Trade policies for a small open economy: The case of Singapore

• DOI: http://doi.org/10.1111/twec.12555
• Author: Yuchen Shao,Xiaoping Chen
• Published date: 01 November 2017
• Date: 01 November 2017

SPECIAL ISSUE ARTICLE

Trade policies for a small open economy: The case

of Singapore*

Xiaoping Chen

1

|

Yuchen Shao

2

1

School of Social Sciences, Nanyang Technological University, Singapore

2

School of Economics, Nanjing University, China

1

|

INTRODUCTION

Singapore is a sovereign city–state that consists of one main island along with 62 other islets lying

at one end of the Strait of Malacca in the centre of South-East Asia. Given its geographic location

and limited land area and natural resources, Singapore’s economic development has been heavily

reliant on international trade and regional integration. Indeed, successive Singapore governments

have actively participated in many regional and global free-trade agreements. Singapore has been a

WTO member since 1995 and member of GATT since 1973. The seventh review of the trade poli-

cies and practices of Singapore under the WTO framework took place in 2016. This paper selec-

tively discusses several main issues raised in the latest trade policy review as well as new

developments and challenges that Singapore is facing in the global economy. As Singapore is a

typical small open economy, reviewing its trade policies may provide important and useful lessons

for other countries with similar macroeconomic characteristics.

The next section lays out the macroeconomic context and some main economic performance

measures for the Singapore economy. Section 3 contains discussion and comments about the recent

WTO Trade Policy Review. Further general discussions on some other important issues are pre-

sented in Section 4 and Section 5 concludes.

2

|

MACROECONOMIC CONTEXT

Singapore’s GDP has grown by an average of 9.5% annually since its independence in 1965. There

are many factors that contribute to this long-lasting high rate of growth. One of them is interna-

tional trade. Although there is still no consistently clear and strong empirical support for the posi-

tive effect from trade to economic growth, for the case of Singapore as well as several other

*We would like to thank the editor David Greenaway for helpful suggestions, and Euston Quah, Chia Wai Mun, Joseph

Dennis Alba and Yunong Li for helpful discussion. Please contact Shao for enquires about the data used in the paper. Chen

acknowledges the financial support from the Ministry of Education AcRF Tier 1 RG173/14.

DOI: 10.1111/twec.12555

2500

|

©2017 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/twec World Econ. 2017;40:2500–2511.