PM Lee Hsien Loong's Dialogue at the US Chamber of Commerce/US ASEAN Business Council Reception

Moderator: Prime Minister, thank you very much. That was terrific, as expected. Welcome again. On behalf of the US-ASEAN Business Council, the Chamber, Madam Secretary, let me add the thank yous that everyone else has added. We are delighted to see you here. I have to tell you, I first met the Prime Minister when I was the United States Trade Representative (USTR) and called on him and was totally blown away. As we got into a conversation, I thought it was one of these courtesy calls. And we started talking about trade and he started talking about trade. I had obviously done my homework, I had read the bio and the Prime Minister had served as Trade Minister and Finance Minister and all of a sudden, I am talking to a policy wonk. I say this with the utmost respect, admiration and awe. He knew more about my portfolio than I did and it was just brilliant. Then, I saw you in action again at the Asia-Pacific Economic Cooperation (APEC) Summit in Australia in your Prime Ministerial capacity and I saw you, as it were, knock the socks off the other leaders, talking about the broader geopolitical matters and for most of the people in this room who are trade policy and geopolitical specialists, ranging from the ridiculous to the sublime, we are going to keep the questions somewhere in that middle range there. So, I am going to start, but you should be thinking about the questions that you would like to ask Prime Minister Lee. He has graciously offered to respond to questions from the audience and there is no smarter, wiser and more knowledgeable leader, I suspect, that we could find anywhere and on these matters related to trade and economics in the Asia-Pacific region and just about anything else you want to ask about. 

You were very polite and diplomatic about the current state of trade politics in the United States. I do not recollect trade politics being as unpleasant as they are now in the United States. We have always been proud of the fact that trade politics in the United States was bipartisan. It is, indeed, bipartisan, but not in the direction that most of us would like. Many of us are hoping that while you are here, you will be saying to our leaders on both sides of the aisle the kinds of things where we would sort of like to say to our leaders on both sides of the aisle. 

Singapore clearly stands out, by any measure, whether it is World Bank’s Ease of Doing Business and innovation rankings. Singapore stands out at the top of the class on almost every ranking. One of the questions that consistently comes up when you mention, Singapore is at the top of this list, the top of that list, the top of the other list, and you point out that Singapore is market-oriented, free trade-oriented as well. Singapore is a very small country and that growth trajectory is an anomaly because Singapore is such a small country. I would love to hear your observations on the lessons that are transferable in terms of Singapore's economic development and trajectory. You talked about moving into the knowledge economy. Clearly, these are lessons that are transferable to other countries that are facing competition. We would love to hear your observations.

PM: We are very wary about teaching other people how to run their countries. It is complicated enough to run our own little place. We have been lucky and successful so far in our journey, not always up but mostly up, and the world has changed and we have changed with it. So, I think the first thing which matters to us is that our people should understand that our lives depend on the rest of the world. Being relevant to them, being effective, making a contribution and being able to hold our own. It is perhaps easier for us to do that because we are so small. You just look across the water and there is another country above the horizon. It is harder to do that when you are a big country like America. If you look out from Kansas, the horizon is very far away. Even the East and West Coast is very far away. I know, as I spent a year living there. Therefore, it is a different perspective. Yet the world matters enormously to you and somehow, people have got to understand that.

Secondly, it is a world which changes on us very rapidly and as it changes, we have to follow on and we have to track that. So, we started off doing economic development, basically manufacturing of labour-intensive things. We made bed sheets, we made pyjamas, we assembled transistor radios and as we went on, we wanted to keep on climbing, we found that we had to change. We had to change our strategy to emphasize skills, we had to emphasize technology, we had to upgrade our people’s education and they had to be prepared to learn new jobs as they did that. You have to do it not just once but many times because after the first time, the world changes again and you have to change again. We are in the midst of that now because growth may be slow but change is not slow. Change is fast and the technologies are taking over different jobs. New jobs, old jobs, old skills and to go from them to new jobs is a tough business. It is not just the person who is on the assembly line who has got a problem. The lawyers, some of them, may have a problem. Because they are the link going and doing legal research. You do not send a young lawyer anymore. You unleash your artificial intelligence (AI) programme, it combs through and it misses fewer things than your young man or young woman. So, we have to keep on changing with the world. 

