PM Lee Hsien Loong's keynote address at Shangri-La Dialogue

How US, China compete affects Asia

Prime Minister Lee Hsien Loong delivered the keynote address at the opening of the Shangri-La Dialogue last night. Below is an extract on US-China competition and disputes in the East and South China seas.

Actions provoke reactions. The US is responding to Chinese activities with increased over-flights and sailings near the disputed territories. Every Asian country stands to lose if regional security and stability are threatened.
Actions provoke reactions. The US is responding to Chinese activities with increased over-flights and sailings near the disputed territories. Every Asian country stands to lose if regional security and stability are threatened. PHOTO: REUTERS

WHEN both the US and China say that the broad Pacific Ocean is "vast enough" to embrace both China and the United States, we read that as a good sign. Provided "vast enough" means that there is space all over the Asia-Pacific region for both powers to participate and compete peacefully, and to work out problems constructively, without raising tensions, and does not mean "vast enough" to divide up the Pacific Ocean between the two, each with its own sphere of influence, circumscribing options for other countries, and increasing the risk of rivalry and conflict between two power blocs.

Realistically speaking, however, competition between major powers is unavoidable, but the question is what form this competition will take. One model of competition is where major powers strengthen their influence within a set of international rules and norms. We see that in how China is actively deepening cooperation and making friends all over Asia, through the 2+7 cooperation framework with Asean, the One Road One Belt, and the Maritime Silk Road initiatives.

The Asian Infrastructure Investment Bank (AIIB) is one of China's major projects. It clearly will enhance China's influence in the world, but it also meets a real and urgent need for infrastructure development and capital in the region. And it is a way China can participate constructively in the international order together with other countries, similar to how the Americans and Europeans influence the International Monetary Fund and World Bank, and how Japan plays a major role in the Asian Development Bank.

That is why Singapore gave its support very early to the AIIB idea, and why many more countries have since welcomed it and joined as prospective founding members, not only Asian countries, but also Britain, France, Germany, Italy, Australia and others.

Likewise, the US is giving substance to its rebalancing towards Asia by increasing its engagement. One major initiative is the Trans-Pacific Partnership (TPP).

President Barack Obama has personally pushed this hard with the negotiating partners. The administration needs to obtain Trade Promotion Authority (TPA) from Congress for, without that, no country will close their TPP negotiations with the US. A TPA Bill has passed the Senate, and is now before the House. All the TPP partners are watching closely, and hoping that Congress passes TPA legislation, in a satisfactory form and in good time. I hope the American legislators and public realise how big the stakes are in the TPP, not just for Asia but for themselves. Because whatever the merits or demerits of individual items in the TPP agreement from the trade point of view, the TPP has a wider strategic significance. Getting the TPP done will deepen links between both sides of the Pacific. Failing to get the TPP done will hurt the credibility and standing of the US not just in Asia, but worldwide.

There is clearly a competitive dynamic here. It is an open secret that the US had reservations about the AIIB and discouraged its friends from participating. And on the TPP, some observers believe that the rules are being crafted to raise the hurdle for China to join. I am sure that is not the thinking of all TPP members, although China is not yet ready to join the TPP.

Speaking as an Asian country and a participant in both, Singapore hopes that in the long term, China will join the TPP, and the US and Japan will join the AIIB.

But there is another model for competition, where win-win arrangements are harder to reach, and unhappy outcomes harder to avoid. The territorial and maritime disputes in the East China Sea and South China Sea are an example.

These disputes have heated up significantly in the last few years. There is daily buzzing of ships and aircraft around the Senkaku/ Diaoyudao islands, and the testing of boundaries by both China and Japan. In the South China Sea, claimant states are taking unilateral actions in the disputed areas, drilling for oil and gas, reclaiming land, setting up outposts, and reinforcing their military presence.

Actions provoke reactions. The US is responding to Chinese activities with increased over-flights and sailings near the disputed territories, to signal that it will not accept unilateral assertions of sovereignty in the South China Sea. Each country feels compelled to react to what others have done, in order to protect its own interests.

Non-claimant countries cannot take sides on the merits of the rival claims. But they do have a stake in the maritime disputes, and in particular how they are handled. Every Asian country stands to lose if regional security and stability are threatened. Major sea and air lines of communications pass through the South China Sea. Every state whose trade passes through the South China Sea, or whose ships and aircraft use the South China Sea, has an interest in ensuring freedom of navigation and over-flight, including Singapore, for whom the South China Sea is a vital lifeline.

No country can renounce its claims, or sometimes even concede that a dispute exists, without paying a high political cost. But the consequence is that all sides harden their positions, and disputes become harder to disentangle. These maritime disputes are thus most unlikely to be solved in the foreseeable future. But they can and should be managed and contained. If the present dynamic continues, it must lead to more tensions and bad outcomes.

China and Asean should conclude a Code of Conduct on the South China Sea as soon as possible, so as to break the vicious circle and not let the disputes sour the broader relationship. If all parties adhere to international law, including Unclos (United Nations Convention on the Law of the Sea), that is the best outcome. On the other hand, if a physical clash occurs, which escalates into wider tension or conflict, either by design or more likely by accident, that would be very bad.

But even if we avoid a physical clash, if the outcome is determined on the basis of might is right, it will set a bad precedent. It may not lead immediately to a hot conflict, but it will be an unhappier and less sustainable position. In the long run, a stable regional order cannot be maintained by force alone, but also requires consent and legitimacy in the international community, together with the balance of power.

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