Interview with PM Lee Hsien Loong for the Bloomberg 2020 New Economy Forum

Bloomberg News Editor-in-Chief John Micklethwait: Thank you for talking to Bloomberg and the New Economy Forum. The last time that we spoke, you talked very eloquently about Singapore's role in Asia and about the rising power of China and about some of the difficulties of being an ally of America in this particular region. And I wondered from all those perspectives, what should President-elect Joe Biden, assuming that he has indeed won, what should he do in terms of a policy towards the region and towards China in particular?

PM Lee Hsien Loong: I think his first priorities will be domestic. He has got many urgent things to deal with, starting with COVID. Asia is a very important part of the world for America, and China particularly. I hope that he will be able to focus his mind on developing a framework for an overall constructive relationship with China. That means one where you are going to be competing, where there will be issues to deal with, but where you do not want to collide and will try very hard to develop the areas of common interest and constrain the areas of disagreement. Within that framework, deal with trade, security, climate change, non-proliferation, North Korea – all the many issues which the two biggest powers in the world have to focus on. Amongst those will also be issues which will be of concern to all the rest of us in Asia, who are watching carefully to see how things will develop. Because the last four years have been quite a tumultuous ride.

Bloomberg: Do you think that Trump has done permanent damage or change the way that America is viewed in the region?

PM Lee: I think that there will be some long-term impact on perspectives on America, and on how America views itself. It did not start with Trump, but over the last four years there has been a clearer shift. When you talk about putting America first and making America great again, it is a more narrow definition of where America’s interests lie than has hitherto been the way US Administrations have seen things. Previous Administrations have seen America as having a broad interest in the stability of the region and the well-being of its partners, in the tending of its alliances with allies, in fostering an overall environment where many countries can prosper in an orderly scheme, and America is part of that scheme and subjects itself to the same rules and – discipline is a strong word to apply to a superpower – but presents itself as complying with an order, which is in the interest of more than itself. It will take some time for America to come back to such a position, and for others to be convinced that it is taking such a position. It may never come back all the way, certainly in the short term and certainly in terms of its relationship with China.

I cannot speak for the whole Administration, but I think there is some elements in the Administration who definitely did want to make moves which would be very difficult to reverse by the subsequent Administration, and which will set the tone for the relationship for a long time to come.

Once you impose punitive tariffs, once you put them on, whatever their merits, no successor government can just say those were the wrong things to do and I take them away. You have to deal with it, but you are dealing from a new starting point. There are many other steps which are even more sharp in that way. On technology, the definition of how you see the other party – whether it is a competitor, whether it is a challenger, whether it is a strategic threat, whether it is a mortal enemy – these are statements which have consequences.

Bloomberg: When you talked about America first, some people have looked at what happened with Trump. By talking that language of always “America First” rather than singing the traditional American song of freedom and liberty and openness, you think that really made a difference?

PM Lee: If you ask the Europeans, I would think many of them would say ‘Yes’. And if you ask the Asians, they would say we fully understand, but we must make our own calculations on that basis.

Bloomberg: One of the things that people have talked about Biden doing is having a kind of coalition of democracies that would bring in people like yourself, Indonesia, Japan, South Korea. Is that part of the framework that you could imagine working?

PM Lee: We all want to work together with the US. We all want to work together with other vibrant economies. We would like to cooperate within the region. I think not very many countries would like to join a coalition against those who have been excluded, chief of whom would be China. Not just Singapore and not just in Asia, I think even in Europe there will be countries who want to do business with China. For example, the EU is trying to conclude an investment agreement with China.

It is quite understandable, and I think it is better. You want everybody in the discussion when trying to work out adjustments to the world order. In that process, you are going to have people form alliances, they will cooperate with one another, they will try and find common cause. But to try and make a line-up, Cold War style, I do not think that is on the cards.

Bloomberg: Just pushing in on trade which is a big focus here. Do you regard CPTPP as dead? Is that gone or do you think that it is possible to revive?

