BEIJING – Singapore Prime Minister Lee Hsien Loong has called for the setting of new ground rules so that global trade can continue without decoupling. This comes at a time when strategic competition between the United States and China is ratcheting up and countries are increasingly falling on one or the other side of the divide.
Going ahead, he said, the playing field will be much less flat, with barriers and gaps, and then we may end up on one side of the gulf or on the other. And thats just the way the world is going to be.
He said that he hopes there is still a way forward for countries to continue to work together within the World Trade Organisation framework, and recognise the national security considerations and the need for assurance and secure supply chain resilience, and not to be overly dependent on any particular partner.
But at the same time, establish some ground rules, he said on Saturday.
So its not just that I will spend any amount I want to bring a project to me, and therefore you will spend any amount you want to make the project go there or to make your own carbon copy of the project.
Because that way is ruinous for all sides.
His comments come amid a slew of policies aimed at what has been called friendshoring where manufacturing and other industries are being relocated to countries with shared values.
These include the US Chips and Science Act, which bans chip manufacturers who have received grants from the US government from expanding their capacity in China for 10 years; and the Inflation Reduction Act, which aims to improve US manufacturing for clean energy to step up competition against China. The latter is a leader in supply chains on green technology.
The latest move is from European Union countries, which have agreed on a new trade defence tool that allows Brussels to fight back against countries that use punitive measures against others, such as Chinas block on Lithuanian imports after the Baltic country opened a trade office in Taiwan in 2022.
PM Lee was speaking to the Singapore media at the end of his one-week official visit to China, which has taken him to the southern city of Guangzhou, Boao in Hainan for the annual forum, and Beijing, where he met Chinese President Xi Jinping. Both leaders agreed to upgrade the bilateral relationship.
At Boao, International Monetary Fund chief Kristalina Georgieva estimated that the long-term cost of trade fragmentation could be as high as 7 per cent of the global gross domestic product.
PM Lee noted that this refers to just the trade and investment impact of the decoupling. More On This Topic You have to keep on making it better and better: PM Lee on Singapore-China relationship Singapore and China to elevate ties following meeting between PM Lee and Xi Jinping If you take into account that there is also the impact on innovation, on technology, on creativity, there is much more than that, so the cost is very high.
You may not end up at war, but it will be very regrettable, at the very least, he said. Its a basic paradigm change.
New rules will take time to be established. And until a new framework is created, we fasten our seatbelts, hold on tight and grit our teeth and work hard, said the Prime Minister.
It is in this climate that China has emerged from the pandemic and is re-establishing links with the rest of the world quickly.
I think, in terms of the overall environment, the Chinese do see the black clouds which all of us see, said PM Lee.
They see, of course, from the Chinese perspective, what problems it causes them and what the dangers are to them. But they want friends and they would like particularly to have stability and cooperation with the other Asian countries, including Singapore. More On This Topic China wants to work with S'pore as it executes ambitious blueprint, Li Qiang tells PM Lee Singapore and Chinas upgraded relationship: What it means Asean, too, would like to build ties with China and also the US, and the Chinese can do quite a lot to make it easy for Asean countries to want to have good relations with them, said PM Lee.
That could mean giving these smaller countries space, enabling them to have their interests respected and preserved, which would make it easier for these South-east Asian states to pursue trade with China.
I think that is the mindset which will make it possible in a troubled world for countries to have give and take, to maintain working relations and mutual trust and to be able to co-exist, said PM Lee.
Asean countries are being tugged in different directions as the major powers tussle, and PM Lee acknowledged the increasing attention the region is getting when asked if this is a concern.
With a wry smile, he said: It depends on your perspective. I think its very nice to have people pay attention to us.
But, of course, we would like the tensions and difficulties between them not to get referred into the relationship with us, and that they will take their relations with us on its own merits; and we find value in them, they find value in talking to us, just because we are productive, we have something to add, and not just because they want us on their side, and not on the other side. More On This Topic Chaos, conflict must not be allowed in Asia or the future will be lost: Chinese Premier Li Qiang Regional groupings will help strengthen Asia in a troubled world: PM Lee