singapore, and six others as being not entirely altruistic but seeking to use workers' rights as a trade instrument. To redress the issue of inadequate protection of intellectual property rights, Singapore enacted its new copyright law, which was deemed an exemplary piece of legislation by the USTR Ambassador Clayton Yeutter. Singapore and the United States have signed a bilateral agreement according reciprocal rights to each other's nationals under their respective laws. The Republic of Korea has also agreed on 21 July 191\6 to offer significantly greater protection to U.S. intellectual property rights. including patents, copyrights, and trade marks. In response to this. the U.S. argument is that the Asian tigers have been unreliable trade partners.') But while the Republic of Korea and Taiwan have accounted for a more significant proportion of the U.S. trade deficit. the same cannot be said of Singapore. Singapore's accumulation of foreign reserves and savings is not a trade strategy. but has more to do with its CPF scheme and the high saving potential of a young work-force. Neither is its exchange rate policy geared to discriminating in favour of its exports: rather its use is more to control intlation. given its high import-dependency. A SEAN took a concerted stand in submitting a memorandum following the U.S. intention to remove Brunei from its GSP benefits. Brunei had been the first ASEAN country to lose its GSP benefits but the case was almost a moot one as it did not and does not export to the United States. Yet. the unified ASEAN statement was considered necessary as a matter of principle and it is only a matter

2. Pre-Graduation Country Scenario

21

of time when Singapore and the other near-NlEs such as Malaysia and Thailand will face the graduation problem. In Brunei's case, ASEAN argued that per capita income was an imperfect yardstick, and that Brunei's developing country status and its non-utilization of U.S. GSP benefits meant that it was not a threat to U.S. competitiveness. ASEAN also argued for it to be treated as a single entity and to exclude any one of its members from the U.S. GSP scheme would be divisive. While all the above economic arguments are cogent and well proven by facts and statistics. it is the political and domestic climate in the United States more than objective GSP principles that is clearly at work. The U.S. Government is plainly pressured by its growing trade and fiscal deficits, industrial structural rigidities, and shrinking international competitiveness in the face of aggressive Japanese competition. Taking all the Asian tigers or dragons together as a whole to task is politically appealing and helps to diffuse attention on domestic problems and issues.

Singapore's GSP Exports to the United States The data for this section have been supplied by the Office of the USTR in Washington. DC. covering the period 1984-88. To assess how affected countries regain competitiveness and how regional co-operation can be promoted, it is crucial to indentify the GSP products affected. The data will thus be presented to reveal the top five, top ten, and top twenty GSP exports to the United States over the period. The data from the USTR cover the top fifty GSP exports. Table 15 shows the top five GSP exports from Singapore to the United States during 1984-88. The top GSP export item in 1984 and 1985 had been microwave ovens though its percentage share of total GSP exports fell from 14.2 per cent in 1984 to 11.1 per cent in 1985. The second top item in 1984, which was switchboard panels, remained in the top five list over the period 1984-88. But the third top item in 1984, tape recorders and dictation machines, only appeared as the fourteenth item in 1986 (see Table 17). The fourth top GSP export in 1984, namely, machines not specially provided for, remained on the top five list over the period. The fifth top GSP export in !984, medical and surgical instruments, remained in the top ten list until 1987 but dropped to fifteenth position by 1988 (see Table 17). Accounting, computing. data-processing machines, which was the eighth and second most important GSP export in 1984 and 1985, respectively. came in top position from 1986 onwards until 1988. Telephone sets and other terminal equipment ranked second in 1986 and 1988, falling to third position in 1987. The trend seems to be that office machines and communication equipment have become important GSP exports to the United States just prior to the graduation. Tables 16 and 17 provide details of the top ten and top twenty GSP exports to the United States. respectively. during 1984-88. Table 18 summarizes the

Eronomic Impact ofGSP Withdrawal on Singapore

22

TABLE15 The Top Five GSP Items to the United States, 1984-88 ----·

US$ Million

Description

TSUS*

%of GSP

·-------

---- ----.---

1984 I. 2. 3. 4. 5.

68425 68590 68540 67850 70927

Microwave ovens Switchboard panels etc. Tape recorders, dictation machines etc. Machines not specially provided for Medical and surgical instruments

88.96 42.38 38.01 36.00 29.78

14.20 6.76 6.07 5.74 4.75

Microwave ovens Accounting, computing, data-processing machines Machines not specially provided for Switchboard panels etc. Medical and surgical instruments

74.84 58.49 58.47 41.34 37.35

11.09 8.67 8.67 6.13 5.54

Accounting, computing, data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Switchboard panels etc. Furniture, wood

105.26 62.89 54.00 45.00 30.42

14.41 8.61 7.39 6.16 4.17

Accounting, computing, data-processing machines Machines not specially provided for Telephone sets and other terminal equipment Switchboard panels etc. Office machines

158.06 135.27 112.27 71.06 63.95

12.19 10.43 8.66 5.48 4.93

Accounting, computing, data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Air-conditioning machines and parts Switchboard panels etc.

196.95 155.12 96.03 92.70 91.42

10.89 8.57 5.31 5.12 5.05

1985 1. 2. 3. 4. 5.

68425 67615 67850 68590 70927

1986 1. 2. 3. 4 5.

67615 68458 67850 68590 72735

1987 1. 2. 3. 4. 5.

67615 67850 68458 68590 67630

1988 I. 2. 3. 4. 5. -

67615 68458 67850 66120 68590

------

.·--

----

---

----

- - - - - - -

* Tariff Schedules of the United States. SouRcE: Office of the U.S. Trade Representative, Washington, DC.

2. Pre-Graduation Country Scenario

23

TABLE16 The Top Ten GSP Items to the United States, 1984-88 ·----·---

TSUS*

- - - --·---- - 1984 1. 68425 2. 68590 3. 68540 4. 67850 5. 70927 6. 68260 7. 72735 8. 67615 9. 65843 10. 65772 Top ten

Description

US$ Million

%of GSP

------·------·---·--··--

Microwave ovens Switchboard panels etc. Tape recorders, dictation machines etc. Machines not specially provided for Medical and surgical instruments Generators, converters etc. Furniture, wood Accounting, computing, data-processing machines Other electric articles Diodes and rectifiers

88.96 42.38 38.01 36.00 29.78 22.76 20.61 19.50 19.06 15.64 332.70

14.20 6.76 6.07 5.74 4.75 3.63 3.29 3.11 3.04 2.50 53.09

Microwave ovens Accounting, computing, data-processing machines Machines not specially provided for Switchboard panels etc. Medical and surgical instruments Furniture, wood Telephone sets and other terminal equipment Parts of motor vehicles Telephone answering machines Non-folding chairs of non-teak wood

74.84 58.49 58.47 41.34 37.35 27.97 18.56 17.03 16.85 16.30 367.20

11.09 8.67 8.67 6.13 5.54 4.15 2.75 2.52 2.50 2.42 54.43

Accounting, computing, data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Switchboard panels etc. Furniture, wood Medical and surgical instruments Telephone answering machines Generators, converters etc. Articles of iron or steel Office machines

105.26 62.89 54.00 45.00 30.42 24.84 20.42 18.84 15.06 14.26 390.98

14.41 8.61 7.39 6.16 4.17 3.40 2.80 2.58 2.06 1.95 53.54

Accounting, computing, data-processing machines Machines not specially provided for Telephone sets and other terminal equipment

158.06 135.27 112.27

12.19 10.43 8.66

1985 1. 68425 2. 67615 3. 67850 4. 68590 5. 70927 6. 72735 7. 68458 8. 69232 9. 68539 10. 72729 Top ten

1986 1. 67615 2. 68458 3. 67850 4. 68590 5. 72735 6. 70927 7. 68539 8. 68260 9. 65725 10. 67630 Top ten

1987 I. 67615 2. 67850 3. 68458

Economic Impact olGSP Withdrawal on Singapore

24 4. 5. 6. 7. 8. 9. 10. Top

68590 67630 68539 68525 66120 72735 70927 ten

Switchboard panels etc. Office machines Telephone answering machines Cordless handset telephones Air-conditioning machines and parts Furniture. wood Medical and surgical instruments

71.()6 63.95 42.22 39.92 36.26 33.70 28.71 721.42

5.48 4.93 3.26 3.08 2.80 2.60 2.21 55.63

Accounting. computing. data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Air-conditioning machines and parts Switchboard panels etc. Telephone answering machines Other receivers Cordless handset telephones Toys having an electric motor Electric t1at irons

196.95 !55.12 96.03 92.70 91.42 89.96 69.54 64.47 59.44 55.90 971.51

10.89 8.57 5.31 5.12 5.05 4.97 3.84 3.56 3.29 3.09 53.69

!9S8 I. 67615 2. 68458 3. 67850 4. 66120 5. 68590 6. 68539 7. 68524 8. 68525 9. 73793 10. 68415 Top ten

-

-

SoliRCE: As for Table 15. TABLE!? The Top Twenty GSP Items to the United States, 1984-88 --~

--

TSUS''

-

-

-

-

--

Description --

1984 I. 68425

2. 3. 4. 5. 6. 7. 8. 9. \0.

II. 12. 13. 14. 15. 16. 17.

68590 68540 67850 70927 68260 72735 67615 65843 65772 72729 69232 66110 73795 68225 68570 68770

US£ Million

%of GSP

88.96

14.20 6.76 6.07 5.74 4.75 3.63 3.29 3. !I 3.04 2.50 2.37 2.33 2.25 1.89

-

Microwave ovens Switchboard panels etc. Tape recorders, dictation machines etc. Machines not specially provided for Medical and surgical instruments Generators. converters etc. Furniture. wood Accounting. computing. data-processing machines Other electric articles Diodes and rectifiers Non-folding chairs of non-teak wood Parts of motor vehicles Compressors and parb Toys and parts Electric motors under 1/40 hp Electric sound or visual signalling apparatus Trans is tors

42.38 38.01 36.00 29.78 22.76 20.61 19.50 19.06 15.64 14.88 14.62 14.08 11.85 11.78 11.61 10.75

1.88

1.85 1.72

2. Pre-Graduation Country Scenario

18. 68235 19. 69610 20. 65725 Top twenty

Motors between II I 0 and I hp Yachts or pleasure boats Articles of iron or steel

25 10.3~

9.15 8.44 450.23

1.66 1.46 1.35 71.85

Microwave ovens Accounting, computing, data-proceo-sing machines Machines not specially provided for Switchboard panels etc. Medical and surgical instruments Furniture, wood Telephone sets and other tenninal equipment Parts of motor vehicles Telephone answering machines Non-folding chairs of non-teak wood Tape recorders, dictation machines etc. Electric motors under l/40 hp Metal-working machines Toys and parts Yachts or pleasure boats Compressors and parts Generators, converters etc. Articles of iron or steel Other connection apparatus Pressure and level gauges, thermostats etc.