PM Lee: The CPTPP is very much alive. There were 12 at the party. Roll over, roll over, one fell out, and now there are 11. The 11 carried on with the party. It was to the great credit of Mr Abe, who was then Prime Minister of Japan, that he held it together and brought everybody back on and we concluded the CPTPP.

America is not part of it. We hope that one day America will come back to it. I do not think realistically that is going to happen anytime soon. The stars are not aligned. The Democrats, I do not think their base is very keen on this. The Obama Administration, which Biden was part of, was keen on this. Hillary Clinton, who was Secretary of State, fully supported it. But when she became Hillary Clinton the candidate, she had to repudiate it. It is the reality of American politics. I still think that it makes sense for the US, but it has to make domestic political sense as well. That will take time and a different alignment of the economic situation as well as the political configuration in the US.

Bloomberg: On that particular point, do you think that there is a possibility that Biden generally could end up being somewhat tougher in terms of everyday things than Trump was. To the extent that Biden is more likely to complain with China about human rights. And you have also got this side of the Democratic Party for whom things like labour rights, environmental rights matter enormously? In some ways, despite being predictable, he could be tougher?

PM Lee: It is possible. He knows Xi Jinping very well because they spent many hours together with Xi who visited the US and he (Biden) visited China too. They have engaged one another. That personal engagement at the top is important. Equally important is how each country sees the other and the intentions of the other, and whether they see the possibility of being able to work together to mitigate the inevitable contradictions which are going to arise between them.

It is not always easy but it is possible. It has historically happened with many Administrations, who will make very fierce statements on the campaign trail. Once you become the Administration, you have to deal with realities, and you have to pivot. Bill Clinton did that. He is the one who (as a candidate) talked about coddling dictators from Baghdad to Beijing, but (as President) he did business with China.

I hope that something like that can happen with the next Administration, but I think it is harder because the consensus to see China as a strategic threat is almost becoming received wisdom and unquestionable in the US, in Washington. It will be very difficult for any Administration, whether it is Biden or on the other side Trump, to disregard that and then just proceed as if the last few years had not taken place.

Bloomberg: What about on the other side? You are one of the people of America's allies who understands and knows China best. Do you think that the Chinese attitude, we talked a lot about the American attitude, do you think the Chinese are prepared to do bargains about this? It takes it takes two to tango.

PM Lee: Yes, it does. This is a bilateral relationship. I do not think the Chinese want a collision. I think they know they are not ready for a collision. But I am not sure that they are prepared to give a lot of ground, and their principal consideration will be a domestic one, rather than the international balance. Intellectually, and in an abstract sense, they will agree when you tell them that they used to be 4% of the world’s trade and are now 13% or so. The rules which are settled when you were 4% have to be updated now that you are 13%. You have to make certain changes. Changes to the overall balance of contributions to the overall system, and also changes to deal with particular grievances and issues which have arisen on specific problems, whether it is trade or whether it is security issues. In the abstract, I think they will agree to, if not to a shift, at least a change in the trajectory.

In practice, when push comes to shove and you have to negotiate a new dispensation, I think there are hard bargains. It is not clear that between the two sides, they will be able to move to a new position. I can understand the difficulty, because we are where we are, as a result of 30 to 40 years of liberalisation and reform and opening up. In the process, China has gotten more affluent, more powerful. The partners of China have also benefited from China's emergence as an economy, its connection to the world, its production of manufactured goods, its consumption of everything from aeroplanes to movies and financial services.

The Chinese narrative would be, it has been win-win, we should all rejoice, why does anything need to be improved? Actually, things have gotten better, yet many countries do feel that things do need to be adjusted. That adjustment will be very difficult to make.

Bloomberg: From your perspective as a democracy, how important is what is happening in Hong Kong, where you are seeing the pro-democratic people resign. Most people would read it as being a clamp down on freedoms in Hong Kong.

