Brad Setser

I know this is a somewhat controversial position, but I have trouble taking Singapore's defense of "pure" globalization seriously ...

Singapore defends its interests of course. But its tax policies have done more to distort global trade than the US inflation reduction act.


Ireland's role as a corporate tax hub is now increasingly well known. But Singapore does much the same thing.

If offers US firms that produce there a low tax rate on their global IP profits in return for a few manufacturing jobs in Singapore.


A large US semiconductor equipment company has radically lowered its US and global tax rate by producing a few parts in Singapore. A subset of US pharma companies do something similar. Some chip designers too ...


These aren't the distortions from "fragmentation" -- but they are massive distortions (and bigger distortions than direct subsidies for capex, which are at least limited to the returns on physical capital).


Singapore also intervenes up the wazoo in the fx market, shifts a lot of those funds over to its SWF and set a bad example for China and others by refusing to disclose the size of its SWF.


But the GIC is huge -- probably over $1 trillion (it has gotten $150b from MAS in the last 2 years in what may be the first transparent shift of funds in Singapore's history ...).


Given its wealth, Singapore also contributes surprisingly little to global public goods (it prefers to just reinvest in its SWF ... )


There are a lot of ways to undermine globalization.

The U.S. inflation reduction act has some discriminatory aspects no doubt.

But Singapore's defense of a globalization centered around tax avoidance should be subject to a bit of scrutiny too.


Quote from Singapore's deputy PM is in Gideon Rachman's latest column -- which is very good even if he gives Singapore a bit of a free pass.

Tue Jun 06 04:43:52 +0000 2023