In hindsight, we were right to have abandoned import substitution. At 300% of our GDP, trade has become essential to our livelihood and key to Singapore’s progress. To Singapore, the message that free trade brings prosperity is not an abstract one, but one borne out by our own experience.

Similar to Singapore’s experience in 1965, the balance of payments crisis in 1991 prompted reforms in India. The crisis was taken as an opportunity for India to orient outward and become more closely integrated with the world economy. Reforms since then have included reductions in tariffs and a liberalized foreign investment regime. India has experienced higher growth in the past decade.

Further evidence of the benefits of free trade abounds. The latest World Bank Global Economic Prospects Report estimates that abolishing all trade barriers could boost global income by US$2.8 trillion and lift 320 million people out of poverty by 2015. The elimination of all tariff and non-tariff barriers can result in gains for developing countries of an estimated US$182 billion in the services sector, US$162 billion in the manufacturing sector and US$32 billion in the agricultural sector.

Singapore is therefore a strong proponent for the objectives of GATT and the WTO. We believe that strengthening the open, rules-based trading system and eliminating or reducing tariffs are time-tested ways to growing prosperity, rising living standards and reduced poverty in the world.

When the Doha Development Agenda (DDA) was launched in November 2001, Members gave their unequivocal stamp of approval for increased support to the developing countries. There was clear recognition that market access is necessary for the progress of developing countries.

The traditional tussle between developed countries and developing countries is a central issue in market access. Developing countries have long sought lower trade barriers so that their exporters can benefit from the improved market access. This is as it should be. It is right that developed countries, being the more advanced members of the global community, help the less-advanced countries move up a step in the developmental ladder by granting them greater market access.

Agriculture is one of the key areas where developed countries can show their commitment to helping developing countries. Developing countries are mostly agrarian economies, and it would help them greatly if their produce were able to gain market access in the developed world. Unfortunately many developed countries have entrenched agriculture sectors which fight to shut out imports. This must change. Developed countries must open their doors to developing countries - particularly least-developed countries - and lower their significant barriers to agriculture trade, whether in the form of tariffs or subsidies. This was the commitment made at Doha and must be fulfilled.

Even on non-agriculture trade, developed countries can do more to give developing economies a boost. Developed countries can, foremost, reduce their tariff peaks on developing countries' industrial exports of interest such as textiles and clothing, leather, rubber, footwear and travel goods. Such exports also continue to be impeded by quantitative restrictions and stringent product standards. To ensure meaningful market access for developing countries, developed countries must reduce these non-tariff barriers too.

However, it is also beneficial for developing countries to provide greater access to their own markets.

In Singapore’s experience, an important element in economic growth is attracting foreign investment. Since such investment is typically geared towards producing goods for export, they must make use of the lowest cost inputs available worldwide in order to compete internationally. Low tariffs were therefore necessary to make Singapore an attractive destination for foreign investment.

Because of high tariffs, manufacturers in developing countries pay more for intermediate goods per dollar of manufactured output. Their production costs are higher and their economies therefore less competitive. Tariffs on intermediates account for 14.4% of manufacturing costs in developing countries, versus 9% in developed countries.

High tariffs in developing countries partly account for why most foreign investments go to developed countries, rather than to developing economies. In 2000, 82% of global FDI went to the US, EU and Japan.

No country can supply all inputs at the lowest cost domestically. This is especially true for a small country like Singapore, though perhaps less so for a large country like India. But nonetheless, tariffs have an impact on the competitiveness of industries. A recent CII - Mckinsey study identified lower tariffs as a reason for greater competitiveness of the Chinese manufacturing industry, and recommended that India reduce its tariffs to enhance the competitiveness of manufacturing in India. India has recognized the importance of tariff reductions to her competitiveness, and has committed to reducing tariffs to East Asian levels within three years.

A final significant aspect of market access relates to the growing significance of trade between developing countries. While access to developed countries’ markets is undoubtedly important, the fact remains that about 110 out of the 145 WTO Members are of developing country status. Trade between developing countries is large and growing. Already, about 40% of developing country exports go to other developing countries. According to the World Bank, it is expected that by 2005, trade between developing countries will account for more than 50% of developing country exports.