74.84 58.49 58.47 41.34 37.35 27.97 18.56 17.03 16.85 16.30 16.00 14.29 11.44 11.43 10.93 10.69 9.13 9.07 8.97 8.66 477.79

]1.()9 8.67 8.67 6.13 5.54 . 4.15 2.75 2.52 2.50 2.42 2.37 2.12 1.70 1.69 1.62 !.58 1.35 1.34 1.33 1.28 70.82

Accounting, computing, data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Switchboard panels etc. Furniture, wood Medical and surgical instruments Telephone answering machines Generators. converters etc. Articles of iron or steel Office machines Yachts or pleasure boats Radio navigation and remote control Construction kits or sets Tape recorders, dictation machines etc. Toys and parts Parts of motor vehicles Non-folding chairs of non-teak wood Other connection apparatus Electric motors under 1/40 hp

105.26 62.89 54.00 44.91 30.42 24.84 20.42 18.89 15.06 14.27 13.68 13.64 13.24 13.15 11.50 11.38 I 1.30 10.85

14.41 8.61 7.39 6.15 4.17 3.40 2.80 2.59 2.06 1.95 1.87 1.87 1.81 1.80 1.57 !.56 1.55 1.49 1.26

1985

1. 68425 2. 67615 3. 67850 4. 68590 5. 70927 6. 72735 7. 68458 8. 69232 9. 68539 10. 72729 11. 68540 12. 68225 13. 67435 14. 73795 15. 69610 16. 66110 17. 68260 18. 65725 19. 68842 20. 71178 Top twenty /986

!. 2. 3. 4. 5. 6. 7. 8. 9. 10. II. 12. 13. 14. 15. 16. 17. 18. 19.

67615 68458 67850 6~590

72735 70927 68539 68260 65725 67630 69610 68560 73715 68540 73795 69232 72729 68~42

68225

9.1~

Compressors and parts

8.32 507.19

1.14 69.46

1987 1. 67615 2. 67850 3. 68458 4. 68590 5. 67630 6. 68539 7. 68525 8. 66120 9. 72735 10. 70927 11. 68415 12. 68524 13. 68260 14. 68560 15. 73716 16. 73793 17. 68514 18. 65725 19. 68255 20. 69610 Top twenty

Accounting, computing, data-processing machines Machines not specially provided for Telephone sets and other terminal equipment Switchboard panels etc. Office machines Telephone answering machines Cordless handset telephones Air-conditioning machines and parts Furniture, wood Medical and surgical instruments Electric flat irons Other tranceivers Generators, converters etc. Radio navigation and remote control Construction kits or sets Toys having an electric motor Entertainment broadcast band receivers Articles of iron or steel Electric motors under 1/40 hp Yachts or pleasure boats

158.06 135.27 112.27 71.06 63.95 42.22 39.92 36.26 33.70 28.71 27.46 26.44 24.55 23.06 21.95 20.19 16.53 16.26 15.62 15.45 928.95

12.19 10.43 8.66 5.48 4.93 3.26 3.08 2.80 2.60 2.21 2.12 2.04 1.89 1.78 1.69 1.56 1.27 1.25 1.20 1.19 71.63

1988 I. 67615 2. 68458 3. 67850 4. 66120 5. 68590 6. 68539 7. 68524 8. 68525 9. 73793 10. 68415 11. 68260 12. 68514 13. 67630 14. 68470 15. 70927 16. 72735 17. 68528 18. 66110 19. 67620 20. 65725 Top twenty

Accounting, computing, data-processing machines Telephone sets and other terminal equipment Machines not specially provided for Air-conditioning machines and parts Switchboard panels etc. Telephone answering machines Other receivers Cordless handset telephones Toys having an electric motor Electric flat irons Generators, converters etc. Entertainment broadcast band receivers Office machines Microphones, loudspeakers, headphones etc. Medical and surgical instruments Furniture, wood Other transmission apparatus Compressors and parts Calculating machines Articles of iron or steel

196.95 155.12 96.03 92.70 91.42 89.96 69.54 64.47 59.44 55.90 53.27 51.00 47.33 47.01 43.43 40.50 21.92 21.67 20.85 20.61 1,339.11

10.89 8.57 5.31 5.12 5.05 4.97 3.84 3.56 3.29 3.09 2.94 2.82 2.62 2.60 2.40 2.24 1.21 1.20 1.15 1.14 74.01

20. 66110 Top twenty

-- -..

SouRcE: As for Table 15.

2. Pre-Graduation Country Scenario

27

TABLE 18 Summary of Values and Shares of the Top GSP Exports to the United States, 1984--88 1984

1985

1986

1987

1988 -------

------

Value in million US$ Top five Top ten Top twenty Top fifty

235.12 332.70 450.23 558.03

270.49 367.20 477.79 586.64

297.57 390.98 507.19 624.88

540.61 721.42 928.95 1,149.77

632.21 971.51 1,339.11 I ,631.48

Total GSP

626.63

674.63

730.23

1,296.92

1,809.35

40.75 53.54 69.46 85.56

41.68 55.63 71.63 88.65

34.94 53.69 74.01 90.17

Percentage share of total GSP e.\ports Top five Top ten Top twenty Top fifty

37.52 53.09 71.85 89.05

40.09 54.43 70.82 86.96

SouRcE: As for Table 15.

cumulative shares of the top five, top ten, top twenty, and top fifty ofGSPexports to the United States for the same period. On a very rough magnitude, these accounted for over one-third, over one-half, about three-quarters, and about 90 per cent, respectively, of total GSP exports to the United States in 1988. Finally, Table 19 shows the percentage of selected GSP imports from Singapore by the United States compared with its total world imports. The only item which Singapore supplied a substantial amount of total U.S. imports was electric flat irons in 1988, which accounted for US$55.9 million or 50.5 per cent of total world imports by the United States. For medical and surgical instruments, which accounted for quite a large share of total U.S. imports, the share declined over time from 22.6 per cent or US$37 .3 million in 1985 to I 1.8 per cent in 1986, I0.1 per cent in 1987, before rising to 12.6 per cent or US$43.4 million in 1988. On the other hand, for telephone sets and other terminal equipment, Singapore's shares were 2.2 per cent or US$18.6 million in 1985, rising to 5.5 per cent or US$62.9 million in 1986, 8.8 per cent or US$26.4 million in 1987, and 13.5 per cent or US$15.5 million in 1988. The GSP utilization rate is the most commonly used concept to measure how effectively an individual beneficiary country utilizes the GSP. It measures the beneficiary country's ratio of the value of GSP-eligible imports which actually receive preferences to the value of GSP-eligible imports. In other words, the ratio is the share of GSP-eligible imports which actually receives preference. This measure indicates the success rate of GSP utilization, scheme by scheme.

Economic Impact ofGSP Withdrawal on Singapore

28

TABLE19 U.S. Imports from Singapore on Selected Items, 1985-88 Singapore -----

---

TSUS

World (US$ m)

GSP (US$ m)

Duty (US$m)

70927 68225 68539 72729 67615 69610 68560 66120 72735 68458

165,595 142,222 194,003 272,392 1,443,241 298,290 215,463 289,873 1,088,245 828,970

37,338 14,283 16,859 16,305 58,494 10,932 7,513 7,569 27,969 18,556

70927 68539 68225 67615 68458 69610 68560 72729 65725 72735

211,514 272,662 138,315 1,910,001 1,144,905 316,329 324,311 308,582 595,938 I ,359,337

68415 68539 68525 68225 70927 68458 73793 68524 67615 66120

68415 68539

GSP %of World

Duty %of World

800 1,230 2,319 42 1,157 927 475 707 284 2,752

22.55 10.04 8.69 5.99 4.05 3.66 3.49 2.61 2.57 2.24

0.48 0.86 1.20 0.02 0.08 0.31 0.22 0.24 0.03 0.33

24,842 20,424 9,182 105,261 62,895 13,677 13,640 11,299 15,056 30,416

10,397 2,245 1,925 41,337 1,597 769 929 165 241 302

11.75 7.49 6.64 5.51 5.49 4.32 4.21 3.66 2.53 2.24

4.92 0.82 1.39 2.16 0.14 0.24 0.29 0.05 0.04 0.02

94.821 277,445 351,272 143,969 282,479 1.166,682 210,267 300,464 2,216.808 590,806

27,464 42,220 39,925 15,219 28,714 112,271 20,192 26.441 158,057 36.260

27,233 376 445 829 21,517 1.966 485 8,139 71,505 116

28.96 15.22 11.37 10.57 10.17 9.62 9.60 8.80 7.13 6.14

28.72 0.14 0.13 0.58 7.62 0.17 0.23 2.71 3.23 0.02

110,637 372,134

55,904 89,956

97 802

50.53 24.17

0.09 0.22

1985 I.

2. 3. 4. 5. 6. 7. 8. 9. 10.

1986 I.

2. 3. 4. 5. 6. 7. 8. 9. 10.

1987 1.

2. 3. 4. 5. 6. 7. 8. 9. 10.

1988 l.

2.

