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Singapore overtakes US as World’s Most Competitive Economy

This article revolves around how Singapore has knocked USA out of the top spot in the World Economic Forum’s annual competitiveness report. Singapore earned the highest scores for its infrastructure, health, labor market, and financial system, which overall determine a nation’s competitive landscape. Singapore and Vietnam put up strong performances this year partly due to the US-China trade war. A report noted that the two Asian economies “appear to be benefiting from global trade tensions through trade diversion.” For instance, US imports from Vietnam rose by 36% in the first five months of 2019, as companies have been shifting manufacturing from China to Vietnam and other Southeast Asian countries to avoid steep tariffs. However, the trade war hasn’t been completely beneficial for Singapore, as Singapore relied heavily on exports, and counts China as its biggest trading partner. In fact, Singapore had a big drop in economic activity and even sense a looming recession as the trade war between US and China continues.

From a graphical perspective, trading partners can be mapped onto a directed graph, in which the nodes represent nations (USA, Singapore, China, Vietnam, Hong Kong, etc…) and a directed edge going from node A to node B could represent node A exporting goods to node B. This is an example of a network exchange, in which nations play the roles of nodes and communicate across edges as trading partners, and the two trading partners negotiate over the amount of goods to exchange. If a particular nation asks for too much from another nation, then it is highly likely that they would not continue being trading partners, as in real life, nations won’t accept a situation with no gain, just like how real people won’t accept zero in an ultimatum game. Due to China’s steep tariffs, many countries whom previously had trading ties with China (an edge between them) began relying more heavily on their outside options, resulting in a shift in power dynamics. For example, USA and other countries had a decrease in options for trading partners as now they refuse to trade with China. USA and other countries’ increased dependence on other outside options, such as Vietnam and Singapore, placed Vietnam and Singapore in positions of greater power and USA in a position of slightly less power. This backs the following claim: Singapore and Vietnam put up strong performances this year partly due to the US-China trade war. However, at the same time, Singapore had a large drop in economic activity despite seemingly becoming more powerful. This was the case because Singapore was also directly affected by China’s steep tariffs, since China was Singapore’s biggest trading partner. China’s steep tariffs resulted in Singapore having a very weak trading tie with China – a tie that once used to be Singapore’s strongest. This resulted in Singapore depending on other outside options as well, affecting Singapore’s economy. All in all, network structure and changes in tariffs clearly have a large impact on power dynamics in network exchanges along with the nations’ economies.




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October 2019