TPP is more than just a trade deal or jobs issue for Americans

In a wide-ranging interview with Time Magazine editor-at-large Ian Bremmer, Prime Minister Lee Hsien Loong gives his views on the US pivot to Asia, the lollipops the Chinese carry in their pockets and the tough new challenge of job loss among Singapore professionals

Q What are the consequences of no TPP (Trans-Pacific Partnership)?

A Your standing goes down with many countries around the world. Your opponents as well as your friends will say: "You talked about the strategic rebalance, 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 (US President Barack) 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 got Vietnam to join, after you have got 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 any more?

It is not just on trade, even on strategic issues. The key thing in North-east 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.

Q I saw Abe during the United Nations General Assembly on the sidelines. We sat down and the first thing he asked me about, of course, was the TPP. He had just met Hillary (Clinton) and she said all the right things but he was not convinced.

A He is quite worried. It is a lot of harm. Some Americans say: "We understand all the strategic arguments but we have had enough of sacrificing for strategic interests of the United States. What about me?"

Q But the problem is that if Obama had argued TPP from day one, not as a trade deal, not as a jobs deal, but as a standards deal, that, "look you guys have to understand that if we do not do this, the Chinese are. That is your alternative in the region". He did not. He had people like Paul Krugman who were actively undermining him from day one, only focusing on the jobs issue in the US.

A Paul Krugman has a very fixed position on this. But Obama did not push this very hard domestically, and expend the political capital until quite late. He may have left it too late.

Q So when you see our friend (Philippines President Rodrigo) Duterte, now going to Beijing, probably en route right now...

A He is there.


PM Lee during the interview last Thursday with Time magazine's Mr Bremmer. Mr Lee said that while change cannot be stopped, the Government can help in training, transition assistance and social support if people are out of a job. PHOTO: MINISTRY OF COMMUNICATIONS AND INFORMATION

Q Certainly the announcements he made in advance were about as negative as one could have expected towards the United States. You also saw demonstrations towards the US Embassy. How far do you think that is likely to go?

A I do not know, because these are early days. Mr Duterte's own position, I think, is deeply felt. I do not think he is posturing. How far he will go, and what his civil service's and his armed forces' positions will be, and whether they can influence him or he will work with them, only time will tell. I would not like to speculate.

CHINA-U.S. RELATIONS

I do not know whether they (the Chinese) are well disposed to Hillary. They have said that they are fine with an America that is focused on the region, but I think they will be quite comfortable if the US is focused elsewhere.

PM LEE HSIEN LOONG , on what China has said about the US focus on the region.

Q As you say, the American fleet can only get you so far. Looking at the South China Sea from an outsider's perspective, it seems to me that the Chinese have handled it pretty well over the course of the last few years. They have made incremental gains consistently but they backed them up with continued lollipops and with continued economic policies.

A It is an issue where, on the South China Sea itself, you are in a (zero-sum) situation. But each of the other claimant states has a broader relationship with China, and none of them wants to push it to the brink. So there is this game which will be played. How do you move, what are the trade-offs, and what are the alliances or partnerships which try to get formed and try to get broken? The Chinese are quite clear what their interests are and very consistent on pushing their interests.

IMPORTANCE OF TPP

The one big thing which you (the US) have done is to settle the TPP, which Obama has done. It shows that you are serious... 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 got Vietnam to join, Japan to join, after 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 any more?

PM LEE, on the consequences to the US if it fails to deliver on the TPP.

Q What do the geopolitics of this region look like? How different are they in five to 10 years' time? Hillary, as President, is certainly very competent. She knows all the players, she will appoint people in Cabinet who know Asia reasonably well. We did not have many in the second term for Obama. But the external constraints and the domestic constraints are only getting higher. I do believe America's foreign policy influence is decreasing. That is structural and in part that is because of America's changing interests.

A It is the perception of their interest. Because Americans are preoccupied with jobs, upset about globalisation, so they say: "How about turning inwards?" Forty per cent support building a wall. It does not mean it is in the interest of those 40 per cent to build a wall, but that is the sentiment and it is not helpful. If that continues to be the sentiment, I think it is negative for America and it is negative for the world. Because in fact, you have got a lot of friends, you have got a lot of partners, you have got a lot of interests. Your investments in Asia are considerable and there is goodwill towards America all over the region. If you look at the Asean countries, practically all are very happy to see you present in the region. It means prosperity, it gives options and it fosters stability. So for you to say it is not an important interest and it does not matter to the US any more for the next 10 years, I think that is not accurate. Hillary knows that. Hillary as secretary of state worked very hard for South-east Asia.