2. Pre-Graduation Countrv Scenario 3. 4. 5. 6. 7. 8. 9. !0.

73793 68524 68525 68458 66120 70927 68514 68225

290,924 416,239 394.381 1,148,879 724.030 343,568 565,338 177,943

59,438 69,540 64,467 155,115 92,698 43,429 50,997 12.540

29 618 2,178 53 938 343 16,765 5,237 1,071

NoTES

65725 65772 65843 66120 67435 67615 67620 67630 67850 68225 68260 68415 68425 68458 68470 68514 68524 68525 68528 68539 68540 68560 68570 68590 68770 68842 69232 69610 70927 71178 72729 72735 73715 73793 73795

Articles of iron or steel Diodes and rectifiers Other electric articles Air-conditioning machines and parts Metal-working machines Accounting, computing. data-processing machines Calculating machines Office machines Machines not specially provided for Electric motors under 1/40 hp Generators, converters etc. Electric flat irons Microwave ovens Telephone sets and other terminal equipment Microphones. loudspeakers, headphones etc. Entertainment broadcast band receivers Other receivers Cordless handset telephones Other transmission apparatus Telephone answering machines Tape recorders, dictation machines etc. Radio navigation and remote control Electric sound or visual signalling apparatus Switchboard panels etc. Transistors Other connection apparatus Parts of motor vehicles Yachts or pleasure boats Medical and surgical instruments Pressure and level gauges, thermostats etc. Non-folding chairs of non-teak wood Furniture, wood Construction kits or sets Toys having an electric motor Toys and parts

20.43 16.71 16.35 13.50 12.80 12.64 9.02 7.05

0.21 0.52 0.01 0.08 0.05 4.88 0.93 0.60

Economic Impact ofGSP Withdrawal on Singapore

30

TABLE 20(a) U.S. GSP Utilization Rates by Country/Area, 1988 U.S. GSP Covered (A) (US$ thousand) Asia (26 countries) Afghanistan* Bangladesh* Bhutan* Brunei China Hong Kong India Indonesia Iran Kampuchea Korea, Republic of Korea, DPR Laos Malaysia Maldives* Mongolia Myanmar* Nepal* Pakistan Philippines Singapore Sri Lanka Thailand Vietnam Yeman, Arab Republic* Yeman, Democratic* Total LDCs in Asia only* The Pacific ( 19 countries) LDCs in the Pacific only* -

---·----

U.S. GSP Applied (B) (US$ thousand)

(B)/(A) % U.S.

Japan

28.6 98.7

5,646 354 191

5,238 264 93

92.8 74.6 48.9

2,453,385 367,380 91,271

1,858,559 349,152 87,057

75.8 95.0 95.4

33.1 14.9 44.1 71.1 65.5

2,985,283

2,765,788

92.6

46.5

826,968 389

633,908 88

76.7 22.6

79.9

877 3,657 65,445 605,111 2.426,511 27,737 781,098

229 2,910 63,056 507,870 1,809,348 26.385 714,077

26.1 79.6 96.3 83.9 74.6 95.1 91.4

574

46

8.0

10,641,875

8,824,065

82.9

46.9

10,619 21,046 464

8,545 16,529 425

80.5 78.5 91.6

92.6 12.5 38.2

47.8 76.0 83.5 48.4 71.9 84.9 67.2 54.9 35.9

--------

*Least developed countries (LDCs). SouRcE: UNCTAD/UNDP (January/February 1990) for data on the United States and UNCTAD/UNDP (March/April 1990) for data on Japan.

2. Pre-Graduation Country Scenario

31

TABL E20(b ) U.S. GSP Utiliza tion Rates by Region, 1988

Region

Total GSP Applied (US$ thousand)

South Americ a Central Americ a and Carribean" Asia-Pacific Africa LDCs''

2,243,928 351,635 8,831,623 203,289 16,327

Others

6.706,938

Total

18,353,740

Total Utilization

%

(%)

Share

85.3 32.1 82.9 75.3 61.0

12.2 1.9 48.1 1.1

0.1 36.5

76.1

100.0

" Excluding Mexico. "Exclu ding Haiti. SouRCE: As for Table 20(a).

the last column Table 20(a) shows the utilization rates of U.S. GSP in 1988, Singapore, its For rison. being the utilization rate of Japan 's GSP for compa which was cent, per 74.6 was utilization rate of the U.S. GSP scheme in 1988 for 1988. also cent, per 84.9 lower than that of the Japanese GSP scheme of highest the among not also was e Singa pore's utilization rate of the U.S. schem higher had esia Indon and Korea of compared with other countries. The Republic put rate pore's Singa while tively, rates, of92.6 per cent and 95.4 per cent, respec cent. per 75.8 Kong, Hong and cent, it more in the range of Malaysia, 76.7 per tion rate was only However, in the Japanese GSP scheme, Singa pore's utiliza second to that of Bangladesh. t share of total Table 20(b) shows that the Asia-Pacific region had the larges tion rate utiliza a and cent, per 48.1 at e, GSP applied under the U.S. GSP schem the rison, compa In ca. Ameri South of that to of 82.9 per cent, which was second se Japane the under d applie GSP total of cent Asia-Pacific region took 54.1 per es schem GSP For 1988. in cent per 46.7 of rate GSP scheme, with a utilization per 70.8 were 1988 in rates tion utiliza pore's under Canada and the EC, Singa n ECUs applied), cent (C$114.3 million applied) and 22.5 per cent (605.1 millio 1990]). Singa pore's respec tively (UNC TAD/ UNDP [Septe mber/ Octob er Republic of Korea the of those than lower was GSP utilization rate of Canadian utilize any such not did which i, Brune except ies, and all the other ASEAN countr ped countries (86.3 per benefits. It was also below the average for all less develo was also the lowest cent). For the EC GSP scheme, Singap ore's utilization rate (59.8 per cent). The and below the average for all less developed countries e in 1988. Republic of Korea was suspended from the EC GSP schem

32

Economic Impact ofGSP Withdrawal on Singapore

The New Zealand GSP Scheme New Zealand instituted its GSP scheme in 1972, which was then broadened in 1976 in terms of product coverage and increasing preference margins. A negative list was adopted for both agricultural and industrial products with exclusions confined to some 7 per cent of all tariff items. A new tariff introduced on 1 July l97S with fewer tariff items increased the percentage of exclusions to 8 per cent on all tariff items. At present, 65 per cent of less developed countries' imports by value enter New Zealand under tariff items which are free for all sources. The New Zealand GSP scheme was reviewed in 1984 and a policy of graduation was introduced whereby the GSP would no longer be applied to countries with a per capita GNP exceeding 70 per cent of the New Zealand level. As a result of this policy, twenty countries and territories, including Brunei and Singapore lost their GSP status, with Israel being the last to be graduated in 1989. The two AS EAN countries and some other countries expressed strong objections to the decision. On l July 1985, following representations from Singapore and ASEAN, it was agreed that the graduated countries would be able to apply for the reinstatement to the less developed country rate for individual products where there was no domestic manufacture and where there was a significant trade interest. 10 In the case of Brunei, apart from its utilization rate of the U.S. GSP scheme of48.9 percent in 1988, it was Opercentforthe GSP schemes under Japan, the EC. and Canada in 1988. Its utilization rate for the New Zealand GSP scheme was probably also not significant. However, Brunei has joined ASEAN to make the representation as GSP benefits matter to ASEAN as a group and the precedence taken by New Zealand could start other graduation exercises. A number of requests for reinstatements on a product-by-product basis were made by ASEAN on behalf of Singapore and Brunei. In July 1985, thirty-four products were reinstated. In 1987, more goods from Singapore and Brunei were back on the New Zealand GSP scheme (Business Times, 12 June 1987). A total of 114 products were reinstated, which put to rest the two-year-old problem between ASEAN and New Zealand from the time the two ASEAN countries lost their GSP benefits in 1985. The 1987 move brought the total number of products from the two ASEAN countries qualifying for New Zealand GSP benefits back to 148. In the latest round of inclusion were typewriters, medical equipment, tools. and other consumer products. At the ASEAN-New Zealand dialogue in 1988, ASEAN presented New Zealand with its fifth list of products of interest to Singapore and Brunei to be reinstated to GSP status. This was reformatted to the Harmonized System (HS) of tariff classification and submitted again in the ASEAN-New Zealand dialogue in 1990. As trade statistics from New Zealand were not available under the resource constraints of the study. more indepth quantitative analysis is precluded for the time being. While New Zealand may be a major supplier to Singapore of some

2. Pre-Graduation Country Scenario

33

dairy and fruit products, the significance of exports from Singapore to New Zealand is not likely to be of the same magnitude.

33 Post-Graduation Scenario

The post-graduation economic impact is analysed by looking at the scenario in four ways. One is the presentation of estimated welfare losses borne by American consumers based on an estimate done by the U.S. Department of Commerce for 1986, shown in Table 21. The estimated welfare cost for fifty GSP imports from Singapore into the United States in 1986 was US$29.3 million or 86.7 per cent of total welfare cost. It is recognized that a one-point analysis, that is, one that is based on only one year, 1986, cannot offer much rigour apart from giving a rough order of magnitude. TABLE 21 Welfare Losses of U.S. Imports from Singapore, 1986 (In million US$)

68458 67615 68590 67850 70927 73715 65725 68539 73795 72735 68560 72729 68225 68260 67630 68540 68842 71178

Telephone sets and other terminal equipment Accounting, computing, data-processing machines Switchboard panels etc. Machines not specially provided for Medical and surgical instruments Construction kits or sets Articles of iron or steel Telephone answering machines Toys and parts Furniture, wood Radio navigation and remote control Non-folding chairs of non-teak wood Electric motors under 1/40 hp Generators, converters etc. Office machines Tape recorders, dictation machines etc. Other connection apparatus Gauges, regulators etc.

Welfare Loss

Imports

4.93 3.95 2.26 1.93 1.82 0.96 0.81 0.77 0.75 0.74 0.64 0.57 0.57 0.55 0.51 0.49 0.41 0.35

62.89 105.26 44.91 54.00 24.84 13.24 15.06 20.42 11.50 30.42 13.64 11.30 9.18 18.89 14.27 13.15 10.85 7.73

3. Post-Graduation Scenario 69232 74014 68255 40502 73420 66110 74015 67435 71249 69610 45020 68370 38525 70917 25660 77455 70803 70810 68524 68470 66120 66230 68220 64220 68017 51791 68332 70889 70801 68235 72740 72727

35

Parts of motor vehicles Jewellery of precious metals Parts for electric motors under 1/40 hp D-para-hydroxyphenylglicine and salts Game machines Compressors and parts Miscellaneous jewellery Machine tools Electrical measuring devices and parts Yachts and pleasure boats Flavouring extracts Flashlights Cordless hand-held telephones Electro-medical apparatus and parts Albums Miscellaneous articles of plastic or rubber Optical lenses Optical elements Other receivers Microphones, headphones and parts Air-conditioning machines and parts Weighing machines Synchronous electric motors Articles of wire rope Valves of iron and steel Articles of carbon and graphite Electrico-mechanical appliances Optical instruments Opthalmic lenses Electric motors under I hp Wooden parts of furniture Folding chairs of teak

Sub-total of fifty products Other products All products Listed products as a percentage of the total - - - ·---·

·---·

---·

----

0.34 0.33 0.32 0.31 0.28 0.27 0.26 0.23 0.22 0.20 0.20 0.20 0.19 0.19 0.18 0.18 0.18 0.18 0.18 0.17 0.17 0.16 0.16 0.15 0.15 0.15 0.15 0.14 0.13 0.13 0.12 0.12

11.38 5.36 3.55 2.25 7.43 8.32 4.33 5.46 4.61 13.68 3.52 0.99 3.35 4.58 4.78 3.60 3.34 2.28 3.09 3.55 7.65 3.15 1.73 2.84 2.02 3.13 3.60 1.66 2.46 2.73 2.43 3.57

29.31 4.50 33.80 86.70

617.94 122.94 740.88 83.41

·-----·

SouRcE: Computer data compiled by the U.S. Department of Commerce.

