SINGAPORE'S INTERNATIONAL TRADE

EXPANSION OF SINGAPORE'S INTERNATIONAL TRADE

This research paper outlines the expansion of the international trade of Singapore since 1970 and discusses various possible explanations for how and why it occurred. Singapore has used government policies, particularly relating to its use of its human and financial capital, to expand its international trade and wealth at a dramatically increasing rate. It may be reaching a point of diminishing returns.

Expansion of Singapore's International Trade

Le Poer said that "Singapore entered nationhood with a mixed legacy. The industrial sector was small, its productivity was low. Manufacturing in 1960 was a mere 11.4 percent of the GDP; commerce, far and away the largest sector, accounted for 32 percent" (147). Swedish economist Gunnar Myrdal noted in 1968 that the economies of almost all the nations of South Asia, including Singapore, would experience "acute and worsening balance of payments crises as they attempted to reverse their dependence on the former colonial powers and to industrialize (114, 115 and 116).

In fact, since 1970 Singapore has had phenomenal economic growth, averaging 8.5 percent per annum (Smelling 37). By 1994 it had a gross national product of U.S. $65,842 million and a per capita income of $23,310, which made it the ninth wealthiest country in the world (Europa Year Book 2812). This accomplishment is remarkable when one considers that Singapore's economic development took place in a small island, with a populati

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h as products for the electronics and computer industries and high-fashion clothing (Le Poer 155). Singapore imported more goods from Japan (25.3 per cent in 1987) than from any other country (Le Poer 155). In 1994, principal exports were office machinery, electronic components, television and radio, petroleum products and chemicals and principal imports were electrical and non-electrical machinery, crude petroleum, chemicals, and food products (Europa Year Book 2812). By 1989, Singapore was the fourth largest investor in China and its fifth largest trading partner (Le Poer 157). She says that "Malaysia and Indonesia remained the principal sources of . . . primary products [crude rubber and oil, vegetable oils and spices) and an important destination for manufactured goods" (154). Explanation for the Growth in Singapore's International Trade The theory of comparative advantage holds that countries will benefit and international trade will expand between them if they each specialize in producing the commodities or services in which they are more efficient, i.e have higher productivity. According to the Heckscher-Ohlin Model, a country tends to have comparative advantage in the production of commodities that require intensive use of

Category: Foreign - S