Thirdly, what we have tried to do in Singapore is to reconcile the needs of economic growth and development. Which means being rational, efficient, competitive, with the needs of building a nation. Where you have to work together, you have to sense the non-tangible things, where you have to have safety nets and a willingness to work as one nation. It is acute for us because we are both a city and a country. So in one place, you have the dilemma. Whereas if it were New York in America, New York can be very dynamic and you have a ballast, you have base and all the way through the Midwest and the South. London is the same with Great Britain. London prospers, Britain not quite so. So, in Brexit, London voted for stay and England voted to leave. We are both in one place and we cannot both stay and leave. You have to reconcile that and find the right balance and then you can sustain growth and you can maintain confidence in the system, in people's own future and in our ability to change with the world. It is very broad but these are some of the things which we think about.

Moderator: May I ask you about Trans-Pacific Partnership (TPP)? The TPP negotiations were actually launched, as you know, at the end of the Bush Administration. The Obama Administration picked it up and ran and made a negotiation. We now have two presidential candidates that are not terribly friendly about TPP. One of the arguments that has been raised in favour of TPP has been, if we do not do the TPP, then ‘China will write the rules’. That is perhaps euphemism for others who write the rules. It has been taken by some to be anti-Chinese. It sort of plays into the geopolitics. I would be interested in your thoughts on this because one of the things that I think a large number of people in this audience are hoping is that while you are here, you will be talking some more about the benefits of the TPP. That is one argument that a lot of people have used here and there has been some pushback on that.

PM: Well, your relationship with China is not a zero-sum exercise. You compete but you also cooperate. If you have more trade with China, China gains, you gain too. In fact, that is what has been happening. People in America often talk about the threat from things made in China, so cheap and in Walmart. But in fact, your exports to China have grown very rapidly and it has been a plus for any number of American industries, all the way from Boeing to cars, to pharmaceuticals, to insurance services, you are there. So, when it comes to the TPP, you can say it gives America a head-start because you are in on a major trade agreement which includes a big part of the Asia-Pacific, in fact, a significant part of the world. But actually, what you are looking for is a longer term where you have free trade in the whole of the Asia-Pacific.

The ideal was to do it in APEC. That was the initial motivation for APEC, really, trade liberalisation in the Asia-Pacific. Initially, China was not in, but China came in pretty early after two or three meetings and you want to have free trade in the Asia-Pacific, including all these countries. But honestly speaking, I think even with a very great ambition, that is too hard to do straightaway. Because if you wanted to have Japan, China, America and all the other countries in, just the first three would keep you busy reconciling their difficulties before the rest of us got a word in. So, it is not going to happen. But you do want to move and you can move piecemeal. Then it is messy, it is overlapping, but it covers the ground and hopefully, our grandchildren or children will have the wisdom and the basis on which to take the next step and rationalize, simplify, expand and make a less imperfect cooperation. 

The TPP is one big part of what is happening in the Asia-Pacific, but there are the pieces as well. There is this thing called the Regional Comprehensive Economic Partnership (RCEP) which covers a lot of the countries on the western side of the Pacific, including China and Japan and Korea. China and Korea are not in the TPP but some of the other members are. ASEAN has got a Free Trade Agreement (FTA) or economic community amongst itself. It is a very messy patchwork but it covers the whole of the Asia-Pacific. 

With the TPP, you are part of the game and you are setting the rules. Well, you have helped to set norms and expectations which will cover many economies. One day, others will be able to join you. If you ask whether the Chinese will join the TPP, initially, they looked at it very much askance. Now they are looking at it quizzically, it is different. They are still sceptical but they are not hostile. They are trying to understand this, what will it take. They are not ready yet, but one day, I think they are not averse to the idea of being part of this group. I think they believe that you will want to set high rules and make sure that the entrance fee is not too low, to put it mildly. But I do not think they rule out being part of the party. So, I think if you call that setting the rules, I think it is not a bad thing to do.

Q: Since Susan mentioned geopolitical issues as part of the Prime Minister's expertise, could you comment on the South China Sea in terms of the recent decision, the next steps, particularly whether you think there has been a change in China's basic policy unannounced as a result of the decision, leading to more nuances, lower-key policy to produce tensions, or do you think it is just a tactical pause till the G20 meeting and maybe the US election? 

PM: I do not think the Chinese have changed their policy as a result of the decision. They have rejected it vehemently. They said so before, they said so after, but they have said that they have made a decision, what they want to do in the South China Sea and I think they will maintain that over the long term. They have said that they have a nine-dash line claim that is historical, that is indisputable. They have not exactly specified in legal terms what it is which is being claimed, but they said, “This is ours and, well, the others, we can talk, but what is ours is ours”. 

