Imperative that US, China come to 'new equilibrium': Heng Swee Keat

SINGAPORE: It is imperative that the United States and China come to a "new equilibrium", as the cost of decoupling will be "very high" and lead to "mutually assured economic value destruction", said Deputy Prime Minister Heng Swee Keat on Tuesday (Nov 30).

This comes as strategic competition between the US and China, the two largest economies in the world, has added to the "fragility of peace and prosperity" amid uncertain global economic recovery due to the pandemic.

As China’s economy and influence grew, doubts grew about its symbiotic relationship with the US, with tensions spilling into other domains like technology and security, said Mr Heng at the S Rajaratnam Lecture, which is held every two years and touches on matters of diplomacy.

"Unlike the Cold War environment, the US and China are competing within the same inter-connected and inter-dependent economic system," said Mr Heng, who is also Coordinating Minister for Economic Policies.

"At best, neither can fulfil their maximum economic potential. There could be a regression in living standards, not only for the US and China, but also the rest of the world. At worst, economic decoupling is a slippery slope towards strategic miscalculation and a disastrous conflict."

Mr Heng said a new equilibrium will take time, stressing that both countries should not let strategic mistrust overshadow opportunities for mutual progress.

"The US and China will compete where they must, but it is critical that there are safeguards in place to ensure that competition does not veer off course into conflict," he said.

"Any clash between the world’s two largest economies will only be to the detriment of themselves and the world."

Mr Heng urged them to cooperate where necessary, pointing to how they share "many areas of complementarity" in economic development even though they are at different stages of development.

"By working together to exercise global leadership to tackle shared challenges, and tapping on their vast resources of talent, capital and innovation, they can lead the charge on international progress and development," he added.

SINGAPORE'S ROLE

Singapore can contribute in this age of complexity by continuing to strengthen a rules-based multilateral system so that all countries, big and small, will have their voices heard and sovereignty respected, Mr Heng said.

"As the world evolves, so too must the global rules and norms that govern our actions. However, the process of refreshing these rules is often protracted, especially when global leadership is being contested," he said.

"Individually, each of us may not be able to shape the course of global action. But by working collectively, we do have agency, and we can create new building blocks for meaningful change."

For example, Singapore has made an impact in the area of global trade, Mr Heng said, referring to how Singapore is a pioneering member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The CPTPP evolved from a smaller trade agreement – called P4 – between Singapore, New Zealand, Brunei and Chile, signalling a desire for greater economic integration and the further liberalisation of trade and investment at a global level.

More economies have applied to join the CPTPP since, Mr Heng said, and this has catalysed momentum for global change. It is also "noteworthy" that China has recently indicated its wish to join the CPTPP, he said.

"The example of P4 shows how a few determined small states can, over time, create building blocks to catalyse meaningful change in global trade," he added.

US SHOULD BE "ECONOMICALLY ENGAGED"

The US, added Mr Heng, cannot afford to be absent from the region’s evolving economic architecture if its security presence is to continue bringing peace and stability to the region into the next decades.

"While US has revived the Quad and stepped up security cooperation through AUKUS, it is just as, if not more, important for the US to be economically engaged," he said. "If not through the CPTPP, then it must have an equally substantial alternative."

US President Joe Biden announced an Indo-Pacific Economic Framework during his virtual summit with ASEAN leaders in October, Mr Heng noted.

US Trade Representative Katherine Tai then said during a visit to Japan on Nov 18 that the US could set up a new Asian economic framework with allies and "friendly" nations as early as next year, NHK public television reported on Thursday.

"We look forward to the details and to the US’ substantial and inclusive engagement in the region," Mr Heng said.

ASEAN MUST WORK WITH OTHER COUNTRIES

Beyond the US and China, Mr Heng said Southeast Asia should strengthen linkages with India, South Asia, Australia and New Zealand, while remaining open to Latin America and Africa.

In particular, Mr Heng said the Association of Southeast Asian Nations (ASEAN) must work with any country that wants to work with it, where it is in its interests to do so.

"We look forward to greater economic integration when the RCEP (Regional Comprehensive Economic Partnership) comes into force, making it the largest free trade agreement in the world," he said.

"We must continue to welcome global investments to help the region realise its potential."

To achieve this, Mr Heng said ASEAN must maintain its credibility, with the bloc's position on Myanmar showing it can hold its own against external pressures.

"We have taken a principled position to forge consensus, and urge other countries to do likewise," he said.

WANING SUPPORT FOR GLOBALISATION

Nevertheless, Mr Heng acknowledged that support for globalisation has waned in recent years, as the benefits of the global economy are not well distributed within and across economies.

"The acute pain felt by disrupted workers and the angst of wage stagnation have come to dominate sentiments on globalisation," he said.

"Domestic disgruntlement has hampered the ability of governments to engage in free trade and to come to agreement on much needed reforms in the multilateral system and institutions.

"COVID-19 has further deepened societal fault-lines. The lack of unity has made it harder for governments to carry out international engagements coherently."

Mr Heng said Singapore, as one of the most open economies in the world, has reaped the benefits of globalisation, with improved salaries, more job opportunities and a more vibrant economy.

But with greater globalisation, Singaporeans are also concerned about competition from abroad and the disruption to their livelihoods, he added.

"This does not mean that we should turn inward," said Mr Heng.

"To continue to improve the lives of our people, the only way is to remain useful and relevant to the world. We must therefore continue to transform our companies and upskill our workers."

Mr Heng said Singapore has been refreshing its Industry Transformation Maps by developing new strategies for new economic realities, and updating its brand of tripartism between the Government, unions and employers to work together in this transformation.

"In a more globalised world, we hope to share and learn from others, and forge new collaborations with partners from around the world to ride the next wave of globalisation," he added.