Nobody wants a trade war

Singapore’s prime minister: Nobody wants a trade war

By Lee Hsien Loong, for The Washington Post 
18th April 2018

Lee Hsien Loong is the prime minister of Singapore.

Trade friction between China and the United States has been brewing for some time. But with the Trump administration’s announcement of unilateral tariffs on imports, targeted at China, the specter of a trade war has never been clearer.

There is broad political support in the United States for such measures. American businesses that had previously advocated China’s accession to the World Trade Organization now feel disadvantaged doing business in China. They feel, with some justification, that the playing field is uneven, market access is limited and investments are restricted, especially in the financial and technology sectors. Trade arrangements and concessions made in the past when China was about 5 percent of the world’s gross domestic product are less readily accepted today with China’s share rising to 15 percent.

But unilateral tariffs are not the correct solution. A trade war between the United States and China is far from inevitable, but if one breaks out, it will gravely undermine the rules-based multilateral system that has underpinned global prosperity since the end of World War II. Countries around the world, big and small, will be hurt.

We believe trade disputes should be resolved within the WTO framework. As economists have pointed out, when assessing economic relationships, what matters is not a country’s bilateral trade balance with a specific trading partner but its overall trade balance with the rest of the world.

Furthermore, the cause of a country’s trade deficit lies at home. A trade deficit is the result of a country consuming more than it produces, and it is neither caused nor cured by trade restrictions.
The United States and China share the most important bilateral relationship in the world. Both countries have benefited from an open, rules-based international order and multilateral trading system. This has fostered economic cooperation within the Asia-Pacific region and deepened interdependence among Asia, the United States, Europe and the rest of the world.

"A trade deficit is the result of a country consuming more than it produces, and it is neither caused nor cured by trade restrictions."

Asia is the fastest-growing export market for U.S. goods and services. As the world’s second-busiest port and fourth-largest financial center, Singapore is a global hub that connects the economies of the United States and Asia. We are a small, open economy with trade flows more than three times our GDP. A trade war between the two largest economies in the world will have a big, negative impact on Singapore.

Since China joined the WTO in 2001, its weight in the global economy and its share of world trade have grown enormously. This has shifted the overall strategic balance. It has also raised reasonable expectations for China to liberalize its markets further and contribute more to the multilateral trading system.

China has declared its commitment to upholding openness and multilateralism. The Asian Infrastructure Investment Bank and the “Belt and Road Initiative” are two major efforts by China to strengthen trade and investment ties, and to enhance integration and interdependence. At the recent Boao Forum for Asia Annual Conference, President Xi Jinping announced further plans to open up China’s financial sector, liberalize foreign investment rules, protect intellectual property rights and lower tariffs on automobile imports. These moves have been acknowledged and welcomed by President Trump. We look forward to seeing these steps elaborated, implemented and bearing fruit.

Although most Asia-Pacific countries continue to pursue trade and economic liberalization — for example, through the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership — these initiatives will not compensate for the damage caused by a trade war.

Beyond the economic loss, strained ties between the United States and China will make it harder for them to cooperate on other pressing issues such as the denuclearization of the Korean Peninsula, regional security, nonproliferation and climate change. None of these issues can be solved without the full participation of both countries. If any of these disputes escalates and destabilizes relations between the United States and China, the consequences for the world would be disastrous.

Competition between the United States and China is to be expected. But whether this competition takes place within a framework of interdependence and generally accepted international rules makes all the difference. Ultimately, what is at stake is war and peace, and the security and stability of the world. The United States, China and the rest of the world have too much at stake.


This article was first published by The Washington Post.

Transcript of PM Lee Hsien Loong's interview with Ian Bremmer, Time Magazine

A summit with leaders of the (then) negotiating states of the Trans-Pacific Strategic Economic Partnership Agreement (TPP). Pictured, from left, are Naoto Kan (Japan), Nguyễn Minh Triết (Vietnam), Julia Gillard (Australia), Sebastián Piñera (Chile), Lee Hsien Loong (Singapore), Barack Obama (United States), John Key (New Zealand), Hassanal Bolkiah (Brunei), Alan García (Peru), and Muhyiddin Yassin (Malaysia). Six of these leaders represent countries that are currently negotiating to join the group. Pic: Wikimedia Commons

Interview Transcript Extract:

Q: What are the consequences of no TPP?

PM: Your standing goes down with many countries around the world. Your opponents as well as your friends will say, "You talked about the strategic re-balance, you talked about developing your relationships. You can move aircraft carriers around. But what are the aircraft carriers in support of"? It has to be deeper economic and broad relationships. You do not do things which the Chinese do. The Chinese go around with lollipops in their pockets. They have aid, they have friendship deals, they build you a Prime Minister’s office or President’s office, or Parliament House or foreign ministry. For them, trade is an extension of their foreign policy.

You do not do these retail items. The one big thing which you have done is to settle the TPP, which Obama has done. It shows that you are serious, that you are prepared to deepen the relationship and that you are putting a stake here which you will have an interest in upholding. Now, let’s say you cannot deliver on the TPP. After you have gotten Vietnam to join, after you have gotten Japan to join, after Japanese Prime Minister Shinzo Abe has made very difficult arrangements on agriculture, cars, sugar and dairy. Now you say, "I walk away, that I do not believe in this deal." How can anybody believe in you anymore?

It is not just on trade, even on strategic issues. The key thing in Northeast Asia is North Korea. They are unpredictable, they are developing their nuclear capabilities and their missiles. You do not want the South Koreans to do that, you do not want the Japanese to do that. What is the restraint on them? It is your credibility as an ally and as a deterrent. I do not think failing to ratify the TPP will strengthen that at all, or help Mr. Abe, who has gone out on a limb to support this and is in the process of ratifying it right now.

Read the Full Interview Transcript (from PMO) here.

Singapore’s Lee Hsien Loong on the U.S. Election, Free Trade and Why Government Isn’t a Startup

By Ian Bremmer, TIMES

"Maybe Americans feel they don’t need the rest of the world anymore"

By virtue of its location—on the mouth of the Strait of Malacca in Southeast Asia, through which one-third of the world’s seaborne traffic passes daily — Singapore has always been a country that punches well above its weight on the geopolitical and economic stage. It’s a country of many cultures and languages, and one that is a staunch ally of the U.S. while maintaining strong trading ties with a rising China.

That makes Lee Hsien Loong, Singpore’s Prime Minister and the son of its founder Lee Kuan Yew, a good person to speak to if you want to understand how Asia works. TIME foreign-affairs columnist Ian Bremmer had a chance recently to sit down with Lee in Singapore. The full transcript of their conversation — which touches on U.S. politics, China’s reforms and how to run a country in the age of automation — is reprinted below:

Q: Let me ask you a couple of questions about the perception of the U.S. election in Singapore, because I am very interested in that. Let us assume Hillary [Clinton] is going to win, I feel very confident about that. Let us assume that Trump does not do significant damage after the elections are over. How much damage do you think has been done concretely through this 18-month electoral process?

PM: In every American election, crazy things are said. Positions are taken which the winners try very hard to forget afterwards. George Bush Sr. said “read my lips” and regretted it. All American candidates who won have before winning been very harsh on China, and after winning, much more restrained in their approach towards China. On trade too, that has been true for some time. But this time it has been so nasty and harsh that I think Hillary, if she wins, will have a lot of things to unspeak which she will find very difficult to do. I think TPP [the Trans-Pacific Partnership] will be a casualty if it is not settled by January.

Read the full  Times Magazine article "Singapore’s Lee Hsien Loong on the U.S. Election, Free Trade and Why Government Isn’t a Startup" here.