Second, to provide some qualitative assessment, eight firms were interviewed, comprising one in furniture making, three in electronics, one in computer peripherals, one in precision products, one in tools and dies, and one in garments. The overall impression is that even manufacturing establishments which exported substantially to the United States did not appear adversely affected by the withdrawal of U.S. GSP benefits.

36

Economic Impact oj"GSP Withdrawal on Singapore

The furniture factory which was 99 per cent owned by its American parent suffered minimal impact as the withdrawal of GSP benefits was based on items of furniture rather than across the board. In any case, most of these establishments have had advance warning from the hints dropped by the U.S. Government to graduate some NIEs. Many of them have diversified their products and markets in anticipation of Singapore's graduation, which is seen to be inevitable by more forward-looking entrepreneurs. Many of them responded that while the GSP benefits are useful, like the icing on the cake, they are not the bread and butter of their existence. Some of these establishments have relocated parts of their manufacturing lines to Malaysia and nearby locations to take advantage of more competitive resource and labour costs and operating costs. While some expressed that it is convenient that countries such as Malaysia, Indonesia, and Thailand still have their GSP benefits, that is not the primary motive for their relocation. There does not appear to be any significant adverse effect on the establishments which are producing solely for GSP exports. In other words, the GSP is not an additional strong factor propelling trade and investment diversions. The private sector has responded rationally given Singapore's resource constraints and the attractions offered for "business migration" to the Riau Islands and Johor. They are continuously upgrading and diversifying, with much encouragement from the government. However, some smaller establishments may have been hurt and if the withdrawal had occurred during recessionary times, the impact would have been graver. The year 1989 was still relatively good after the bumper year in 1988, and industries had probably insulated themselves with a layer of fat from the phenomenal expansion over the period. Third, an attempt is made to compare the values of exports which enjoyed GSP benefits to the United States in 1988 with the same items exported to the United States in 1989. This is shown in Tables 22 and 23 (for the top twenty and top fifty GSP exports to the United States in 1988, respectively). It is noted that the comparison is based on information on the conversion between the Tariff Schedules of the United States (TSUS) codes and the Standard International Trade Classification (SITC) codes used by Singapore, as provided by UNESCAP. 11 Appendix 2 provides the conversion of the top fifty GSP exports to the United States in 1988. Table 22 shows that for the top twenty GSP items in 1988, the values of similar domestic exports to the United States in 1989 had generally risen rather than fallen, by S$1, 175.8 million or 15.3 per cent compared with the amount in 1988. Eight items registered increases in 1989 compared with eleven others which had declined. The top twenty domestic exports which are GSP-free in 1988 and 1989 constituted 49.1 per cent and 53.5 per cent of total domestic exports to the United States, respectively. When expanded to fifty-one items, 12

3. Post-Graduation Scenario

37

the increase in 1989 over 1988 was S$1,239.0 million or 15.4 per cent. The conclusion seems to be that the withdrawal of GSP benefits by the United States did not harm Singapore's domestic exports to the United States significantly.

TABLE 22 Comparison of Export Values of the Top Twenty GSP Items to the United States in 1988 and Similar Exports in 1989 (In thousand S$) --------

No. SITC

Description

1989

1988

1988/89 Difference

l. 75200 Data-processing machines 2. 76493 Parts of TV s, radios 3. 76410 Phone sets, switchboards and parts 4. 76388 Dictation machines 5. 76280 Other radio receivers 6. 89423 Toys 7. 74150 Air-conditioning units and parts 8. 77584 Electric smoothing irons 9. 82100 Furniture 10. 74310 Gas and air compressors ll. 87202 Surgical and general instruments 12. 77586 Ovens and coffee makers 13. 77210 Applicances for making connections 14. 76430 Transmitter and receivers 15. 76420 Microphones, loudspeakers 16. 71690 Parts of motor generator 17. 87483 Other electronic instruments 18. 89731 Jewellery of precious metal 19. 71621 Other electric motors 20. 75121 Calculating machines

4,405,175 5,500,427 1,095,252 (24.9) 792,04 -100,985 (-11.3) 893,033

Total of the top 20 GSP items Top 20 GSP items as '7c of total domestic exports to the United States

7,674,502 8,850,272 1,175,770 (15.3)

372,562 334,034 254,148 188,004

269,505 -103,057 (-27.7) 293,551 -40,483 (-12.1) 474,584 220,436 (86.7) 95,700 -92,304 (-49.1)

145,651 132,053 117,903 117,836

155,022 116,671 100,468 196,195

l 09,144 90,518

108,154 95,796

79,179 76,153 72,260 71,442 66,617 56,662 47,180 44,948

196,767 272,810 78,920 57,664 6,572 19,713

49.1

19,705

53.5

9,371 -15,382 -17,435 78,359

(6.4) (-11.6) (-14.8) (66.5)

-990 (-0.9) 5,278 (5.8) 117,588 196,657 6,660 -13,778 -60,045 -36,949 -47,180 -25,243

(148.5) (258.2) (9.2) (-19.3) (-90.1) (-65.2) (-lOO.Q) (-56.2)

n.a. n.a.

NoTE: Figures within parentheses are in percentages. SouRCE: Computed from Trade Development Board, Singapore (1988 and 1989).

Economic Impact ofGSP Withdrawal on Singapore

38

TABLE 23 Comparison of Export Values of the Top Fifty GSP Items to the United States in 1988 and Similar Exports in 1989 (In thousandS$)

No.

SITC

1988

1989

1.

75,200 76,493 76,410 76,388 76,280 89,423 74,150 77,584 82,100 74,310 87,202 77,586 77,210 76,430 76,420 71,690 87,483 89,731 71,621 75,121 78,490 89,399 79,321 77,578 87,490 87,430 87,109 74,920 73,690 76,492 71,390 74,149 77,121 73,619 88,411 69,311 77,122 71,610

4,405,175 893,033 372,562 334,034 254,148 188,004 145,651 132,053 117,903 117,836 109,144 90,518 79,179 76,153 72,260 71,442 66,617 56,662 47,180 44,948 44,785 37,559 36,606 33,366 31,052 23,775 19,772 18,913 15,077 12,938 12,685 12,607 8,896 8,697 7,477 4,959 3,933 3,774

5,500,427 792,048 269,505 293,551 474,584 95,700 155,022 116,671 100,468 196,195 108,154 95,796 196,767 272,810 78,920 57,664 6,572 19,713 0 19,705 45,212 46,769 32,951 18,331 18,958 1,815 14,173 17,589 15,461 15,968 11,497 20,963 28.654 6,558 13,329 865 7,048 40,326

2. 3. 4. 5. 6. 7. 8. 9. 10. II. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38.

1988/89 Difference 1,095,252 -100,985 -103,057 -40,483 220,436 -92,304 9,371 -15,382 -17,435 78,359 -990 5,278 117,588 196,657 6,660 -13,778 -60,045 -36,949 -47,180 -25,243 427 9,210 -3,655 -15,035 -12,094 -21,960 -5,599 -1,324 384 3,030 -1,188 8,356 19,758 -2.139 5,852 -4,094 3,115 36,552

(24.9) (-11.3) (-27.7) (-12.1) (86.7) (-49.1) (6.4) (-11.6) (-14.8) (66.5) (-0.9) (5.8) (148.5) (258.2) (9.2) (-19.3) (-90.1) (-65.2) (-100.0) (-56.2) ( 1.0) (24.5) (-10.0) (-45.1) (-38.9) (-92.4) (-28.3) (-7.0) (2.5) (23.4) (-9.4) (66.3) (222.1) (-24.6) (78.3) (-82.6) (79.2) (968.5)

3. Post-Graduation Scenario 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51.

73,623 77,883 77,810 77,129 89,489 76,483 69,979 77,886 87,420 55,140 74,320 89,733 77,521

39 3,566 2,737 2,677 2,577 2,116 1,862 1,099 807 341 318 148 93 34

676 14,311 16,884 2,558 0 19,835 876 4,601 1,815 128 184 184 0

-2,890 11,574 14,207 -19 -2,116 17,973 -223 3,794 1,474 -190 36 91 -34

(-81.0) (422.9) (530.7) (-0.7) (-100,0) (965.3) (-20.3) (470.1) (432.3) (-59.7) (24.3) (97 .8) (-100.0)

Total ofthe top fifty GSP items 8,029,748

9,268,791

1,239,043

15.4

NoTE: Figures within parentheses are in percentages.

Finally, to examine the possibility of trade diversion to Japan and the EC, the values of similar major domestic exports in Tables 22 and 23 exported to Japan and the EC in 1988 and 1989 were also compared. Thus, Tables 24 and 25 present the same top twenty and top fifty GSP items which were exported to the United States in 1988, but for the Japanese and EC markets. In the case of Japan, there was an increase ofS$343.8 million or 74.0 percent in the same top twenty GSP items to the United States in 1989 as shown in Table 24, rising to S$459.4 million or 92.9 per cent for the top fifty GSP items in Table 25. In other words, there seems to be evidence of trade diversion to Japan as a result of Singapore's loss of GSP benefits from the United States in 1989. In particular, significant increases in domestic exports to Japan in 1989 were observed for data-processing machines, which rose by 172.6 per cent; other radio receivers, by 700.2 per cent; parts ofTVs, radios, by 112.2 per cent; and plastic articles by 102.8 per cent. These were the first, sixth, eleventh, and fifteenth top GSP items exported to the United States in 1988, respectively. Nevertheless, it cannot be ascertained how much of the increase in domestic exports to Japan was strictly due to such trade diversion or to other factors giving rise to the higher demand for Japanese exports. The same evidence on trade diversion to the EC has not been observed. For the EC, there had been declines of S$747.3 million or 30.4 per cent for the top twenty GSP items, moderating to S$639.7 million or 25.2 per cent decrease for the top fifty GSP items.

