Transcription
Uh, welcome and thank you. Um, I hope you appreciate you're the only one who gets the personal introduction from from Mike.
>> Well, so did you. [laughter]
>> That's true.
>> I think he's raised expectations too high.
>> Appropriately high, I think, given our previous uh conversations. We've heard you on this stage before and elsewhere. Look, I I know I sort of surprised you earlier because I said I want to start with some good [snorts] news and you kind of looked at me. You said that there's good news. Um, but Singapore has been a part of that. I think we should. There's so much that's happened. We're going to talk about some of the themes that have been raised even in the introductory film. [snorts] A lot of surprises, a lot of bad surprises this year or challenges that businesses and governments have had to deal with. But one thing that hasn't happened that I think given the dominant narrative at the beginning of the year we might well have expected to happen is we haven't ended up with a global retaliatory trade war. The US has taken the path of protectionism as we would have expected a year ago with the election reelection of Donald Trump. But with the exception of China, and we'll definitely get on to China, but as a group, the vast majority of America's trading partners faced with these big tariffs did not retaliate [snorts] and decided, you know what, we'll just pay this higher price for entry into the US economy. And meanwhile, we're going to get on with doing a bit more liberalization. and Singapore has been part of forging new active relation trade deals and encouraging closer integration of the world minus the US. So I just wanted to ask you a bit about that. Do you think that can offset what's happened to the trading system this year?
>> Well, I'm [snorts] reminded of uh there's a quote attributed to Ernest Hemingway. [snorts] How did you go bankrupt? He says two ways gradually and then suddenly. So [snorts] hold that thought in mind. This year has been the year of sudden changes. But actually the gradual changes, the pressure has been building up for a long time. The first point I wanted to leave with you is the role of the United States for the last eight decades actually is historically unprecedented. the ultimate winner of the Second World War, 40% of global GDP, that was his share of global GDP, [snorts] decided instead of conquering and eliminating the vanquish, rebuilt Germany, Europe through the Marshall Plan, Japan, [snorts] and it set really a rules-based globalization with economic integration at the core. And this is highly highly unusual and unprecedented. So that's the first point. It is about the US. Second point is [snorts] that actually the pressures on the US to give up on this has been building up for a long time. And what what do I mean? If you think about it, [snorts] what the US did for eight decades was to provide first the market, second technology, third capital and rules-based economic integration. The first beneficiary of that apart from Europe was Japan and then you had the Asian tigers, Hong Kong, Korea, [snorts] Singapore and then the rest of Southeast Asia. But the real winner of rules-based free trade has actually been China. And the [snorts] US is only 249 years. It has never met a peer competitor with the scale, the ability, and the willingness to reorder the world in a way that's favorable to it. But the point is that China, if you look at its per capita GDP, it's still a middle income country. And China is not able or willing to replace the US as the underwriter of globalization. So we are to quote my prime minister in a interactum a state of messy transition [snorts] from a world in which there was a underwriter and enforcer and that underwriter and enforcer has now decided to become disruptor in chief be for political reasons for domestic political reasons because after eight decades of providing capital technology and markets what the middle class in America has seen is de-industrialization rust belts, hopelessness, and middle inome stagnation. And guess what? Elections are local. So it is a completely legitimate question for the American voter to say, wait a minute, why should we underwrite in blood and treasure this system which seems to have profited the rest of the world and [snorts] especially a big peer competitor. And I think we need to pull back. So you see my point about gradually and then suddenly. So we just happen to be witnessing [snorts] the you know it's like an iceberg or an ice continental ice shelf falling but actually the climate warming was predated that. So my point is what we're witnessing today is not just a change of weather. It's not the storm that helped delayed Mike yesterday.
>> [snorts]
>> This is real climate change, geopolitical climate change. So that's context setting.
>> Well, I think we will we will go back to the trade piece in a second, [snorts] but just following on from what you said, I mean, we've also I think it's historically unprecedented also to have a single global superpower almost voluntarily step back from a lot of its obligations. not be forced to do so, not lose a war, but just decide I don't want to do this anymore.
>> Yes.
>> And I think
>> but it was unusual to have such a benign heaggamon in the first place. And for us now to say where did that haggamon go? I I I'm saying if you take a longer view of history and geopolitics, the point is this was a unique period. I I've tried to go back in I can't find another period in history when we had such a benign heaggamon.
>> And when you just think back even just a few years ago and we would have been on this stage talking about decoupling.
>> Yes. And that may be the climactic change to distinguish from the change in the weather as you've said. But the Biden administration I think for many of it of the US allies it felt that the US was asking countries to choose between the US and China. And that was obviously challenging no more than nowhere more than than than here. President Trump has had a much many people would say less consistent certainly more freewheeling unilateralist approach. It feels a little bit like the world is less divided between US and China now and more the US and the rest of the world just left in a mess.
