From an entrepôt to a global trading hubAs a land-scarce country with almost no natural resources, Singapore’s economy is heavily reliant on global trade. It is one of the leading exporting countries worldwide. However, its re-exports surpass its domestic exports. Apart from the re-exports of oil and petroleum products, other major non-oil merchandise re-exports include that of machinery and transport equipment, as well as chemical products.
Singapore’s position as maritime and aviation transport hubs, as well as its position as a leading financial services sector in Asia, contribute significantly to its export of services from these sectors. Singapore’s export commodities and services provide a significant amount of revenue for the country. On the other hand, the lack of land and resources meant that Singapore heavily relies on imports for its consumption and economic needs. This includes necessities such as water and food, which it imports mainly from its neighboring countries.
Facing the uncertainties and volatilities in global tradeThe COVID-19 pandemic, however, has shown how vulnerable Singapore’s trade-heavy economy is to the fluctuations of global trade, leading to the worst recession in the city-state’s history. Border restrictions and lockdowns severely impacted manufacturing outputs and global trade volume, leading to a decline in merchandise trade in Singapore. Not only that, its reliance on imports, especially of basic necessities such as food and water, means that prices and supply of such commodities are vulnerable to fluctuations in the global supply chain, as seen during the pandemic and the current global economic crisis.
In order to ensure stability and maintain competitiveness in its trading sector, Singapore has signed several free trade agreements (FTA), both bilateral and regional, as part of ASEAN. Existing bilateral FTAs include the USSFTA and the EUSFTA. Recently, as part of ASEAN, Singapore became a signatory of the world’s largest FTA, the Regional Comprehensive Economic Partnership (RCEP), consisting of 15 Asia-Pacific countries. By eliminating tariffs and establishing a harmonized set of trade rules among the bloc, the RCEP aims to entice businesses to move their operations and supply chains to the bloc.