Economic Impact ofGSP Withdrawal on Singapore

40

TABLE24 The Possibility of Trade Diversion of the Top Twenty GSP Items to the United States in 1988 and Similar Exports to Japan and the EC in 1989 (In thousand S$) ·-·---

Japan --···--

No. SITC

Description

1988

1989

1988/89 Difference

.·---

I. 75200 Data-processing machines

2. 77210 Appliances for making connections 3. 87202 Surgical and general instruments 4. 77121 Static converter etc. 5. 71610 Motors, battery-operated 6. 76280 Other radio receivers 7. 87109 Optical applicances and instruments n.e.s. 8. 87483 Other electronic instruments 9. 89423 Toys 10. 73619 Metal sharpening etc. II. 76493 Parts of TVs. radios 12. 76388 Dictation machines 13. 89731 Jewellery of precious metal 14. 74310 Gas and air compressors 15. 89399 Plastic articles 16. 73690 Other parts and accessories 17. 71690 Parts of motor generators 18. 87420 Drawing. marking-out machines 19. 76420 Microphones, loudspeakers 20. 71621 Other electric motors Total

79,135 215,730 62,853

98,782

136,595 (172.6) 35,929 (57.2)

52,709 9,478 32,706 9,383 31,400 56,473 30,562 244,560

-43,231 -23,323 25,073 213,998

(-82.0) (-71.3) (79.9) (700.2)

81

-26,982 -20,256 -730 5,025 17,966 2,573 4,611 4,026 9,770 6,048 1,533 -4,516 3,983 -4,257

(-99.7) (-100.0) (-4.1) (30.0) (112.2) (18.6) (36.0) (32.5) (102.8) (78.6) (21.7) (-91.4) (83.1) (-88.6)

27,063 20,256 18,022 16,735 16,012 13,851 12,816 12,394 9,504 7,697 7,067 4,940 4,795 4,316

17,292 21,760 33,978 16,424 17,427 16,420 19,274 13,745 8,600 424 8,778 59

464,833 808,668

343,835 (74.0)

3. Post-Graduation Scenario

41

----

EC No. SITC 1. 2. 3. 4. 5. 6.

75200 76280 89423 76388 76493 77210

7. 8. 9. 10. 11. 12. 13. 14.

75121 87483 77584 77586 89731 89399 74310 87202

15. 78490 16. 88411 17. 18. 19. 20.

87490 76420 71690 87109

Description

1988

Data-processing machines 1,249,523 Other radio receivers 383,248 Toys 131,084 107,373 Dictation machines Parts of TV s, radios 100,981 Appliances for making connections 86,336 Calculating machines 58,557 Other electronic instruments 47,618 Electric smoothing irons 45,114 Ovens and coffee makers 37,426 Jewellery of precious metal 36,044 Plastic articles 32,916 Gas and air compressors 27,786 Surgical and general instruments 27,096 Other parts of motor vehicles 17,408 Contact lenses and optical elements 16,555 15,595 Parts for measuring/control Microphones, loudspeakers 14,327 Parts of motor generators 13,500 Optical appliances and instruments n.e.s. 10,563

Total

1989

1988/89 Difference

119,120 305,515 134,515 378,357 108,902

-1,130,403 -77,733 3,431 270,984 7,921

(-90.5) (-20.3) (2.6) (252.4) (7.8)

223,375 43,797 6.880 68,998 24,761 34,106 75,869 40,497

137,039 -14,760 -40,738 23,884 -12,665 -1,938 42,953 12,711

(158.7) (-25.2) (-85.6) (52.9) (-33.8) (-5.4) (130.5) (45.7)

12,850 21,077

-14,246 (-52.6) 3,669 (21.1)

515 44,405 52,216 8,319

-16,040 28,810 37,889 -5,181

(-96.9) (184.7) (264.5) (-38.4)

7.702

-2,861 (-27.1)

2,459,050 1.711,776

-747,274 (-30.4) ···-----

NoTE: Figures within parentheses are in percentages. SocRCE: As for Table 22.

Economic Impact ofGSP Withdrawal on Singapore

42

TABLE 25 The Possibility of Trade Diversion of the Top Fifty GSP Items to the United States in 1988 and Similar Exports to Japan and the EC in 1989 (In thousand S$) Japan No.

SITC

1988

1989

l.

75200 77210 87202 77121 71610 76280 87109 87483 89423 73619 76493 76388 89731 74310 89399 73690 71690 87420 76420 71621 76410 77122 75121 87490 79321 74150 76492 87430 88411 78490 82100 69979 74320 74149 55140 77129 74920 89489 71390

79,135 62,853 52,709 32,706 31,400 30,562 27,063 20,256 18,022 16,735 16,012 13,851 12,816 12,394 9,504 7,697 7,067 4,940 4,795 4,316 3,951 3,142 2,862 2,531 2,311 1,717 1,509 1,337 1,171 1,078 1,061 1,050 923 920 893 707 658 514 480

215,730 98,782 9,478 9,383 56,473 244,560 81 0 17,292 21,760 33,978 16,424 17,427 16,420 19,274 13,745 8,600 424 8,778 59 79 16,459 1.681 9,236 3,069 499 1,023 424 183 1,381 79,265 1,255 775 1,385 773 847 2,377 297 978

2. 3. 4. S. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39.

1988/89 Difference 136,595 35,929 -43,231 -23,323 25,073 213,998 -26,982 -20,256 -730 5,025 17,966 2,573 4,611 4,026 9,770 6,048 1,533 -4,516 3,983 -4,257 -3,872 13,317 -1,181 6.705 758 -1,218 -486 -913 -988 303 78,204 205 -148 465 -120 140 1,719 -217 498

(172.6) (57.2) (-82.0) (-71.3) (79.90) (700.2) (-99.7) (-100.0) (-4.1) (30.00) (112.2) (18.6) (36.0) (32.5) (102.8) (78.6) (21.7) (-91.4) (83.1) (-98.6) (-98.0) (423.8) (-41.3) (264.9) (32.8) (-70.9) (-32.2) (-68.3) (-84.4) (28.1) (7,370.8) ( 19.5) (-16.0) (50.5) (-13.4) (19.8) (261.2) (-42.2) (I 03.8)

3. Post-Graduation Scenario 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51.

76430 77810 69311 77584 77886 77586 73623 89733 77883 77521 76483 77578

Total

43 462 258 130 84 35 28 0 0 0 0 0 0

2,646 13,881 142 133 0 530 55 83 0 0 5,419 467

494,645

954,010

2,184 13,623 12 49 -35 502 55 83 0 0 5,419 467

(472.7) (5,280.2) (9.2) (58.3) (-100.0) (1,792.9) n.a. n.a. n.a. n.a. n.a. n.a.

459,365 (92.9)

EC No.

SITC

1988

1989

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

75200 76280 89423 76388 76493 77210 75121 87483 77584 77586 89731 89399 74310 87202 78490 88411 87490 76420 71690 87109 71621 79321 74150 71610 77121 82100 87430 71390 77122

1,249,523 383,248 131,084 107,373 100,981 86,336 58,557 47,618 45,114 37,426 36,044 32,916 27,786 27,096 17,408 16,555 15,595 14,327 13,500 10,563 10,132 9,114 7,058 6,515 6,405 5,536 5,125 4,825 4,635

119,120 305,515 134,515 378,357 108,902 223,375 43,797 6,880 68,998 24,761 34,106 75,869 40,497 12,850 21,077 515 44,405 52,216 8,319 7,702 8,550 14,171 10,749 15,478 9,383 24,258 1,839 5,498 11.883

1988/89 Difference -1,130,403 -77,733 3,431 270,984 7,921 137,039 -14,760 --40,738 23,884 -12,665 -1,938 42,953 12,711 -14,246 3,669 -16,040 28,810 37,889 -5,181 -2,861 -1,582 5,057 3,691 8,963 2,978 18,722 -3,286 673 7.248

(-90.5) (-20.3) (2.6) (252.4) (7.8) (158.7) (-25.2) (-85.6) (52.9) (-33.8) (-5.4) (130.5) (45.7) (-52.6) (21.1) (-96.9) (184.7) (264.5) (-38.4) (-27.1) (-15.6) (55.5) (52.3) (137.6) (46.5) (338.2) (-64.1) (13.9) (156.4)

44

Economic Impact ofGSP Withdrawal on Singapore 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. Total

4,225 3,645 3,496 2,494 2,368 1,301 1,191 1,184 834 805 650 630 377 269 266 216 208 96 90 90 0 0

157 1,991 3,637 3,555 7,741 14,195 2,471 1,839 996 40,143 909 2.268 522 0 150 947 50 168 4,028 38 3,649 88

2,542,830

1,903,127

77886 76430 73690 73619 77883 76410 77521 87420 69311 77810 69979 77129 74920 89733 73623 76492 89489 74149 76483 55140 77578 74320

-4,068 -1,654 141 1,061 5,373 12,894 1,280 655 162 39,338 259 1,638 145 -269 -116 731 -158 72

3,938 -52 3,649 88

(-96.3) (-45.4) (4.0) (42.5) (226.9) (991.1) (107 .5) (55.3) (19.4) (4,886.7) (39.8) (260.0) (38.5) (-100.0) (-43.6) (338.4) (-76.0) (75.0) (4,375.6) (-57.8) n.a. n.a.

-639,703 -25.2

NoTE: Figures within parentheses are in percentages. SouRcE: As for Table 22.

Singapore's utilization rate under Japan's GSP was 84.9 per cent in 1988 (April 1988 to March 1989) and 82.3 per cent in 1989 (April 1989 to March 1990). While the utilization rate actually declined, the amount applied for increased from US$605.1 million in 1988 to US$713.2 million in 1989. However, it is still difficult to conclude on the extent of trade diversion from the United States to Japan based on these utilization rates. Given the low utilization rate of 22.5 per cent for the EC GSP scheme in 1988, Singapore may try to improve on that rate.