I think that the ruling of the tribunal has made a strong statement on what the international law is. Ideally, international tribunal rulings set the order for the world because ideally, when you have disputes between countries, it is much better to have an arbitration and adjudication based on acknowledged principles than to fight it out and see whose guns are more powerful. Speaking from the point of view of a small country, this is all the more fundamental important principle. When we have had disputes with our neighbours, we have done that, we have gone to arbitration or adjudication. Sometimes, we win, sometimes we do not, sometimes before the matter is adjudicated, we reach a settlement. Well, it is an impartial, objective, peaceful way of resolving issues and, ideally, all problems in the world could be settled like that. But the world is not like that and big powers, particularly, have interests which sometimes lead them not to follow this path. For example, the United Nations Convention on the Law of the Sea (UNCLOS), under which the recent tribunal ruled, America signed it, but has not ratified it. So, America is not bound by UNCLOS and that makes it harder for you to take a position when other countries follow or do not follow the provisions of the UN convention. So, when you look at China and you see what they have, the stance they are taking, well, you wish it were otherwise, but it is for a big power, not an unprecedented thing to happen. 

I think in the South China Sea, none of the countries want to have to push it to the brink. They have interests, they have claims, they will want to maintain them, but nobody wants to go to war. In particular, I think the Southeast Asian claimant states – Philippines, Brunei, Malaysia, Vietnam – all of them have got substantial bilateral accounts with China, in trade, tourism, investments and aid. Therefore, while this is a thorn in the relationship, it is not the whole relationship and therefore, it is going to be a problem, not solved for a long time. But I do not think it is going to lead to a complete souring and a complete breach. It needs to be managed. There are things you can do to calm things down, to make it less likely that you have a mishap which goes out of control. We have a declaration of conduct on the South China Sea. It is just a declaration of good intentions. We are negotiating a Code of Conduct on the South China Sea with China which is going to be binding but therefore will be more complicated to attain. We hope to make progress in small steps, like having a code on unplanned encounters at sea. What happens if two ships come almost eyeball-to-eyeball? How do I avoid actually physically bumping into one another or exchanging fire with one another, or spraying each other with water hoses, which has happened before? And to have a hotline between the capitals so that you can talk and diffuse issues. So, I think these modest measures we can do, but solving the problem – to have countries having taken positions claiming sovereignty, claiming rights to maritime, seabed resources, to have countries walk back from those and say, ‘Well, it is not quite so absolute and it was not quite clearly mine after all’, I think we have to wait a long time to see that happening. Very few countries do that.

Q: Dennis Wilder, Georgetown University. How do you respond to the Trump supporter who says the free trade agreement with Singapore did not do me any good? The free trade agreement with Korea did not do me any good. Why do you think the TPP is going to be anything that I need if Singapore citizens got the benefits? The Singapore citizens got the benefit of the free trade agreement from their point of view and this is a very serious position held by serious people in the Midwest. They are not just people who are crazy or under-educated. If you look at the median income of these people, all of these free trade agreements did not help them. So, how do we respond to that?

PM: There are a couple of answers to the question. The old textbook solution answer was to say trade is mutually beneficial. I buy, you sell, obviously, I wanted to sell to you, or I wanted to buy from you and you wanted to sell to me, so at the end of it, we must both have been happy, otherwise, we would not have done it. If I am prevented from buying from you and you are prevented from selling to me, then an opportunity has been lost. It is a bit of an oversimplification because that is talking about two people and here, we are talking about two countries. So, if my company sells to you, my company benefits, your consumer benefits, but your company’s competitor may lose out, compared to me, who was making the same thing. So the question is how are the net benefits distributed within the country? There are winners, there are losers and somehow or other, in the process, you have to make good the losers so that the benefits are reasonably widely distributed. When countries negotiate trade agreements, I think this political process comes into play. When the USTR negotiates trade agreements, I think their internal process, talking to the different states, different Senators and Congressmen and what their interests are; who has chewing gum; who has aeroplanes; who has got information technology (IT); who has got pharmaceuticals; the USTR knows all about that. If she or he is not an expert in your domestic politics, he cannot do his job. And when the foreign party negotiates with you, when the Chinese negotiated with you, not a free trade agreement, but just a trade agreement bilaterally before they joined the WTO, and Zhu Rongji was the Premier who did that on the Chinese side. I cannot remember who was your Trade Rep then – he knew exactly which states made which things and he negotiated a deal with you which made sure that every state got something. And this is a political leader in a communist state who has no votes to worry about. He knew what needed to be done.