PM Lee: We watch carefully and with some concern what is happening in Hong Kong and responses in Hong Kong. That something was going to happen, was very much on the cards and could not have been avoided, because the demonstrations and expressions of defiance could not have carried on indefinitely. Certainly not to the end of One Country Two Systems in 2047.

The question was how it could be headed off. The Chinese government have settled on this formulation where they have made the legislation in China, in the National People’s Congress, and the administration in Hong Kong has followed through and carried out those new rules.

We hope that it could be done in a way which would deal with a problem but not shake confidence, and maintain the Hong Kong system intact, so that it can be valuable to China and can be part of the prosperity in the region. There is a lot of concern in Hong Kong, and you can see the way actions have reactions and further anxieties arise. I hope it can settle down to a new norm. It will not go back to where it was, but something which is sustainable, which will enable the Hong Kong people to live stably and have the economy working and have a greater degree of the freedoms and access to information and expression than pertains on the other side of "One Country, Two Systems".

Bloomberg: Jumping back to trade. We began with TPP, but there is also the RCEP which is about to be signed. When it is signed, do you regard that remotely as a comparative thing to TPP? People always point out that it is not much more toothless than TPP was designed to be. How should we look at this in terms of regional trade?

PM Lee: It is a different animal, for a different purpose. The TPP had a relatively small number of economies – there were 12, then 11. It went for very deep agreement requiring substantial commitments from these participants, and covered areas which are very difficult to cover, like intellectual property. There was even content on exchange rates and things like that.

The RCEP is a different configuration. It is Asian, it includes all of the major Asian economies, except India which unfortunately has decided not to be part of the grouping. It covers one third of the global population and one third of the world's GDP. But it does not go as deep. Nevertheless, it is a significant step towards reducing trade barriers and facilitating trade between these economies. It is also a significant statement that in Asia, whatever happens in the broader world, we would like to promote regional integration and that we do believe in a model of cooperation and win-win trade rather than go it alone and beggar thy neighbour. In these troubled times, it is worth quite a lot.

Bloomberg: You have always been a great supporter of globalisation and things like that. One thing which worries me about RCEP is if you look at for instance China's treatment of Australian exporters at the moment. It is punishing Australian exports for political reasons. Most people will look at that and say that is an infringement of what a trade bloc is about. But under this format, there is no tools for dealing with this. Do you think that is something that may come in the future?

PM Lee: The way to deal with those kinds of issues is the WTO. I mean, the WTO does have rules – what restrictions you can impose, how you have to justify them, how to adjudicate them and appeal the adjudication. I hope with a Biden Administration, the WTO will no longer be deliberately pushed to one side, as has been the explicit policy of the Trump Administration.

The way the world has tried to think about trade since the Second World War and the creation of GATT (which was the WTO’s predecessor), is to try and segregate trade from any other issues and disputes which countries may have, on the basis that trade is win-win. You have to have rules for trade, but the rules have to be objective and fair, and there must be some way to deal with the rules. That was the General Agreement on Tariffs and Trade and then the WTO.

When countries treat trade like that, you can quarrel over many other things, almost come to blows, but let us try to insulate trade, because if I hit trade, I hurt myself, I hurt you as well. Unfortunately, the lines are grey and, it is not just in Asia but even on the other side of the Pacific, or in Europe, we have all sorts of issues. When it comes to phytosanitary or medical requirements, on wine, on bananas, on rock lobsters. Even between America and Canada, once in a while, strange things happen. They are always declared to have nothing to do with any other dispute and to be purely trade. Sometimes it is purely a trade issue, sometimes it is not.

The more countries avoid doing that, the more it will be credible when they say we believe in multilateral trade, and they believe in win-win development and cooperation with our neighbours. The penalty is not just what you can do with a slap on the wrist. Some of that is necessary, because otherwise why would you pull back? The price really is, in the longer term, the reputation of the countries and how they practice their trade diplomacy and their international relations with other countries. Whether they have a reputation for dealing above board and directly or whether when issues arise, myriad of other problems spontaneously appear. Countries do have reputations to protect.

