SINGAPORE: Even with the signing of a “phase one” trade deal, challenges remain when it comes to resolving the geopolitical confrontation and competition between the United States and China, said Prime Minister Lee Hsien Loong on Wednesday (Jan 22).
Mr Lee was responding to a question from Mr Borge Brende, president of the World Economic Forum (WEF), at a dialogue session held as part of the 50th WEF meeting in Davos, Switzerland.
Citing the latest WEF report, which identified geopolitical polarisation and the US-China trade war as the biggest risks to global growth in the short term, Mr Brende had asked Mr Lee if he thought there were still challenges related to geopolitical confrontations and competition or if they had peaked at the signing of the partial trade deal last week.
To that, the prime minister replied: “We are relentlessly optimistic but not that much so. I do not think it has peaked at all.”
Describing this as a “very serious issue”, Mr Lee said this is about how the US, as an incumbent hyper-power, accommodates a rising new power that is China.
It is also about how both sides make adjustments to accommodate each other and head off what Harvard scholar Graham Allison has called the “Thucydides Trap”, where a rising power threatens to eclipse a rival and lead to potential conflict.
But it is “not at all obvious that it is easy to do” due to domestic pressures in both countries, he added.
“Both sides primarily are calculating the next election or the next domestic political succession, and those domestic pressures do not naturally factor in a global strategic stable balance,” Mr Lee said.
Already, the world is seeing some consequences. Counter-tariffs have reduced trade, while uncertainties due to the trade spat have affected investments and seen business decisions being put off.
There is also the prospect of a bifurcation in technology.
Mr Lee said: “Whether it’s on 5G or the whole supply chain, that will cause ‘I don’t trust you therefore you don’t trust me, therefore I cannot rely on your products and you must develop your own supply chain’.
“It will take a long time for that process to run its course, but it’s a very expensive process which is going to hurt us.”
Apart from cost, the mutual suspicions and anxieties might create more frictions and problems.
“I don’t think that’s a better world to be in,” said Mr Lee.
HOW SINGAPORE DEALS WITH A WORLD AT TURNING POINT
During the 30-minute dialogue session, Mr Lee also touched on how the world is at a “turning point” and elaborated on how the three external factors – the US, China and the trend of globalisation – that have helped Singapore to do well in the past decades have been changing.
The US, for instance, has shifted its attitudes on global security and now wants its allies to take on more responsibilities in financing the cost. It has also had a “fundamental shift of stance” in economics as it becomes more concerned about the impact on its workers and whether other countries are taking advantage of it.
For China, its role in the international economy has changed substantially and as its influence grows, its relations with other countries, in particular with the US, has become more difficult to manage.
On globalisation, concerns have emerged about its impact on disadvantaged groups and the climate, as well as other uncertainties.
Mr Lee said Singapore has to find a way forward in such a changing environment. It will continue working with both the US and China, he said. Singapore will also continue to bet on countries cooperating closely with one another, despite recent pressures and problems.
But to prosper in this “new globalised but troubled environment”, Singapore will have to up its game, raise its capabilities, and bring in new investments that can connect the country to centres of vibrancy and prosperity all over the world.
“That means we have to upgrade our companies, upgrade our people, education, skills, and have the environment where we can welcome in very high-quality investments, operations, R&D (research and development) centres, places where high quality people want to live, want to work and want to be," said Mr Lee.
“It is not just costs, but it is also the whole environment – safety, security, confidence, opportunities, vibrancy. That is what Singapore needs to be."
It will also have to make sure that these benefit Singaporeans across the board.
“So that they are able to take advantage of the jobs we create (and) are able to fend for themselves against global competition," said Mr Lee.
“So that if one industry is declining, which will happen from time to time, the people there are given the help, the support and the time to gain new skills and transfer their employment to another industry, another job and be able to make a living for themselves and not feel that they are fending for themselves on their own and that the system is not on their side."
Mr Brende also asked for Mr Lee’s take on the Singapore economy and whether the country has paid a price for the ongoing trade war given how growth slowed down significantly in 2019.
The prime minister replied that the growth slowdown was due to slower trade and a global electronics slowdown.
For the year ahead, he said there are some prospects that the electronics slowdown will turn around, noting that people in the industry are “reasonably optimistic”.
“What we are not sure this year is where the US economy is going – it does not look like it is going into a recession, but nobody has a very good record predicting when economies go into recession," he added.
“The key thing is, if you have strategic tensions not being resolved and flaring up again downstream, which can happen, then it is not just an impact on the business cycle," said Mr Lee.
"It is an impact on the long-term trajectory of the world.”