Well,
>> is that easier or harder for you?
>> Well, first of all, I you know, the the American ambassador is here, so I'm not here to be an apologist. But but I would say [snorts] President Trump as a person in fact has been uniquely consistent for decades. What do I mean? If you look at his record of what he said over I mean look look at watch the interview with Oprah Winfrey back in 1988. [snorts] his views on war, anti-war, his views on free trade that it it's an avenue for America to be taken advantage of. His [snorts] views on business in a main street real estate way as opposed to Wall Street and financial engineering. [snorts] His views on immigration actually have been remarkably consistent and I think people don't give enough marks for that point. So he is consistent. It's just that his methodology, his presentation is somewhat novel and people get, you know, react to that. But my point is American policy under President Trump in fact is reflecting longheld deep convictions.
>> I think you you are right. I guess that the [snorts] exception to that and I'm interested in whether you read it the same way. Mike mentioned you've been at the recent meetings uh with your prime minister in um Malaysia and and Korea where we did see this deal as repro between [snorts] the US and China.
>> Yes,
>> but it will not have been lost on many of the people around the table that the US was the China was ending up with a relatively better position than many of the other countries in the region who had thought that they were going to be an alternative to China for US manufacturers.
Well,
>> that feels a little inconsistent with wanting to wean American industry off Chinese manufactur.
>> Well, again, I would distinguish between strategic and tactical. I think what we've witnessed so far is a tactical pause. The fundamental problem with the US and China is a almost complete lack of strategic trust. And that means each side has to assume the worst of each other. And even if you're taking precautions, it's viewed as escalatory. Both sides have identified pain points. And I think what you've seen so far is not a strategic realignment or [snorts] a sudden dawn of strategic trust is that both sides have decided they need time. You need a tactical pause whilst you get on with the real business. And the point about decoupling is worth unpacking because what we are witnessing in the world right now is a couple of phenomena. Number [snorts] one, you have witnessed the weaponization of everything. Weaponization of the dollar, weaponization of finance, weaponization of critical minerals, global supply chains, interdependency [snorts] used to be a good thing. Now it's a vulnerability. But my point about weaponization of everything, you know, the third Newton's third law applies in diplomacy too. For [snorts] every action, there's an equal and opposite reaction. So the weaponization of everything has led to an erosion of trust has led to a need to assume the worst and to prepare for it. And in the absence of trust, it's very hard to actually have strategic alignment. So that's first point, right? What you're witnessing now is a tactical pause. the strategic problem remains. The [snorts] next aspect of what's going on now is the fracturing of supply chains not [snorts] and it's not an ideological point but I think especially during co [snorts] you found that even simple things like making a mask is not rocket science but [snorts] that essential components were not within reach and everyone was panicking and you didn't have access to it. So the fracturing of supply chains in the in the name of national security and in search of resilience [snorts] actually means a world which hitherto has been based on efficiency is now building supply chains on the basis of nearshoring onshoring French shoring. [snorts] Economically, what that must mean is some inflation because you're no longer cheaping, you know, choosing the cheapest and the best most [snorts] efficient. You're now having other considerations. So, watch that bout on inflation. The third point is the global comments. You you saw the opening video and [snorts] I've been involved in this game long enough. So, I'll give you an example. The Paris climate change agreement. The [snorts] only reason that got done is because America and China were on the same side and were able to drag the rest of us and imperfect but important agreement. [snorts] Today, if the two main players are not in the same room and it goes further than that, in fact, it's not just a matter of picking up your marbles and leaving the game, but you're [snorts] actually disrupting the game. And my worry is that we're going to be unable to deal with the global commons. It means climate change, [snorts] pandemics, the challenges from AI. We won't be able to respond adequately to it because the two key players either are disrupting actively or are spoiling for a fight and are certainly not willing to [snorts] restrain themselves with multilateral rules imposed by Liliputian uh countries big and medium and and small elsewhere. I hope that's not too depressing.
on. Well, but so as far as you're concerned, [clears throat] because what I was saying at the beginning was that it just seems a muddier picture than the decoupling team us.
>> No, it's messy. My point is that it's messy, but try to understand what's
>> but as far as you're concerned, the long-term trend
>> Yes.
>> I mean, someone has likened it to a couple saying, "We're going to divorce in 10 years, but we have to live together before then." You still think the long-term trend is decoupling between the US and China?