The importance of trade between developing countries has led to what some people may consider a perverse result – developing countries bear a disproportionate burden of world tariff payments on industrial goods. In fact, they pick up 40% of the annual world tariff bill on industrial goods, even though they only account for about 22% of world GDP. What is even more alarming is that 70% of the tariffs paid by developing countries, or some US$57 billion annually, are paid to other developing countries. On average, a developing country will gain more if tariffs in developing countries were reduced, than if tariffs were reduced in developed countries.

Given the great potential in further trade growth amongst developing countries, phenomenal growth and an increase in living standard could take place if developing countries were to engage in a concerted effort to reduce their trade barriers.

I have given one example of how developing countries can help one another. There will be other areas where developing countries can benefit from deeper cooperation. Developing countries have traditionally turned to developed countries for assistance. They should work together in a spirit of mutual help as well.

There is much India can do to take the lead among developing countries to bring about mutual help and cooperation. India is seen as a leader in the developing world. India can play a major role in showing the way forward.

Indeed, India has already taken an important first step. In Nov last year, Leaders of India and the ten ASEAN countries held their first ever Summit. They agreed to conclude a Framework Agreement that will include a Regional Trade & Investment Agreement or Free Trade Agreement (FTA) as a long-term objective. Prime Minister Vajpayee proposed that this FTA be realised within 10 years.

Beyond trade and investment, the Leaders also agreed to strengthen economic cooperation. A joint study completed last year found that ASEAN and India could benefit by cooperating in a wide range of issues including science and technology ICT, biotechnology, pharmaceuticals, tourism, infrastructure, human resource development and others.

ASEAN and India are natural partners. We share a land border 1600 km in length. The interaction between our peoples goes back to its beginnings in the second and third centuries. Many ASEAN countries and India share a similar colonial heritage.

Our economic relationship is becoming increasingly important. For example, ASEAN-India trade grew by more than 5 times since 1991 to US$10.9 billion in 2001. There are also complementarities between our economies. For example, Prime Minister Vajpayee pointed out during the ASEAN-India Summit that ASEAN was strong in IT hardware, while India was strong in IT software. There is scope to leverage off one another’s strengths.

ASEAN is keen to deepen its ties with India. Work to progress the ASEAN-India relationship is well underway. Already, a Task Force of ASEAN and Indian officials and businessmen has met to prepare the Framework Agreement. Leaders have agreed to meet every year. So have economic ministers. And our foreign ministers will continue doing so. A certain momentum has set in.

Singapore too is keen to contribute to the deepening of ties between India and the ASEAN region. To this end, Singapore and India launched a Joint Study Group in April last year to study the benefits of an India-Singapore Comprehensive Economic Cooperation Agreement (CECA).

The JSG has met four times to study the scope and structure of the CECA. The CECA will include liberalisation of trade in goods, services and investments, as well as cooperation in fields such as tourism. The JSG is expected to complete its report in three months time, after which we expect to move onto negotiations for the CECA.

CECA will allow Singapore to serve as a launch pad for India in Southeast Asia and beyond. This is against the backdrop of a dramatic growth in economic relations between India and East Asia. For instance, India-China trade has grown by 50 times since 1991. For Singapore, CECA will link our economy to India’s vibrant economy and enormous market. Our companies will benefit.

But CECA has significance beyond our two economies. Just as the ASEAN-India relationship can be a model for cooperation between developing nations, Singapore and India can lead the way towards deeper cooperation between our two regions. Singapore is India’s largest trading partner in Southeast Asia, and India is Singapore’s largest trading partner in South Asia. CECA can serve as a pathfinder to the ASEAN-India Regional Trade & Investment Agreement.

On that note, let me thank CII for the honour of participating in this Summit. Singapore looks forward to the many opportunities to be a partner to India – at WTO, at ASEAN, and bilaterally. The many facets of our partnership reflect just how India and Singapore are good friends in so many different ways.

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