Transcription
Welcome and thank you. I hope you appreciate you're the only one who gets the personal introduction from Mike. Well, so did you. I think he's raised expectations too high. Appropriately high. I think, given our previous conversations.
We've heard you on this stage before and elsewhere. Look, I know I sort of surprised you earlier because I said I want to start with some good news. And you kind of looked at me. You said there's good news. 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. 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 re-election 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. But not retaliate 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 liberalisation. And Singapore has been part of forging new active relations 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 reminded of that's a quote attributed to Ernest Hemingway. How did you go bankrupt? And this is two ways. Gradually. And then suddenly. So 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 a share of global GDP. Decide it instead of conquering and eliminating the vanquished rebuilt Germany. Europe. Through the Marshall Plan. Japan. And it's 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 that actually the pressures on the US to give up on this has been building up for a long time. And one would I mean, if you think about it, what the US did for eight decades was to provide. First the market. Second, technology. The. 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, Singapore. And then the rest of South-East Asia. But the real winner of rules based free trade has actually been China, and the US is only 249 years. It has never met a peer competitor with the skill, the ability and the willingness to reorder the world in a way that's favourable 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 interregnum, a state of messy transition from a world in which there was an underwriter and enforcer and then underwriting and forces now decided to become disrupter in chief 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 deindustrialization, rust belts, hopelessness and middle income 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 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 happened to be witnessing the you know, it's like an ice boat or an ice continental ice shelf falling. But actually the climate warming was pre-dated that. So my point is, what we are witnessing today is not just a change of weather. It's not the storm that helped delay Mike yesterday. This is real climate change. Geo political climate change. So that's context setting.
Well, I think we will we will go back to the trade piece in a second. 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 decides, I don't want to do this anymore. Yes. And I think but it's also unusual to have such a benign hegemon in the first place. And for us now to see where did that hegemon go? I'm saying if you take a longer view of history and geopolitics. The point is this was a unique period and I've tried to go back and I can't find another period in history when we had such a benign hegemon and. When you just think back, even just a few years ago, and then we would have been on this stage talking about decoupling. Yes. And that may be the climactic change to distinguished from the change in the weather, as you've said. But the Biden administration, I think, for many of us allies, felt that the U.S. 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 U.S. and China now and more the US and the rest of the world just left in a mess.
Well, that's easier or harder. Well, first of all, you know, the American ambassador is here, so I'm not here to be an apologist. But but I would see President Trump as a person, in fact, has been uniquely consistent for decades. Although, 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, his views on war and, you know, his views on free trade, that it. It's an avenue for America to be taken advantage of. His views on business in a main street realistic way, as opposed to Wall Street and financial engineering. 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 long held deep convictions. I think you are right. I guess the exception to that. I'm interested in whether you read it the same way Mike mentioned. You've been at the recent meetings with your prime minister in Malaysia and Korea, where we did see this deal as rapprochement between 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 money.
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 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 a strategic realignment or sudden dawn of strategic trust is that both sides have decided they need time. You need a tactical pause while you get on with the real business. And the point of decoupling is worth unpacking, because what we are witnessing a world right now is a couple of phenomena. Number one, you've witnessed the weaponization of everything, weaponization of the dollar, weaponization of finance, weaponization of critical minerals, global supply chains. Interdependency used to be a good thing. Now it's a vulnerability. But my point about weaponization of everything, you know, the term Newton's third law applies in diplomacy to for every action is 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 of all, what you're witnessing now is a tactical pause. The strategic problem remains the next aspect of what's going on now is the fracturing of supply chains. Not and it's not an ideological point, but I think especially during COVID, you found that even simple things like making a mask. Is not rocket science, but 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 this, in the name of national security and in search of resilience actually means a world which hitherto has been based on efficiency, is now building supply chains on the basis of mere shoring, on shoring, financially, economically. What that must mean is some inflation, because you're no longer shipping, you know, choosing the cheapest and the best, most efficient. You're now having other considerations. So watch that bout of inflation. The third point is the global commons. You saw the opening video, and I've been involved in this game long enough, so I'll give you an example. The Paris Climate Change Agreement. The only reason that got done is because America and China were on the same side and were able to drag the rest of us an imperfect but important agreement today of the two main players and all 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 actually disrupting the game. And my worry is that we are going to be unable to deal with the global commons. It means climate change, pandemics, the challenges from air. We won't be able to respond adequately to it because the two key players either disrupting actively or are spoiling for a fight and are certainly not willing to restrain themselves with multilateral rules imposed by Lilliputian countries beacons medium and small elsewhere. I hope that's not too depressing and well, but as far as you're concerned, because what I was saying at the beginning was that it just seems a muddier picture than the decoupling is telling us. So it's messy. My point is it 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 ten years, but we have to live together before then. You still this long term trend is decoupling between the US and China. I think without the 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 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, there are far bigger elephant, our ego, than the rest of us. So what's the point of retaliating when in fact the little guy will be the ultimate loser? So that's the first thing. Second, and I'm coming to your 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 North East Asia, particularly Japan and Korea, and another sport, South west 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 rules based globalization. The only thing is the enforcer in chief is no longer there. And there is a need, therefore, to assemble a coalition of the willing. So what are you watching now? All this scurrying around by medium and small economies is to keep globalization alive, reform what needs to be reform. And there's a lot of different reforms. But to work together in a more collegiate way, knowing full well that the underwriter, the enforcer, is not really doing the heavy lifting. So that's where I think there is a glimmer of hope. And that's why, you know, my prime minister, I've been scurrying around to regional and international conferences. And the good news I agree with you in majority people, in fact, want some wanted some stability and some benefits, economic benefits from working together, from into operating. And what we are hoping ultimately is that when things settle down between the two big boys, they will then rediscover the benefits of globalization.