>> I think without strategic trust, the logic for decoupling at least partially in the name of national security and anxiety over competitiveness will continue to play out and that what's that's what we're witnessing. But if I [snorts] can come back to where you started with a piece of good news. You said why hasn't the rest of the world retaliate. I think a couple of reasons. Number one, [snorts] they're a far bigger elephant or ego than the rest of us. So what's the point of retaliating when in fact the the little guy will be the ultimate loser? So that's the first thing. [snorts] Second, and I'm coming to your good good news. If you leave aside the two big powers and if you think if you open a world atlas and draw a diagonal Europe, the Middle East, South Asia, Southeast Asia, Australia, New Zealand, and then you draw two spokes, one to Northeast Asia, particular Japan and Korea, and another spoke southwest to Africa and South America. Guess what? In fact, there is still a majority of countries and even I would say the majority of global GDP that still wants to operate on supply chain efficiencies on economic integration on rulesbased globalization. [snorts] The only thing is the enforcer in chief is no longer there and [snorts] there is a need therefore to assemble a coalition of the willing. So what you're watching now, all that scurrying around by [snorts] medium and small economies is to keep globalization alive, [snorts] reform what needs to be reformed. And there's a lot that needs reformed, but to work together in a more collegiate way knowing full well that the underwriter, the enforcer is not going to be doing the heavy lifting. So that's where I think there is a glimmer of hope and that's [snorts] why you know my prime minister and I have been discovering around to regional and international conferences and and the good news I agree with you the majority [snorts] people in fact want some order some stability and [snorts] some benefits economic benefits from working together from interoperating [snorts] and what we are hoping ultimately is that when things settle down between the two big boards uh they will then rediscover [snorts] the benefits of globalization.
>> One of the initiatives that you had in the summer was that with the the Gulf and the GCC. I just wondered is there any do you see that moving forward?
>> Well, if you look earlier this year, Malay, we had a when we had an ASEAN summit, we included the GCC and China. If you look at, you know, in Singapore, we're members of both the CPTP and RC, which are big mega free trade deals. We're trying to convince the European Union, who is also a reflexely protrade, [snorts] pro- rules, are they going to join entity? No, I think that's a bridge too far. But can we get a partnership between the European Union and the CPTPPP, especially a CPTP which is expanding?
>> You got to think of a better name. We need a
>> I know. I know. [snorts]
>> In fact,
>> I think that's why no one talks about it honestly.
>> I know. But but if you strip aside the labels and the names, I mean the point is is there benefit from globalization, from efficiency, from interoperability, from standards, from peaceful resolution of disputes including trade disputes. The answer is unequivocally yes, but we need to do it now and we everyone needs to chip in. So I think the EU is a natural partner with the CPT. So think of the EU and the Pacific. Can we construct something that cuts a diagonal across the globe? [snorts] And is Africa in keen on this? I think they are South America. I mean, you may be surprised, even little Singapore, we've signed free trade deals with Mercur, which is Argentina, Brazil,
>> [snorts]
>> uh, Ecuador, Parag, uh, Paraguay, [snorts] uh, Uruguay. We've even signed a free trade agreement with the Pacific Alliance, Mexico, Colombia, Chile. So, the point is, you'll be surprised the appetite for economic integration remains and that's what Singapore is working. Now, of course, I'll tell you, of course, we are biased. This is a place, this is Manhattan without upstate New York, or this is 1/5if of Rhode Island without [snorts] continental United States. Or if you want another uncomfortable analogy, Singapore is just twice the size of Gaza, but with three times the population. So, we're a tiny place in which our trade volume is three times our GDP.
>> [snorts]
>> So you I hope you understand when we promote free trade it's lifeblood it's not a negotiating point right and when we [snorts] say rules are better than the alternative because the alternative is right is might big is beautiful and small is irrelevant so I I will confess this is a self-interested argument
>> but you've talked about the importance of rules but also of countries working together yes
>> even without enforcer should the Southeast Asian economies, even the ASEAN countries have worked together more in negotiating these trade deals with the US. You talked about bilateral arm wrestling you described.
>> Yes. No, I don't think that was necessary. Not certainly not at this stage.