4J Policy and Business Level Options and Initiatives

From the preceding analysis, by 1989 when the United States withdrew its GSP benefits from Singapore, a number of factors have helped to soften the impact. While the government would like to delay the graduation for as long as possible since GSP benefits are like the icing on the cake or added bonus without reciprocity in costs, its economic restructuring strategies have paid off by the time the decision could not be further postponed. A more durable and resilient strategy is to ensure international competitiveness, which the government has been promoting since the recession in 1985. Although not specifically conceived to compensate for the loss in GSP benefits, the growth triangle, involving Johor and the Riau Islands which got off formally and more rigorously in 1989, is an added factor. Such relocations of investments away from Singapore both as a result of push and pull factors have been going on for some time under market dynamics. With official government sanction and co-operation, the process has simply been accelerated and magnified. However, not all relocations to Indonesia and Malaysia are strictly motivated by their GSP benefits. Investors are very conscious of the uncertain mood of preference-giving countries and their political sensitivities, and the temporary nature of GSP benefits. In other words, the GSP schemes are best thought of as benefits of a past development era in the 1960s, and now that both the recipient countries and the international environment have evolved into new entities, the GSP schemes are becoming anachronistic and burdensome. In the short term, they are merely the icing on the cake to recipient countries, but they could also hinder their long-term restructuring and international competitiveness. It may well be a blessing in disguise to lose the benefits as long as ample warning is given to prepare the countries for the graduation. In fact, the uncertainty surrounding the GSP due to the arbitrary determination by developed countries of product exclusion, ceilings, and graduation have been observed to have reduced the programme's benefits by discouraging investment in the affected industries and countries (Noland 1990). Having said that, it would still not hurt Singapore if some reinstatement by products can be negotiated. But given the current political mood and the

Economic Impact ofGSP Withdrawal on Singapore

46

affordability of the preference-giving countries, the chances appear brighter with New Zealand than with the United States. A more realistic consideration is that the amount of GSP benefits enjoyed by Singapore and Brunei would be less costly to New Zealand than to the United States. A more positive line ofthought would be to stimulate industrial restructuring to help Singapore regain or retain its competitivess in some products. An examination of the top GSP items to the United States in Tables 16 to 18 reveals that some items had been displaced by new ones over the period 1984-86. For instance, tape recorders and dictation machines no longer featured so prominently in Singapore's top GSP list to the United States, but may well be better positioned if exported from other nearby countries. The major GSP exports to the United States from Singapore were either in office machines, communication equipment, or other electronic products. It makes sense to relocate its industries to countries which still enjoy such GSP benefits and have more competitive production costs. Table 26 shows the utilization rates of the A SEAN countries under U.S. GSP in 1988. While Singapore topped in value of GSP covered and applied, the utilization rate was well below those of Indonesia, Thailand, and the Philippines. The potential forthe other ASEAN countries to gain from Singapore's graduation is good and indirectly this could benefit Singapore too if their export capacities are built up as a result of production processes being relocated from Singapore. TABLE 26 Utilization Rates of the ASEAN Countries under U.S. GSP, 1988 GSP Covered (A) (US$ thousand)

GSP Applied (B) (US$ thousand)

(B)/(A) % - - - -

Brunei Indonesia Malaysia Philippines Singapore Thailand

191,051 91,271,105 826.968,064 605, II 0,733 2,426,511 '183 781 ,()98,261

SouRcE: As for Table 15.

93,364 87,057,037 633,907,946 507,869,520 1.809,347,916 714,076,690

48.9 95.4 76.7 83.9 74.6 91.4

@ Summary and Conclusions

In tem1s of the economic impact of the withdrawal of GSP benefits by the United States, Tables 21 and 22 show that domestic exports of items which were the top GSP exports in 1988 increased in 1989 despite the loss ofGSP privileges. By this score, the economic impact seems inconsequential. As for trade diversion to Japan and the EC. there seems to be evidence of more domestic exports of items which previously went to the United States under the GSP now going to Japan but not to the EC. With respect to Japan, an increase in Singapore's domestic exports of data-processing machines, other radio receivers, parts ofTVs, radios, and plastic articles in particular, was observed for 1989. It must be cautioned, however, that the exact quantum of trade diversion cannot be conclusively determined as other factors such as the exchange rate, trade policies, and relative international competitiveness may have encouraged more of such exports into Japan. Since one major objective of this study is also to draw implications for the target countries, it may be useful first to briefly review the GSP utilization of the target countries. This is shown in Table 25 as well as in Appendix 3. Two observations may be provided. One is that while the three ASEAN countries, namely, Indonesia, Malaysia, and Thailand, still rely on GSP benefits and would like to resist graduation, they are aware of the sentiments of preference-giving countries and realize that graduation is only a matter of time. Second, in the short run, while the benefits are available, they are trying their best to improve administrative rules and regulations to ensure better GSP performance as measured by the utilization rates. In the case of Malaysia, specific reference was made of Singapore's loss of its GSP affecting Malaysian industries. This is in respect of certain products, particularly in electrical and electronic sectors, where Singapore inputs are crucial for Malaysia to attain the 35 per cent value-added requirement for the U.S. GSP scheme. In such cases, there would be added bargaining strength for the ASEAN countries to argue for reinstatement on a product-by-product basis. In this regard, the growth triangle should also be an added bargaining factor. Malaysian and Indonesian industries that are in need of GSP benefits but are

48

Economic Impact ofGSP Withdrawal on Singapore

linked up with Singapore's industries would be penalized with Singapore's graduation. Treating ASEAN as a group in terms of GSP privileges would thus not lead to a premature or indirect graduation for the other ASEAN partners. However, GSP schemes and concessions are basically modalities invoking the infant industry argument. As such, there is a time-bound consideration for both preference-giving and recipient countries. International economics based on comparative advantage and competitive advantage would abhor such an infant industry argument, which is protectionistic and induce inward-looking policies and horizons. The new international environment with new technologies, changing demand and supply structures, and generally harsher economic conditions due as much to the structural rigidities of the industrial countries as to unfortunate events such as the Gulf War, cannot condone such infant industry arguments much longer. The welfare costs of protection are well known and the knife cuts both ways for industrial and developing countries practising protectionism. In short, the GSP would diminish in importance in the 1990s (Langhammer and Sapir 1987). In the final analysis, developed and developing countries are better off with a liberalized trading system rather than with one in which certain parties are accorded preferences but are bound by all sorts of conditions. The trade liberalization objectives pursued by GATT may still be the best framework despite the problems in the Uruguay trade round (Arndt 1990; Prestowitz et a!. 1991 ). Free trade for all is better than concessions for some in a restricted regime.

Apppendices

APPENDIX 1 Understanding the U.S. GSP Scheme The purpose of this appendix is to present a simplified understanding of the U.S. GSP scheme in terms of its evolution, requirements, coverage, implementation, and usefulness as of 1 September 1988. It is noted that with effect from I January 1989, the Tariff Schedules of the United States (TSUS) was replaced by the Harmonized System (HS) tariff nomenclature. The HS is a new uniform international tariff nomenclature which the United States has negotiated with its major trading partners to facilitate international trade by eliminating problems resulting from each country's use of a different classification system. The conversion from TSUS to HS has ensured ''trade neutrality", with no change to GSP coverage. The information for this appendix is drawn heavily from the Handbook on the Scheme of the United States of America (UNCTAD(fAP/163/Rev. 12).

Evolution The United States offers under its GSP, preferential duty-free entry to approximately 4,100 products from 136 designated beneficiary countries. The programme was instituted on 1 January 1976 for a ten-year period, and renewed through 4 July 1993 by the Trade and Tariff Act of 1984. The new law, completed on 2 January 1987, introduced important changes including a mandatory General Review of the U.S. GSP.

How to qualify The importer makes the request for GSP treatment. The product must be included in the GSP list and be from a designated beneficiary country, satisfying the value-added requirements. The sum of the cost or value of materials produced in the beneficiary country plus the direct cost of processing must equal at least 35 per cent of the appraised value of the article at the time of entry into the United States. Imported materials can be counted towards this 35 per cent value-added requirement if they are '"substantially transformed" into new and different constituent materials of which the

Appendices

50

eligible article is composed. The article must be imported directly from the beneficiary country into the United States with a Certificate of Origin provided. A total of 4,100 categories of articles are found on the U.S. GSP list, defined at the eight-digit level ofthe HS system (five-digit level underTSUS). The list includes most dutiable manufactures and semi-manufactures and also selected agricultural, fishery, and primary industrial products not otherwise duty-free.

Rate of duty and eligibility All GSP imports are free of duty. A country may be ineligible on certain products for the following reasons: exceeding the competitive need limitations; graduation; failing to meet the value-added requirement; or supplying inadequate information. Once removed from GSP eligibility on an article, a country can be redesignated if U.S. imports of that article from the affected country fall below the competitive need limits in a subsequent year.

Competitive need limits A country will automatically lose its GSP eligibility for a product if its competitive need limits are exceeded. The competitive need limits require the termination of a country's GSP eligibility on a product, if during any calendar year U.S. imports from that country: 1. account for 50 per cent or more of total U.S. imports of that product; and 2. exceed a certain dollar value which is adjusted annually in proportion to the change in nominal U.S. GNP for each calendar year, the precise amount being known only early the following year. GSP modifications resulting from the application of competitive need limits take effect on 1 July of the next calendar year. The 50 per cent provision in competitive need limits can be waived for certain GSP-eligible articles not produced in the United States on 3 January 1985 or where total U.S. imports of the product were"de minimis". Like the U.S. GNP, the de minimis level is adjusted each year to reflect changes in nominal U.S. GNP. The level in 1988 was US$9.7 million. In addition, the President is authorized to waive competitive need limits on a product- and country-specific basis. The GSP subcommittee publishes a warning list of articles based on statistics collected in the first ten months of the year, released in January the next year.

Graduation Graduation is the discretionary removal from the GSP list of beneficiary countries on a product-by-product basis. Graduation is applied by the President in three contexts: I.

in responding to petitions submitted by interested parties in the annual review;

Appendices

51

2. in precluding individual beneficiaries from GSP eligibility on newly designated articles; and 3. in denying redesignation to countries eligible for the reinstatement of GSP status on specified articles. The GSP subcommittee considers the following factors in graduation actions: !. 2. 3. 4.

the country's general level of development; its competitiveness in the particular product; the country's practices relating to trade, investment, and workers' rights; and the overall economic interests of the United States including the effect that continued GSP treatment would have on the relevant U.S. producers, workers, and consumers.

Entrepot trade Entrep6t trade is eligible for the GSP under certain circumstances. Eligible articles shipped from a beneficiary developing country through a free-trade zone will qualify for the GSP if: I . the merchandise does not enter into the commerce of the country maintaining the free-trade zone; and 2. the eligible articles do not undergo any operations other than sorting, packing, unpacking, changing or packing, repacking, affixing marks, labels, or other signs, or operations necessary to ensure the preservation of the merchandise in the condition it was introduced into the free-trade zone. If the merchandise is purchased and resold other than at retail for export within the free-trade zone, two Certificates of Origin are required.