Q I agree completely. The people around her definitely would reflect that.

A If she can keep those instincts, it would be very helpful. It does not mean that you want America to go there on a warship but you want America to be here friendly, benign and supportive.

Q My question is if it turns out that the United States' pivot to Asia is seen to have failed in the next five to 10 years. Do you think that the only real alternative is that China becomes the dominant player in the region or do you think that we are evolving towards a much more multilateral situation?

A It depends on what the Indians do, what the Japanese do. India's scale is not as massive as China's in terms of their gross domestic product or their trade. The Chinese are three times their GDP, but India is growing. Mr (Narendra) Modi is trying to set the country in the right direction and they will have interests beyond the South Asian subcontinent. They have a complicated relationship with China. There is a border problem and there is rivalry. It depends how they participate in the region. I think their interests will push them to be more active, but we will have to see how that goes. The Japanese, if the Americans begin to look less reliable as a partner, you do not know what they will do. Their Cabinet Secretary has already said in February this year that nuclear weapons are not against their Constitution.

Q On a slightly different topic here, were you surprised to see the Americans put sanctions against the Chinese companies doing business in North Korea two weeks ago?

A Yes, I saw that.

Q That is kind of new. I am hearing a lot from the Defence Department now, both Democratic and Republican-leaning folks, that in the next year or so, the Americans will have to make a big strategic decision on whether they really want to squeeze the Chinese on their support for North Korea - that North Korea is getting to breakout capabilities and red lines for the Americans on what they can do vis-a-vis the US. The Americans do not think they have many other options other than the China card.

A I do not know what the texture of their discussions with China on this are. I know that Obama has spent quite a lot of time talking to (Chinese President) Xi Jinping. He did so in Hangzhou at the G-20; he did so at the Sunnylands retreat in 2013, and they have spent a lot of time talking. (US Vice-President Joe) Biden has spent time talking to Xi Jinping too. I am not sure what the relationship is or how directly they are able to discuss these issues. The one saving grace this time round is the substantial economic relationship: Chinese have lent America trillions of dollars so they do not want America to crash, and America has a lot of business with China which you do not want to lose. That is different than the relationship between you and the Soviet Union in the Cold War.

If you have a very hot issue, like over Taiwan, then of course that is a different proposition. But short of that, economics is one of the important items in the overall bilateral relationship, and the linkages have to be exercised.

Q I look at the US and China and I see a relationship that despite all the problems that US has had with foreign policy, it feels reasonably well managed right now. Do you agree with that?

A Yes, though I do not think there is a lot of strategic trust. I did not use to believe that you could do much about building up strategic trust because fundamentally you have taken a position, and it is not a matter of having a drink after dinner and then resolving your elementary misunderstandings. You are fundamentally in different positions which are not easily reconciled. But there is an absence of strategic trust in the sense that the Chinese are convinced that you are trying to slow their growth and you are convinced that the Chinese may do something unpredictable. It does not mean they want to fight you but they may push in a direction which is not in your interest, including in the South China Sea. How do you establish enough dialogue in order to overcome that? It has to happen at the top. With the Soviets, you used to have back channels. You used to have (Henry) Kissinger with (Anatoly) Dobrynin and Kissinger with (Andrei) Gromyko, and then (Richard) Nixon would talk to (Leonid) Brezhnev. They were opponents, but they made some progress. Now you have the mechanisms with China. You have the Strategic Dialogue where your secretaries of state, defence and treasury meet their Chinese counterparts. But I am not sure the degree to which you are able to engage and come down to brass tacks.

Q I was a little surprised that you said the Chinese believed that America does not want them to grow, that we are trying to constrain them.

A I think they deeply believe that.

Q You think they still believe that - it has not changed at all?

A Yes.

Q That is interesting. And you think they are reasonably well disposed to Hillary? Because a year ago, they were not.

A I do not know whether they are well disposed to Hillary. They have said that they are fine with an America that is focused on the region, but I think they will be quite comfortable if the US is focused elsewhere.

Q Off the record, if you were grading Xi Jinping over the last four years on everything he has been able to accomplish internally, you would give him what?

A No, I do not think I want to grade people.

Q That is why I said off the record.

A No, not even off the record. But what he has done on anti-corruption I think is progress. He has worked very hard at reforms in the armed forces, in the PLA (People's Liberation Army), which is not easy to do. He has restructured the chain of command and made himself commander-in-chief to assert himself. He must have had a lot of resistance to that but he went ahead and did it.