One of the initiatives that you had in the summer was with the Gulf and the GCC. I just wondered, is there any do you see that moving forward? Well, if you look earlier this year, mainly we had that when we had an ASEAN summit, we included the GCC and China. If you look at, you know, in Singapore, where members of both the CPTPP and ACP, which are big mega free trade deals, we're trying to convince the European Union who is also reflects the pro-trade pro rules. Are they going to join? No, I think that's a bridge too far. But can we get a partnership between the European Union and the CPTPP especially a CPTPP, which is expanding? You've got to think of a better name. We need it. I know. I know. 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 everyone needs to chip in. So I think the EU is a natural partner with the CPTPP. So think of the EU and the Pacific. Can we construct something that cuts a diagonal across the globe? And is Africa 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 Mercosur, which is Argentina, Brazil, Ecuador, Paraguay, Paraguay, Uruguay. We've even signed a free trade agreement with the Pacific Alliance, Mexico, Colombia, Chile. So the point is, you'd be surprised the appetite for economic integration remains, and that's what Singapore's working. Now, of course, I'll tell you, of course, we are biased. This is a place this is Manhattan. We don't upstate New York. This is one fifth of Rhode Island without continental United States. Oh, 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. So you I hope you understand how we promote free trade. It's lifeblood. It's not a negotiating point. Right. And when we say rules are better than the alternative, because the alternative is right, is might be is beautiful and small is irrelevant. So 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, absolutely. Should the Southeast Asian economies, even the ASEAN countries, have worked together more in negotiating these trade deals with the US? You know, I don't I don't buy bilateral arm wrestling you describe. 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, my point is, don't overreact. To the headline of of today. Understand what's going on. So if you now bring your zoom lens to ASEAN has. Have we systematically brought down our trade barriers, non-tariff barriers? Is ASEAN fulfilling its mission of becoming a single production zone, a single investment, or has there been economic growth in Asia? 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 by the way, has a population slightly larger than the EU. We are 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. So long as we don't overreact, we don't do stuff that actually boomerangs back on us. And we just look at what we did this year. We upgraded the ASEAN agreement on trade in goods within ASEAN. We upgraded the Asean-china 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 is to focus on the long term and what this long term mean. It means technology, bearing in mind that we've got three technological revolutions going on in real time simultaneously, II, biotech, renewable energy. And we we're focusing on building up the infrastructure for that. We're focusing on educating a workforce, work ready for that kind of work, a World War II and robotics. And we're focusing on integrating. We can still increase our interest rate significantly. And what about ASEAN, Africa, ASEAN, South America? You know, it's some people call south south. I don't really like the term, but my point is there is still a majority in favour of this. I would also point out the CPTPP began as four tiny states Singapore, Brunei, New Zealand and Chile, and it only became TPP when America and Japan came in. Now, we knew by the time Hillary Clinton had to withdraw from her support from the TPP, which in fact she had a lot to do with stopping that the cause of free trade was in political problems. 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 you have to convince your local electorate. That jobs and wages and opportunity come from free trade. Otherwise, you if you don't understand the political reality that for every free trade agreement, winners and losers, you need to put seatbelts on. You need to have compensatory mechanisms. And whilst you don't expect governments to choose winners and losers at the enterprise level, but governments do need to be activists. Infrastructure, education for all. You know, pro enterprise regulatory environments. You do need an active government. But what you don't want is completely state directed capitalism, where you pick winners and losers. We think that's ultimately a dead end. So anyway, my point is, watch this space. 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 U.S. I mean, you have said obviously trade is the lifeblood of Singapore and you're absolutely at the center of looking is 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. Yes, 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 destabilising 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 referring to overcapacity. I feel the world has had unsustainable imbalances for some time. If you outsource all manufacturing to China, you outsource all energy to Russia and you outsource security to America. I'm referring to the EU. I mean, 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 was giving you one example, right in the case of China. It's worth also reflecting because China became the manufacturing center of the will and enjoy economies of scale. And by the way, I must say Chinese workers happened 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 T-bills. What it meant is for a while the Western consumer enjoyed low inflation, low interest rates, high quality goods at affordable rates, but actually were consuming beyond what they were producing. And we should not be surprised that this system, based on the imbalance, was not sustainable. Now, if you imagine that America shuts its market to the productive capacity of China and the you also follow suit. I mean, and think of automotives as an example. Then the question will be, 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 do, right? No, I think but but I'm saying, listen, without being pejorative or making value judgments, just ask yourself, do you need domestic changes to the economic structure of China? I think we do what the Southeast Asia, Africa and South America. Why do we need an infrastructure? We do? Is the productive capacity of China for the development of that infrastructure, particularly green energy, air and even biotech, which, by the way, speaking as a doctor. The Chinese are no slouches in that area, too. So what I'm saying is watch this space. I am sure adjustments will occur 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 we maximize opportunities for the rest of us. So don't do this. I'll come back to the hopeful note in which you started. Not all of us have lost our heads and reacted in panic or even acted on sense of retribution. But we've tried to take a longer term view of the imbalances and of the trends and to seek opportunities in these interactions.
Well, I think that's the basis of arbitrage. For 60 years, Singapore has been fairly good at that now. But 60 years is, you know, in Asia, 60 years is far too early to tell. So we never take our, you know, our survival for granted. Thank you so much for joining us and for starting us off on a hopeful footing. I hope so. So don't lose your head. You know, understand what's going on. Look for opportunities. There are opportunities emerge. Thank you all very much.