WP’s Jamus Lim points out reasons why CECA benefits India more than Singapore

Workers’ Party (WP) Member of Parliament (MP) Jamus Lim took to Facebook on Friday (19 March) to pen down reasons why the India-Singapore Comprehensive Economic Cooperation Agreement (CECA) offers more gains for India rather than Singapore.

During WP’s recent house visit at 326C Anchorvale Road, he met a resident who voiced his unhappiness towards the CECA.

“Since its conclusion in 2005, there has been much sturm und drang about the merits of the CECA deal between Singapore and India. These have focus principally on the sense—one shared by Mr Singh—that the deal has been unfair for Singaporean workers, and has led to both a flood of Indian nationals, alongside a loss of local opportunities,” said Mr Lim.

Given that the Sengkang GRC MP is also an international economist, he expressed that he understands that trade deals are rarely “unequivocal”, and that there will often be a loser in a trade deal and that the benefits depend on conditions faced by both parties.

“As an international economist, I recognize that the support for trade liberalization is seldom an unequivocal one, but based on how, on net, the benefits outweighed the costs. This not only means that there would generally be losers in any trade deal, but also that the extent of gains would depend on the specific conditions faced by both parties to any agreement.”

However, for CECA, there a few unique instances that make “gains from the deal less unambiguously positive”, said Mr Lim.

The first is India’s massive population size will lead to a flood of Indian nationals in the country, resulting in displaced locals as these foreigners are more enticing for employers given their lower costs.

“One is that India’s massive population means that even if a small fraction acquired certain skills (such as in ICT), their lower costs could displace local, higher-cost Singaporeans doing the same job, and perhaps even decimate the entire local industry, due to their sheer size,” he explained.

Other reasons include massive decrease in wages for workers as well as quality of workers being hired will be compromised due to lower wages.

“Another is that—since India is so much earlier in its stage of development—it could lead to a significant lowering of wages of workers exposed to such competition, even if they were to keep their jobs. And finally, subtle quality differences may get washed out by the sheer force of lower wages, leaving the end consumer worst off than before.”

To this, Mr Lim pointed out that while the Government said there Singapore companies will benefit from CECA as they will get better access to the Indian market, but there is “no assurance that the net benefits of trade are to be more equally distributed”.

“For example, such corporations would have to be confronted with higher taxes. Or talent on employment or S passes—who are not required to contribute to CPF—could be taxed at a higher marginal rate, to better equalize the costs of hiring between locals and foreigners. These tax revenues could then be used to fund worker safety nets and retraining programs for locals displaced as a result of CECA,” he said.

As such, Mr Lim opined that amending the deal itself is just half the work that needs to be done, as the bigger chunk is to study the effect of CECA on local workers.

“The 3rd review of the deal is currently ongoing, but in my view, amending the deal itself is only half the story. As much depends on policies we can take, at home, to iron out the effects of CECA on our workers.”