On the economic side, I think they face difficult policy choices. Some people think they have collected all the low-hanging fruit and whatever they do, growth will henceforth be slow. But I believe there are still some more things which they can do. They have been very cautious about acting when there could be social or political fallout - like cleaning up the state-owned enterprises or the massive expansion of debt, which is happening. They must know these problems need to be tackled, but they have not acted yet. I am not sure whether they are as impatient to rationalise the economic system like a World Bank economist would, but I am sure somewhere in their system, their officials know that these things need to be done. How urgently they feel that and do that over the next five years will have a significant influence on whether China can continue to grow 5, 6 per cent or whether it runs into a middle-income trap. I think the potential is there. The biggest potential is half the population is still rural and agricultural, and you do not need half the population to feed China. If they can free up that, and not just move people into the cities but employ them productively, to build up their services sector or social services, then there is growth and prosperity to be had.

Q Is he accumulating so much power individually that the ability to continue to reform and transform beyond Xi Jinping becomes a significant risk?

A I think one of the issues now is that there may be different views as to which way to go, policy-wise, and so the officials are cautious, and decision-making has slowed down. It is a balance when you are in the leadership team - it depends somewhat on the personality, somewhat on the phase. After a period with a strong leader, you tend to go for a collective leadership. Then you find that collective leadership is difficult to operate, and you try to centralise the leadership in a more dominant figure. We will have to see what team Xi comes up with next year in the 19th Congress and how he balances or divides up the responsibilities in that team.

Q Labour in the developed world is becoming much more efficient, much faster, the whole fourth industrial revolution.

On one hand, Singapore is incredibly well positioned to take advantage of all these forces of efficiency, incredibly digital-savvy than the rest. On the other hand, we may see a creeping protectionism in the United States and Europe and maybe other places too if we do not deal with it. How do you think about the social contract in Singapore? How do you think about Singapore's position in the world given how fast that transformation comes?

A It is a challenge for us, just as it is for other developed countries. It is a challenge preparing young people to cope with the future world, which we are not quite able to define yet. They have to have the skills to learn and learn again.

It is also a challenge helping people who are already in the workforce. They have a career, they have a family, they have obligations. And now they are not sure whether they can continue in the same job until they retire. And if they can't, how can we help them? You cannot solve it by saying "keep out the problem, stop the change, and therefore I carry on doing what I used to do". Even General Motors could not survive that way.

There are things you can do to help: training, transition assistance, social support if people are out of a job. But you cannot stop the change from happening. It is going to put the social contract under pressure. People have to feel that the Government is on their side and is helping them to cope. In Singapore, unemployment is very low by international standards - currently 2.1 per cent. But it can go up and it is going to go up even for the professionals. Because blue collars, in a way, are an easier problem to solve. The numbers are bigger but we can train them on courses for three months or six months while they learn new skills.

Q But lawyers, the accountants, the financial advisers…

A Yes indeed. Bank managers - that is harder. And that is coming. You can see it beginning already.

Q Do you think about universal basic income? Do you think about flexible corporate environments? Is it all about retooling and skilling? Where do you lean?

A We have not gone towards universal basic income. We do not have a minimum wage. We have what we call Workfare, basically a negative income tax. It provides support to those up to the 30th income percentile, around 440,000 people. We think it is a more flexible way of doing it. I do not think we can afford a universal basic income. Nobody has done it. Even the Swiss voted against it. Silicon Valley thinks it will solve the problem, but it is a vast expense and we do not know what the social consequences will be of doing that.

I think we progress step by step. We will build up our social safety nets, but we also have to make sure they are sustainable and affordable. It will mean more spending. More revenues will have to be raised, and people will have to understand and accept that. It is not just spending on the low-income (earners), it is also for the retirees, and on medical care which is related to ageing. All of which will cost more, and somewhat more of the burden will have to be carried by the state. We have tried our best to make each individual self-sustaining. That is how we structured our Central Provident Fund - when you work, you contribute; when you retire, you have provided for yourself. Now with Workfare for the lower end - you work, but you are not quite earning enough, so we help you to top up. Then when you grow old, you will also have a nest egg, which the Government has helped you to build up.

  • Ian Bremmer is editor-at-large and foreign affairs columnist at Time magazine and president of Eurasia Group.
A version of this article appeared in the print edition of The Straits Times on October 27, 2016, with the headline 'TPP is more than just a trade deal or jobs issue for Americans'. Print Edition | Subscribe