Bloomberg: Singapore has been one of the great successes of global trade. When you look at the world at the moment, there is a possibility of division into two Internets, there is a possibility in the division into regional blocs with maybe things like RCEP becoming a sort of more regional variety. You talked about the WTO. Do you worry about a global world becoming a much more regional one?

PM Lee: Regional blocs are a possibility, but I do not think it will split up all together. Because the trans-Pacific trade links and trans-Atlantic trade links are too substantial to be cut off, and to divide us into two worlds or three worlds. The risk of bifurcation of technology is there. In fact, it is not just a risk, it has already happened because in China, you cannot get Google or Facebook or Twitter. They have their own equivalents. There are legitimate reasons why you may be concerned about the provenance and ownership and control of the technology for vital parts of your information infrastructure, like the 5G system.

Bloomberg: You have finessed Huawei quite elegantly as I remembered it by giving them some access to Singapore.

PM Lee: No, we did what we thought made sense for us. We have stringent security requirements and we stated them upfront. We invited the operators to bid. We did not rule anybody out. The operators made their own calculations, and they decided whom they would partner with. It is up to them. Our attitude is whoever’s system I buy, and it is not going to be my system, because I do not have a Singapore 5G system, there could be vulnerabilities, there could be deliberate vulnerabilities, and there certainly will be intruders trying to come in even if there are no deliberate vulnerabilities. Some intruders are bound to come in. Therefore, absolute security is not to be had. We have to be practical about it. We will do what we can, and we will use the systems for the risks and purposes which suit them. If I really have something which I absolutely cannot risk compromising or losing information about, then I have to find some other solution. If I say I want absolute security, that is not to be had in this world.

Bloomberg: Do you think there is a way of putting the Internet back together again?

PM Lee: The ideal where the whole Internet is one and everybody is instantly connected to everybody else, there is no gatekeeper along the way and it will heal itself and treat censorship as a flaw which you can build around, that was the original ideal. I do not think that is realistic. It is substantially connected, but there will be all kinds of gatekeepers as well as bad actors on it. You will be able to get through better than in the old days by calling IDD, but by no means will it be a seamless network.

Bloomberg: Another subject which is close to that is vaccine. It is very much in the news at the moment. You talked about being a small country does not necessarily make things yourself. Do you worry about the bigger countries? You have a deal with Arcturus to get a particular vaccine. You have Pfizer out there doing things. Do you worry from a Singaporean perspective that it is harder for smaller country?

PM Lee: For Singapore, knowing that we are a small country and we are not going to invent all the vaccines we need ourselves, we have sought to make arrangements with not just one but multiple vaccine makers. So that when products become available, we will not be last in the queue. I doubt we will be first, but we do not want to be the last. Big countries have made sure they are the first in the queue, sometimes by extremely comprehensive measures. I can understand that political urgency. I think it is a reality that they will get some of their way.

It is a pity because the WHO makes a very valid point that the best way to get COVID-19 under control is to have a rational scheme of priorities to distribute the vaccine to the places where it will make the most difference to the outbreak. But to optimise that, on a global scale around 200 countries, I think is going to be very hard.

Eventually you will have vaccines available extensively. Technologies, economies of scale will improve, and it will become much more affordable. But that will take some time. Maybe a few more years. Within the next year, vaccines will become available, but I do not think you would have finished protecting the world's population within the next year.

Furthermore, you are not sure what risks and problems may arise. We have to learn as we feel our way forward. We are not in the best-case situation. But at least with where we are now, it has been possible for the science and the technology and the production to come up with a number of vaccines in record time (and) test them. I am pretty confident some of them will pass muster. Then we will have more options to play with. That is what Singapore is counting on. Meanwhile, we are taking all precautions to prevent a second surge of COVID.