Regional associations If members of a regional association request and are granted recognition as regional associations under the GSP, the association may be considered as one country for purposes of GSP rules of origin. Articles produced in two or more eligible member countries of an association will be accorded duty-free entry if the countries together account for at least 35 per cent of the appraised value of the article, the same requirement for a single country. The competitive need limits will be assessed only against the country of origin and not against the entire association. Three associations currently benefit from this provision, namely, the Andean Group, the Association of Southeast Asian Nations (ASEAN) excluding Brunei and Singapore, and the Carribean Common Market (CARICOM).

Recent changes to the U.S. GSP scheme 1. Trade and Tariff Act of 1984

On 9 October 1984, Congress passed the Trade and Tariff Act of 1984, which

52

Appendices

renewed the GSP through 4 July 1993. Under the new law, the President must lower the competitive need limits by approximately one-half when a country is determined to be "sufficiently competitive" in a particular product. In addition, the President is authorized to waive competitive need limits entirely on a product- and countryspecific basis. The renewed programme requires that in all decisions relating to modifications in the list of articles eligible for GSP, consideration be given to the extent to which beneficiaries are 1. 2. 3. 4. 5.

offering responsible and equitable market access to U.S. goods and services; adequately and effectively protecting intellectual property rights; eliminating trade-distorting investment practices; eliminating trade-distorting export practices; and ensuring internationally recognized workers' rights.

Some changes were made in the GSP's original provisions relating to country eligibility. A new mandatory criterion has been established with respect to internationally recognized workers' rights. Any country failing to take steps to accord such rights to its workers will be barred from GSP eligibility unless the President determines that such an action would be contrary to its national economic interest. An additional change from the original legislation requires the President to terminate a country ·s GSP benefits after a two-year phase-out period if its per capita GNP exceeds US$8.500. The US$8.500 figure is indexed to one-half the increase in nominal U.S. GNP. For 1987, the figure was US$9,728. The new law exempts the least developed countries from all competitive need limits. In addition, it is possible for beneficiaries to obtain a waiver of competitive need limits on a product-specific basis. In deciding whether to grant a waiver, the President is required to place great weight on the extent to which the country is providing reasonable and equitable access to its market for U.S. goods and services, and the extent to which the country is providing reasonable and effective protection to U.S. intellectual property rights. The total value of U.S. imports from all beneficiary countries benefiting from the waiver cannot exceed 30 per cent of the total value of GSP-free imports in a calendar year. No more than half of this 30 per cent (that is, 15 per cent) can consist of trade from countries having a per capita GNP in excess of US$5,000 or which accounts for 10 per cent or more of total GSP benefits. The new law raises the de minimis limit from US$1 million to US$5 million (in both instances, the base year is 1979). It is noted that the base year for indexing to the nominal U.S. GNP is 1979; the 1988 limit was actually US$9.7 million. Whenever the value oftotal U.S. imports of a product is below this limit, the President can waive the 50 per cent competitive need limits. 2. The General Re1·icw

The President was required by the Trade and Tariff Act of 1984 to complete a General Review of the GSP by 4 January 1987, but it was done by 2 January 1987. Changes resulting from the General Review came into effect on I March and 1 July 1987. The

Appendices

53

purpose of the General Review was to determine which countries were sufficiently competitive. In instances where it was affirmative, lower competitive need limits set at 25 per cent of total U.S. imports and US$25 million were applied. Otherwise, the traditional competitive need limits continue to apply (that is, 50 per cent of total U.S. imports and a dollar value ofUS$82.5 million in 1988). The US$25 million limit, like the traditional dollar limit, is indexed to the nominal U.S. GNP and was actually US$32.2 million in 1988. The President determined nine beneficiary countries to be sufficiently competitive in 290 five-digit TSUS categories with an estimated trade value of about US$5 billion in 1985. In all discretionary determinations pursuant to the General Review, the President was required to take into account a number of criteria. Specifically, the President examined: 1. the extent to which the country provides reasonable and equitable access to its market for U.S. goods and services; 2. the extent to which the country provides adequate and effective protection of intellectual property rights (for example, patents, copyrights, and trade marks); 3. the extent to which it refrains from unreasonable export practices (for example, subsidies); 4. the extent to which it is reducing trade-distorting investment practices (for example, export performance requirements); and 5. the extent to which it is according internationally recognized rights to its workers.

As a result of the General Review, the President made three changes with respect to the designation of particular countries eligible for the GSP programme. The President removed Romania and Nicaragua and suspended Paraguay from the GSP programme with effect from 4 March 1987 on the basis of their practices with regard to workers· rights. Chile was also investigated for violations of workers' rights during the General Review. After an extended review, Chile was indefinitely suspended from the GSP programme with effect from 28 February J91\7.

3. Graduation The United States graduated four countries from the GSP because their per capita incomes exceeded the statutory limit for GSP beneficiaries, with effect from 1 July 1988. They are Bahrain, Bermuda, Brunei Darussalam, and Nahru. This action was in keeping with the requirements of the GSP statute; the per capita GNP of these countries exceeded the US$8,763 limit in !985. This action is expected to have a minimal impact on trade. In 1987. GSP duty-free imports from these countries were valued at US$46.1 million for Bahrain, US$760,000 for Bermuda. US$0 for Brunei Darussalam. and US$21,000 for Nahru. The President decided on 28 January 191\8 to graduate Hong Kong, the Republic of Korea. Singapore, and Taiwan from the GSP because of their remarkable achievements in economic development and their improvements in trade

54

Appendices

competitiveness. The President took this action after examining a broad range of economic development and competitiveness indicators, including their per capita GNP, economic growth rates, and their ability to export manufactured goods into the United States. The decision to graduate these four countries was in keeping with the original intent of this programme. This decision was effected on 1 January 1989 and may affect as much as US$1 0 billion in imports.

4. Omnibus Trade and Competitiveness Act o/1988 The Omnibus Trade and Competitiveness Act of 1988, signed into law on 23 August 1988, made one significant change in the GSP programme. Section 192 of the Act amended Section 503(c)(l)(B) of the Trade Act of 1974 to allow GSP treatment for watches entering the United States after 30 June 1989, which the President specifically determined, after public notices and comment, will not cause material injury to the watch band, strap, or bracelet manufacturing and assembly operations in the United States or U.S. insular possessions. Such a review was initiated by the U.S. Trade Representative in late 1988 and was set to be announced in 1989.

APPENDIX 2 Conversion between TSUS and SITC for the Top Fifty GSP Items to the United States, 1988 No.

TSUS

SITC

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13 14. 15. 16. 17. 18. 19. 20. 21.

67615 68458 67850 66120 68590 68539 68524 68525 73793 68415 68260 68514 67630 68470 70927 72735 68528 66110 67620 65725 69232

75200 76410 76388 74150 77210 76388 76430 76493 89423 77584 71610,77121,77122,77129,71690 76280 75200 76420. 76492 87202 82100 76493 74310.74320 75121 69979,69311 78490

Appendices

22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36 37. 38. 39. 40 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

68540 69610 72729 73715 68332 68560 74015 68225 74014 77458 71249 67435 68842 73714 68017 71080 68573 68466 66135 68467 66067 71178 68315 67453 68538 68420 70889 45020 70801

--------·--

No.

SITC

55 76388 79321 82100 89423 77578 76483, 76493 89733 71621,71610 89731 89399 89489,87483,87490 73619, 73623 77886 89423 74920 87420 77883 76410 77521, 74149 76410 71390 87430,87490 77810 73690 74310,74320 77586 87109 55140 88411 ----

--------------

Description

----------------------------

1. 2. 3. 4.

55140 69311 69979 71390

5. 6. 7. 8.

71610 71621 71690 73619

9. 10. 11.

73623 73690 74149

Mixture of odoriferous substances Stranded wire cables slings etc. uninsulated iron/steel Other articles of iron/steel Carburettors, cylinders, pistons, and parts of engines excluding aircraft engines Motors, battery-operated Other electric motors not over 10 kW Parts of motor generators and rotary converters Metal sharpening, polishing, and similar machines operated by grinding wheels, abrasives/polishing machines Metal shearing punching/notching machines Other parts and accessories for metal working Evaporators and condensers and parts for refrigerators

56

Appendices

12. 13. 14 15. 16. 17. 18.

74150 74310 74320 74920 75121 75200 76280

19. 20. 21. 22. 23. 24. 25.

76388 76410 76420 76430 76483 76492 76493

26.

77121

27. 28. 29. 30.

77122 77129 77210 77521

31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42.

77578 77584 77586 77810 77883 77886 78490 79321 82100 87109 87202 87420

43. 44. 45. 46. 47. 48. 49. 50. 51.

87430 87483 87490 88411 89399 89423 89489 89731 89733

Air-conditioning units and parts Gas and air compressors Parts for air compressors and vacuum pumps Taps, valves, and parts Calculating machines including electronic desk calculators Data-processing machines Other radio-broadcast receivers including receivers with sound recorders or reproducers Dictation machines Telephone sets, switchboards, and parts Microphones and stands, loudspeakers, and amplifiers Transmitters and transmitting receivers Radio navigational aid radar and remote-control apparatus Parts of microphones, amplifiers etc. Parts of TV s, radio-broadcast receivers, and other telecommunication apparatus Static converters, rectifiers, and rectifying apparatus, electric Inductors, electric Parts of transformers rectifiers etc., electric Apparatus for making connections/breaking circuit Refrigerators, electric. domestic, over 170 litres but less than 340 litres Other electro-mechanical domestic appliances Electric smoothing irons Ovens and coffee makers Primary cells and batteries and parts Electric sound/visual signalling apparatus and parts Electrical goods and apparatus n.e.s. Other parts of motor vehicles Yachts and other vessels for pleasure or sports Furniture Optical appliances and instuments n.e.s. Surgical and general-purpose instruments Drawing, marking out, mathematical calculating machines and drafting machines Instruments to measure or control liquid gas ortemperatures Other electronic instruments and apparatus Parts for measuring/controlling instruments, etc. Contact lenses, spectacle lenses, and optical elements Plastic articles Toys Other non-electronic instruments and apparatus Jewellery of precious and rolled precious metal Articles containing pearl, precious or semi-precious - - -

Appendices

57

APPENDIX 3 GSP Utilization in Indonesia, Malaysia, and Thailand Indonesia In view of its high dependence on petroleum products, the earnings of which are erratic, as the principal earner of foreign exchange, Indonesia had to diversify into exports of manufactured products. Three levels of its industrial development influence its utilization ofGSPbenefits, namely, the phase of import-substitution, the phase of adjustment in export orientation, and the phase of export orientation. While the government is keen to maximize GSP utilization in its bid to diversify into nonoil exports, the level remains very unsatisfactory. Indonesia's utilization rates under the GSP from Canada and the EC in 1988 were 91.0 per cent and 50.8 per cent, respectively (C$47.7 million and 660.6 million ECUs, respectively). Indonesia has requested UNCT AD and preference-giving countries to have clearer administrative rules such as in submitting new GSP products. The criteria for the rules of origin are also found to be too complex and the need to simplify the criteria for single substantial transformation has been requested for. The limit of the 5 per cent rule within the same heading with the final products is also deemed to be too narrow and needs more relaxation. For the EC and the European Free Trade Association (EFT A) schemes, the introduction of donor country content is also urged. Finally, to improve the utilization of ASEAN cumulative of origin due to different characteristics and individual stage. it is deemed necessary to establish a consultation forum for exchanging information and the consideration of other issues.

