Governments will have to implement programmes to win back confidence in free trade. The softer, consensus-driven approach of groups like the Asia-Pacific Economic Cooperation (Apec) will become more important.
The Apec Summit last month took on extra significance because it came amid rising anti-globalisation and protectionism sentiment.
At the end of the week-long series of meetings, world leaders vowed to fight protectionism and implement policies to win back confidence in the global trading system.
It was a reassuring message from the leaders of the 21 member economies, which together account for 44 per cent of world trade.
There was also acknowledgement that while globalisation had boosted economic growth, the fruits of free trade have not been evenly spread and there was a need for more inclusive growth.
One way is to help micro, small and medium-sized companies to innovate and use technology to tap into overseas markets. Such enterprises account for 97pc of all businesses and employ about half of the two billion workers in the Asia-Pacific.
Giving these businesses a leg up will counter the impression that globalisation mainly benefits large companies while leaving ordinary people worse off.
Other policies include helping workers develop skills for the digital economy, where good jobs will increasingly be found as electronic commerce in the Asia-Pacific region is expected to have increased 30pc from 2015 to 2017.
Ms Joanne Guo, assistant executive director of strategy and development at the Singapore Business Federation, says that, given the political environment, “businesses are likely to take measures to contribute to more inclusive growth”.
But any plans must result in tangible improvements in the lives of people. After all, as Prime Minister Lee Hsien Loong said at the Apec Summit, it is not enough to just educate people about globalisation’s benefits.
Governments need to ensure that “the reality reflects the rhetoric”.
Referring to the economic deterioration in US states like Ohio, he said initiatives must be made to improve conditions so that people can feel hopeful about the future.
“Otherwise, if we tell them it’s all for the best and you are just part of the necessary sorrow in this best of possible worlds, I don’t think you are going to win very many votes,” he said.
But National University of Singapore economics associate professor Davin Chor said it will be an uphill task for US states that are already strapped for resources to adopt the necessary measures.
“A responsible approach would be to strengthen social safety nets for displaced workers, while providing them the incentives to upgrade their skills and that of the next generation through the education system. What is unclear, though, is whether the parts of the US that most need to adopt such policies have the fiscal resources to deliver them,” he said.
The appeal of Apec
There was agreement at the Summit that the Apec approach to globalisation is more pertinent than ever. Participation is voluntary, the institution is consensus-driven and steps taken are incremental.
Apec has always functioned as a test bed for ideas to boost free trade as it is non-legally binding and economies can pull out anytime.
Such a system may be more palatable to the public in the current political environment where rules-based, legally-binding free trade agreements are becoming an anathema.
“Apec as an organisation, and the Free Trade Area of the Asia Pacific that Apec is an incubating supporter of, has been given more relevance,” said Dr Malcolm Cook, a senior fellow at ISEAS – Yusof Ishak Institute.
But all these do not address the proverbial elephant in the room: What will the future Trump administration do with regard to trade?
While Mr Trump has made many statements denouncing free trade, the president-elect has changed his mind often on previous positions and there is no telling if he will follow through on his protectionist pledges to slap tariffs on imports.
Dr Cook said it is not even clear if Mr Trump will attend next year’s Apec Summit in Vietnam and his absence would test the trans-Pacific dimension of the organisation.
There is consensus in the business community that there is uncertainty ahead because it is not known what policies the Trump administration will adopt, said Ms Guo.
However, “businesses are resilient enough to take measures to reduce risks and search for opportunities elsewhere as there are still countries that believe in free trade and open investments”, she said.
Indeed, PM Lee said at the end of his trip that the world was in a state of watchfulness as it awaits the future direction of the impending Trump presidency.
“It is a mood of watchfulness, of waiting to see and being cautious not to foreclose options prematurely, so that you find yourself at a dead-end unnecessarily,” he told Singapore reporters.
Courtesy : Dawn News