Bloomberg: There has been quite a lot of attention in America, particularly you look at the numbers, the crude measure of how well countries have been doing covering COVID. You have America and Britain where at the moment, there are over 700 deaths per million people. You have Germany around 100 deaths for every million people. You have your own country closer to five, China claims the number of three. Japan, South Korea, the countries of Asia have performed unbelievably better 20-30 times better than the countries in the West. How do you explain that? I know there have been some internal critics of what you have done in Singapore. But by any measure, you have done better than Western countries. What has been the reason that Asian countries have done so well?

PM Lee: I would very much hesitate to declare victory now because the fight is far from over. What I think the Asian countries have succeeded in doing is to get their populations to comply with the measures which are necessary and cooperate, for example, wearing masks or safe distancing themselves with greater success than the Europeans or the Americans, where after some time you are fed up and tired of being locked down, and there is a push back. You want to go out and let your hair down and have a drink and have a rave. When you do that, there are consequences for public health. We (Singapore) have been lucky because we have not had a huge number of cases in the community. We have quite an elderly population, so if there had been many community cases, I think we would have had a large number of casualties and deaths too. We did have quite a number of cases, but the vast majority of them have been amongst migrant workers in dormitories, where we were able to keep it confined, and. at the same time, to treat the migrant workers properly and give them the medical attention they needed and to keep the fatality rates amongst them very low. It helped that they are young and therefore many of them had the disease in a mild form.

We worked very hard to make sure that we kept the migrant workers as well as the Singapore population safe. So far we have done that. Now our challenge is, how do I open up my doors, so that I can have flows, tourists and business travel with the rest of the world, and manage the cases which are bound to come in and which are going to  pop up amongst my population. If you are a country like China, you can decide to close all your entry points practically and be in splendid isolation for quite some time without much difficulty. Not forever, but for quite a long time. But for Singapore, that is going to be very tough.

Bloomberg: I understand everyone has challenges on this, but by any measure, you are 20-30-40 times better than people. You look at also the numbers that Singapore records and things like education and these other Asian countries as well. Your father used to follow Western governments closely. How bad do you think government is in places? How inefficient do you think is the public sector in the West now?

PM Lee: I would not put it in terms of the inefficiency of the governments. Governments vary, it depends on the social context. Even very good governments are struggling with COVID. You look at the Germans or the Swiss.

Bloomberg: They are five or six times better than the Americans. It is a relative statement.

PM Lee: It is partly what you do. It is partly how the disease befell you and the cards that you have to play with. It is invidious to say who is better, who is worse. It is a disease which has presented enormous challenges to societies, to governments, as well as to individuals responding to this. Having to do the best for themselves and yet respond rationally from the point of view of the whole society, and to do so in the middle of the fog of war. You do not know what is happening. You cannot understand what is happening. You are not sure what is going to happen next. Very often what happens next turns out to be even worse than you thought was possible.

Bloomberg: You have drawn on your reserves. You have drawn S$52b which I think is equivalent to 20 years of past budget surpluses. Are you going to have to continue running deficits for some while do you think?

PM Lee: I hope that we will be able to come back to prudence and balanced budgets, but it may take a while. The psychology that we have to earn our keep, and even if you have reserves, they are not bottomless, has to be deeply ingrained in our population. It is not easy because the opposition will say, "Well how much do you have? Let me have a look. Why not take a little bit more? We are not broke yet."

Bloomberg: Do you expect next year to go back? I think your next budget is in February but when would you expect to go back to surplus?

PM Lee: The Budget is in February. I very much doubt we will have any budget surplus then. Even a balanced budget will be very hard to do. You have to spend money on COVID and the economy is down. Just from a counter cyclical point of view, you do not want to have a negative fiscal impulse. You must keep the economy on an even keel and people as far as possible in jobs, or if not in jobs, some help is rendered so that they are able to get past this difficult period. The jobs are not yet going to be available in some sectors of the economy, which are going to be at best in suspended animation for quite some time to come, particularly aviation, tourism and the entertainment sector. It is better for me to take care of them and keep these sectors in suspended animation, then to risk reviving them before we are ready to deal with the consequences and then we have another major COVID outbreak. We have to deal with the public health and economic requirements in the immediate and medium term. But one day this too will pass, and when it does, we must make sure that we can get back to the habit of balancing our budgets.