Malaysia Exports under twenty-seven GSP schemes for Malaysia grew by 33.64 per cent between 1987 and 1988 to reach M$7 ,259.89 million, demonstrating the importance of the GSP to Malaysia. The EC is the largest donor, absorbing M$3,633 million of Malaysia's exports in 1989, followed by Canada (M$508 million), Japan (M$279 million), and other countries (M$257.2 million). To increase the utilization rate, more dissemination of information to exporters is required. Malaysia's utilization rates under the GSP from Canada and the EC in 1988 are 93.2 per cent and 41.8 per cent, respectively (C$77.1 million and 603.3 million ECUs, respectively). The graduation of Singapore from the U.S. GSP scheme has also affected Malaysian exports. This is because for certain products, particularly in the electrical and electronic sectors, Singapore's inputs are crucial for Malaysia to attain the 35 per cent value-added requirement for the U.S. GSP scheme. The EC, EFT A, and the United States do not consider donor country inputs as originating. Malaysia, individually and collectively with the other ASEAN countries, has been requesting these three donor countries to reconsider their positions. Malaysia is currently resisting attempts to graduate it based on the U.S. Trade Act conditions concerning unfair trade practices, denial of human rights or workers' rights. But while Malaysia needs the GSP now, it realizes that the GSP is only a temporary adjunct in promoting exports.

58

Appendices

Thailand During 1971-89 GSP exports to all donor countries increased from US$4.80 million to US$4,40 1.43 million, that is at an average of 26.81 per cent per year. The main markets are the United States, Japan, and the EC. The main items exported comprise jewellery of precious metal, toys, frozen or preserved fish and crustaceans, furniture and parts, garments, and artificial flowers. Thailand's utilization rates under the GSP from Canada and the EC in 1988 are 84.1 per cent and 53.4 per cent, respectively (C$70.2 million and 977.4 million ECUs, respectively). Many problems are encountered; one concerning rules of origin is considered as being too stringent. Second, donor-country content rule which deems the material imported from a preference-giving country by a preference-giving country as local materials of the latter, is not applied by some donor countries. Other problems include verification and feedback of information being not transparent, early exhaustion of quota/ceiling, and difficulties in tariff classification.

Notes

I. These include Australia since 1966 benefiting 172 countries and territories; New Zealand ( 1972, 142); Canada ( 1974, 161); the United States (1976, 131); Japan (1971, !55); the EC (I97I, !58); Austria (1972, 163); Finland (1972, 135); Norway (1971, I32); Sweden (1972, 161); Switzerland (1972, 167); Bulgaria (1972, all interested developing countries); Czechoslovakia (1972, 124); Hungary ( 1972, developing countries in Africa, Asia, and Latin America); Poland (1972, Group of 77 with ten exceptions); and the Soviet Union ( 1965, all developing countries in Africa, Asia, and Latin America with trading relations). For details, see "Outlines of the GSP Schemes", prepared by UNCT AD/UNDP, Regional GSP Project for Asia and the Pacific, Kuala Lumpur, 1990. 2. For details on the special treatment given to forty-two least developed countries, see "Least Developed Countries and the GSP", prepared by UNCT AD/UNDP Regional GSP Project for Asia and the Pacific, Kuala Lumpur (RAS/89/028), 1989. 3. For an overview of Singapore's industrialization through the various stages, the composition and structure of industries, output, exports, and other features, see Tan and Ow (I 982), Chng, Low, and Toh (1988) among others. 4. As the information is from the TDB, it is not possible to update many of the figures given by Soon (1987). The analysis is thus regrettably patchy as the data had to be obtained from various sources. 5. This figure was US$69.6 million in 1986, increasing to US$82.5 million in 1988. 6. According to the U.S. I 991 National Trade Estimates Report on Foreign Trade Barriers, Singapore was taken to task on a number of issues including tariffs on cigarette imports, restrictions on the sale of value-added network (VAN) services, legal services, and financial services. See Business Times, 2 April 1991 and Straits Times. 11 April 1991. 7. There are numerous articles in local and foreign newspapers and magazines on the issue of graduation of Singapore from U.S. GSP; see, for instance, Straits Times, II December 1987, 8, 14, 21, 24. 30 January 1988, 2, 4-8, 11-13, 15-16, 26-27 February I 988.2-3, 10 March I 988,3 Apri11988,Business Times. 19, 22, 30January I 988, Asian Wall Street .Journal, I February I 988, among others. 8. Speech by Ambassador Tommy T.B. Koh, Embassy of Singapore, Washington, DC, "Business Relations with the US from the Perspective of the Four Tigers", for the I 987 Annual Meeting of the American Bar Association in San Francisco, California, I I August 1987.

60

Notes

9. U.S. Assistant Secretary of the Treasury for International Affairs, David C. Mulford, "Asian NICs Not Reliable Trade Partners", remarks to a San Francisco conference, 17 November 1987. 10. There is provision for reinstating a product to GSP status if import figures remain below the threshold (NZ$100,000 and 25 per cent) for two years after graduation. Also, the dollar value threshold will be reviewed after two years of the scheme's operations. 11. With effect from I 1anuary 1989, the trade classification adopted for documenting Singapore's external trade is the 1989 Singapore Trade Classification and Customs Duties, which is based on Harmonized System (HS ). However, for the publication of external trade statistics, a classification based on the Standard International Trade Classification (SITC) (Revision 3) is used. 12. There are fifty-one items rather than fifty after the conversion from TSUS to SITC because of some overlap in codes, as can be observed in Appendix 2.

Bibliography

Ariff, Mohamed and Tan Loong Hoe, eds. The Uruguay Round: ASEAN Trade Policy Options. Singapore: Institute of Southeast Asian Studies, 1988. Arndt, Heinz W. "The GATT System, Free Trade Areas and Regional Cooperation". In Perspecti1·es on the PaClji'c Basin Economy: A Comparison of Asia and Latin America, edited by Takao Fukuchi and Mitsuhiro Kagami. Tokyo: Institute of Developing Economies and Asian Club Foundation, 1990. Balas sa, Bela et al. De\·e/opment Strategies in Semi-Industrialised Countries. Baltimore: John Hopkins Press, for the World Bank, 1982. Chng Meng Kng, Low Linda, and Toh Mun Heng. Industrial Restructuring in Singapore. Asia-Pacific Monograph no. 3. Singapore: Chapmen Enterprises, 1988. _ _ .''Trade Policy Options for Singapore". In The Uruguay Round: ASEAN Trade Policv Optiom. edited by Mohammed Ariff and Tan Loong Hoe. Singapore: Institute of Southeast Asian Studies. 1988. Fukuchi. Takao and Mitsuhiro Kagami. Perspectives on the Pacific Basin Economy: A Comparison ofAsia and Latin America. Tokyo: Institute of Developing Economies and Asian Club Foundation, 1990. Isaiah. Frank et al. "The Graduation Issue in Trade Policy towards Developing Countries". World Bank Staff Working Papers, no. 478 (August 1981 ). Lang hammer, Rolf J. and Andre Sapir. Economic Impact of'GeneralisedTariffPreferences. London. Aldershot: Gower Publishing, for Trade Policy Research Centre, 1987. Murray, Tracy. Trade Preferencesj(Jr Dn·eloping Countries. London: Macmillan Press, 1977. Noland. Marcus. Pacific Basin Dc\·e/oping Countries: Prospects for the Future. Washington, DC: Institute for International Economics, 1990. OECD. The Generalised System ofPreferences: Re\·iew of the First Decade. Paris, 1985. Prestowitz, Clyde V., Jr., Alan Tonelsen. and Robert W. Jerome. "The Last Gasp of GATTism". Harmrd Business Rn·iew, March~April1991.

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Singapore International Chamber of Commerce. How to Make Use of GSP to I nCI·ease Exports: A Practical Guide. n.d. Soon Yin Moi. "The Generalised System of Preferences: An Evaluation". Academic exercise. Department of Economics and Statistics. National University of Singapore. 1987. Tan Augustine, H.H. and Ow Chin Hock. "Singapore". In De1'elopment Strategies in Semi-Industrialised Countries, edited by Bela Balassaet a!. Baltimore: John Hopkins Press, for the World Bank, 1982. Trade Development Board, Singapore. Singapore Trade Statistics: Imports and E\ports. Various years. UNCTAD. Handbook on the Scheme ofNew Zealand. UNCTAD/TAP 258/Rev. 2. 1989. UNCTAD. Handbook on the Scheme of the United States. UNCTAD/TAP 163/Rev. 12. 1989. UNCTAD/UNDP. GSP Newsletter, no. l (January/February 1990). UNCTAD/UNDP. GSP Newsletter, no. 2 (March/April 1990). UNCTAD/UNDP. GSP Newsletter, no. 5 (September/October 1990).

THE AUTHORS Toh Mun Heng is a Senior Lecturer in the Department of Economics and Statistics at the National University of Singapore. He is the Co-ordinator of the Econometric Studies Unit. His research interests are in econometric modelling and forecasting, input-output analysis, international trade, human resource development, and transportation. He is also a consultant to the Ministry of Trade and Industry and the Ministry of Health. Linda Low is a Senior Lecturer in the Department of Economics and Statistics at the National University of Singapore. Her research interests include public sector economics, privatization, social security, and industrial restructuring. She is also a consultant to the Ministry of Trade and Industry.