When you negotiate with Singapore, I have no doubt that your USTR knew exactly what needed to be done and did a good job protecting your interests and advancing your interests. It may be in pharmaceuticals, it may be in media, the new economy, it may be in access for aeroplanes, or for your automobiles, or for your banks. It does not mean that every single American was party to every single item on the deal. But if your USTR has done a good deal, you have got something out of it. The other side has got something out of it? Sure. But that is what win-win trade is about. So if you say, ‘I did not get it, I did not get something’. I think if you take a very narrow approach you might be able to establish that. You might also be able to argue that within America, you could have done a lot more to make sure that the winners and the losers shared the benefits and the Rust Belt had more help becoming less Rust Belt. The Midwest, particularly, which does not get a direct benefit, get something out of this. That is necessary. It is part of making the political economy of trade work. 

But if we abandon that and say we do not want to have free trade, let us close the doors, let us go back to the days when we had the United Auto Workers dealing with General Motors and the big two or three and that is how cars shall be made and Americans will be better off. Well, it may be. Detroit will be better off but I think America is worse off. I think America is better off with doors open and America is big and wealthy enough to be able to make good Detroit, and should. I mean I am not taking sides, but there will be those who benefit less or those who do not benefit and I think that your political system should look after them. 

Q: Good afternoon. My name is Prosser Stirling. I am from Oracle Corporation. Thank you for honouring us by your visit today. As Singapore has established itself as a regional business hub, a regional services hub, a regional research hub and a regional data hub. Data has become increasingly important for all businesses and the way businesses function. Particularly the way businesses function across the Pacific and what that has to do with Trans-Pacific value chains. As data has this importance, it is important to know what Singapore's approach is to data, what Singapore's approach is to smart cities and to smart nations. Mr Prime Minister, could you talk about the pathways that you see where the US and Singapore can collaborate in this area?

PM: We have just signed an MOU with your people to collaborate on smart cities. It is a catch-all term, which is a buzzword. A lot of cities want to be smart cities and I think a lot of cities are smart in different ways. Some of them have got central nervous systems. You can actually see a control centre where you track what is happening in the city and you respond in real-time to a traffic jam or an incident or a crisis. Some of them have got intelligence built into the public services, into their public transport system so that it is responsive to the flow of the commuters and is able to move people about more efficiently. Some of them are able to have sensor networks so that you can know what is happening and you can make use of that information either to serve people or to respond to emergencies. I think others have become centres where you are developing IT industry. Either you have data gathered and analysed there or you have companies which are innovating, generating new products, new services, new games. Like you have in Silicon Valley, or like you have in Tel Aviv or Jerusalem in Israel. 

We want to be a bit of each of this. We have a natural advantage because we are a city as well as a country. It is a disadvantage when you talk about having a stabilizer and having to trade-off between economics and social aspects. But it is an advantage when it comes to making a smart city because I have only one level of government and we can make everything happen. Whether it is healthcare, whether it is transport, whether it is urban planning and transportation. Whether it is making use of the government information in order to mine the data and detect either social needs or medical needs, I am able to do it as one central intelligence. I think we also have a natural advantage in doing this because our people are naturally switched on to data. We have more than one smartphone per person or one phone account per person in Singapore. I do not know what you do with them all, but obviously somebody finds it useful, a lot of us. Our young people grow up with this, it is something natural to them. They all have access to the Internet. We are fibred up, almost the whole country. Anything you need, you do online. Whether it is accessing the Government to pay your taxes, or it is texting your family or your employer for friendship or for work. I think that we can move. There are models we can do in other countries or other cities and we can pick up from different cities and put the pieces together in Singapore. We would like to do that.

Moderator: Thank you. Mr Prime Minister, Madam Ho, thank you very much for being here. Thanks for joining us here today and spending time with our business community. We very much appreciate it. Thank you for your visit. Thank you for all of the wisdom you are going to share with our politicians while you are here. We appreciate that too and for your leadership in international economic policy and geopolitics in the Asia-Pacific region and the world. Please join me in thanking Prime Minister Lee.

PM: Thank you.

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