>> I mean, if you look at ASEAN as a whole, you know, the tariffs range from 10%, 19%, maybe 20%. And those numbers keep changing. Anyway, [snorts] my point is don't overreact to the headline of of the day. [snorts] Understand what's going on. So, if you now bring your zoom lens to ASEAN, [snorts] has have we systematically brought down our trade barriers, non-tariff barriers? [snorts] Is ASEAN fulfilling its mission of becoming a single production zone, a single investment zone? Has there been economic growth in Assean? What are the prospects for ASEAN in the next two decades? We think we can double our combined GDP. If you add up the combined GDP of ASEAN, which [snorts] by the way has a population slightly larger than the EU, we're about number five. And because half our population is below the age of 35 and our middle class is growing, the prospects, the long-term prospects are bright. [snorts] So long as we don't overreact, we don't do stuff that actually boomerangs back on us. And if you just look at what we did this year, we upgraded the ASEAN agreement on trade and goods within ASEAN. We upgraded the ASEAN China [snorts] free trade agreement and we're still looking at building more more bridges across the world. So my point is that in fact Southeast Asia is a zone of hope and growth. The key thing [snorts] is to focus on the long term. And what does long-term mean? It means technology bearing in mind that we've got three technological revolutions going on in real time simultaneously. [snorts] AI, biotech, renewable energy, and we're focusing on building up the infrastructure for that with focusing on educating a workforce [snorts] work ready for that kind of world, a world of AI and robotics. And we're focusing on integrating we can still increase our intraan trade significantly. And what about assean Africa, ASEAN South America? You know, it's some people call it south south. I don't really like the term, but [snorts] my point is there is still a majority in favor of this. I I would also point out the CPTP began as four tiny states, Singapore, Brunai, New Zealand, and Chile. And it only became TPP when America and Japan came in. [snorts] Now, we knew by the time Hillary Clinton had to [snorts] withdraw from her support from the TPP, which in fact she had a lot to do with starting that [snorts] the cause of free trade was in political problem. And I think all of us in this room who I would say are probably instinctive free traders need to realize that we didn't make the political case for it. And it [snorts] you have to convince your local electorate that jobs and wages [snorts] and opportunity come from free trade. Otherwise you if you don't understand the political reality that [snorts] for every free trade agreement there are winners and losers. You need to put seat belts on. You [snorts] need to have compensatory mechanisms. And whilst you don't expect governments to choose winners and losers at the enterprise level, [snorts] but governments do need to be activists, infrastructure, education, [snorts] pro, you know, pro-enterprise regulatory environments. You do need an active government. But what [snorts] you don't want is completely stateirected capitalism where you pick winners and losers. We think that's ultimately a dead end. So anyway, my point is watch this space.
>> Uh that's why there's still buzz in this part of the world.
>> I want to we're going to run out of time. So I want to just quickly ask you, I started talking about the US. I mean you have said obviously trade is the lifeblood of Singapore and you're absolutely at the center of looking at this. The one country that despite all these tariffs and trade wars by the US, the one country that has managed to increase its export growth this year is China. And we see that country
>> in many ways doubling down on a focus on manufacturing on export-led growth when many economists might have said long-term they have to be on a different path. How destabilizing is that for this region especially now they have a slightly more
>> well I think I think what you're referring to you're being too delicate. You're [snorts] referring to over capacity. Actually the world has had unsustainable imbalances for some time. If you outsource all manufacturing to China, you outsource all energy to Russia and you [snorts] outsource security to America. I'm referring to the EU, right? That's not a sustainable model. And if the EU wants to have strategic autonomy or independence, it needs to get a grip on manufacturing, on its industrial capacity, on its defense, and on its energy policies. I mean I'm just giving you one example right in the case of China it's worth also reflecting [snorts] because China became the manufacturing center of the world and enjoyed economies of scale and by the way I must say [snorts] Chinese workers happen to be really hardworking and efficient I don't think you can fault China for that but a world in which all manufacturing is accumulating on one half trade surpluses accumulating there but those trade surplus are being recycled. It used to be recycled into tea bills. What it meant is for a while the western consumer enjoyed low inflation, low interest rates, highquality goods at affordable rates but actually were consuming beyond what they were producing. And we should not be surprised that this system [snorts] based on imbalance was not sustainable. Now if you imagine that America shuts its market to the productive capacity of China and [snorts] the EU also follows suit. I mean and think of automotives as an example. Then the question will be [snorts] will China be able to expand its domestic consumption to match its capacity or will it still try to export its way out and if it does where will it export to?
>> But that is what they
>> right. [snorts] No, I think but but I'm saying let's without being porative or or making value judgments, just ask [snorts] yourself, do you need domestic changes to the economic structure of China? I think we do. [snorts] What does Southeast Asia, Africa, and South America want? Do we need infrastructure? We do. is the productive capacity of China for the development of that infrastructure particularly [snorts] green energy AI and even biotech which by the way speaking as a doctor the Chinese are no slouches in that [snorts] area too so what I'm saying is watch this space I am sure adjustments will occur [snorts] both domestically and across borders and across zones and the opportunity will be to try to catch these waves, catch these new tides and winds so that [snorts] we maximize opportunities for the rest of us. So don't, you know, so I'll come back to the hopeful note in which you started. Um, not [snorts] all of us have lost our heads and reacted in panic or even acted on sense of retribution. [snorts] But we've tried to take a longer term view of the imbalances and of the trends and to seek opportunities in these interactments.
>> Well, I think
>> that's the basis of arbitrage.
>> For 60 years, Singapore's been fairly good at [snorts] that.
>> Yeah. But 60 years is, [clears throat] you know, in Asia, 60 years is too far too early to tell. So, we never take our, you know, our survival for granted.
>> Dr. Thank you so much uh for joining us and for starting us off on a hopeful footing. [snorts]
>> I hope so. So don't lose your head, you know, understand what's going on. Look for opportunities. There are opportunities, you know. Thank you all very much.