Bloomberg: Has COVID changed the way that you look at the world. How profound do you think the impact has been?

PM Lee: I think the psychological impact on this generation will be considerable. In January, you and I were having a conversation in Davos. It was just about to happen and we were still carrying on as if the world was in its old tracks. You were talking about globalisation, the trade trends and trade issues, therefore we are going to have competition, and what are we going to do about technology and so on. Overnight, all that is no longer your top priority. Your top priority is just making sure your people are safe and that where their jobs have been lost, they are able to feed themselves and their families. It is a very powerful reminder that Man proposes, God disposes. Therefore, whatever you may think in terms of planning ahead and projecting ahead, something drastic can happen tomorrow, which can totally change your plans. You have to have the spunk, the resilience to say, "this is a new situation, where do we go?". So be prepared for the uncertainty, plan for the future, but also have a modest estimation of how capable you are in determining the outcome.

Bloomberg: Do you think it gives Biden an opportunity, assuming again that he becomes President. Do you think it gives him an opportunity to reach out to areas like Asia? This is the first big crisis, I think you can say since the Second World War, where America has not played a leading role. It withdrew from the WHO. It did not reach out to other countries in the way you might expect. Does that give him an opportunity, a way of bringing your region back to America?

PM Lee: I hope so. The chance is there, but he has many priorities and Asia is but one of them. In Europe, he has many priorities too – trade as well as NATO. With Russia, he has issues to settle, and in the Middle East. I think he has a full plate. I hope that it will be a new direction for America, but do not forget that Mr Trump collected more votes than Barack Obama. He has not disappeared, nor the pressures which he represented, they have not disappeared from America's body politic either. That will be something which Joe Biden will have to contend with, deal with. Hopefully we will be able to remove some of the bitterness and rancour and poison, and begin some reconciliation between the red and the blue Americans so that come 2024, the contest is not such a poisoned one.

Bloomberg: Conversely, to the Chinese does this is also offer an opportunity? If you look at these big challenges like COVID, climate change, these are these are things that happen to all humanity. They offer a potential bridge to open up a better relationship with America.

PM Lee: I hope so. When Mr Trump was elected, some Chinese commentators, perhaps overly confident of their ascendance, thought that they saw a strategic opportunity – that America would now not have a coherent position in the world, and therefore they had the field open to them, and that they could expand their influence in the world. I think that they have since discovered that it is not really that much to their advantage to have America at sixes and sevens, and unable to have a coherent foreign policy vis-a-vis China and the rest of the world. It is better to have somebody there who may not fully agree with you, but understands his interest in a broad way and whom you can deal with.

With Biden, maybe they will decide that they want a new try. I hope so. It is not easy to do this. You remember when Mr Obama first came in and Hillary Clinton was his Secretary of State. She met (Russian Foreign Minister) Sergey Lavrov and said perezagruzka (reset). It did not succeed in resetting relations, because both sides’ principal considerations are domestic ones. The driving forces, the compulsions, their priorities, are domestic ones. If you want the outside world to be at peace, that is unlikely to drive your domestic policy or cause you to adjust your domestic attitudes to lead to a stable international order. That is why you end up with miscalculations and all kinds of unexpected developments in the world.

Bloomberg: You have talked about leaving office when you're 70 which I think is in February 2022. You may have noticed America has just selected a 78-year-old. Does that make you think at all that you might hang on a bit longer?

PM Lee: I am not sure hanging on is the word but as I have been saying in recent months, we are in the middle of a crisis. It is a huge challenge for Singapore. It is existential – both economically as well as from a public health point of view. It is my responsibility to see us through this crisis before I hand it over in good shape into good hands. I hope that will be before too long.

Bloomberg: I will take that as a maybe. Prime Minister thank you very much for talking to Bloomberg and the New Economy Forum.

PM Lee:  Thank you very much.