Imperative that the US and China come to a new equilibrium: Heng Swee Keat

At the 12th S. Rajaratnam Lecture on Tuesday, Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat spoke on the challenges of fostering growth and stability in an age of complexity. Here are edited excerpts from his speech.

Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat (left) at the 12th S. Rajaratnam Lecture on Tuesday, with Ambassador-at-Large Ong Keng Yong moderating the Q&A session. PHOTO: LIANHE ZAOBAO

Even as global economic recovery remains uncertain, strategic competition between the US and China - the two largest economies in the world - has added to the fragility of peace and prosperity.

It was only 20 years ago that the United States supported China's entry into the WTO (World Trade Organisation), on the mistaken belief that greater economic integration would somehow transform China politically and socially into a system more like the US.

But as China's economy and influence grew, so did doubts about this symbiotic relationship.

While this was initially characterised by differences on trade, tensions have spilled into other domains.

It is also worrying that voices of restraint - traditional stabilisers of the relationship - have diminished. This is partly due to disappointment felt by the US business community, who used to be advocates for greater economic ties with China. People-to-people ties have also weakened, especially after the onset of Covid-19.

The blurring of lines between competitive domains - economic, technological, security and ideology - has also made it harder to find common ground for cooperation.

But as recent events have shown, it is not an impossible task.

Both countries have recognised the need to work together on issues of global concern. For instance, the US and China issued a joint declaration on climate action at the recent COP26 in Glasgow.

High-level exchanges, including the recent dialogue between President Xi Jinping and President Joe Biden, are welcome signs that both countries want to manage competition responsibly, and put in place necessary steps to ensure that the relationship stays on a stable footing.

It is imperative that the US and China come to a new equilibrium.

Unlike the Cold War environment, the US and China are competing within the same inter-connected and inter-dependent economic system. The cost of decoupling will be very high. Doing so will lead to mutually assured economic value destruction.

At best, neither can fulfil their maximum economic potential. There could be a regression in living standards, not only for the US and China, but also the rest of the world.

An outdoor screen shows a news programme about a virtual meeting between Chinese President Xi Jinping and US President Joe Biden in Beijing, on Nov 16, 2021. PHOTO: AFP

At worst, economic decoupling is a slippery slope towards strategic miscalculation and a disastrous conflict.

A new equilibrium will take time. Differences cannot be bridged overnight.

The US and China should not let strategic mistrust overshadow opportunities for mutual progress.

In supporting China's entry to the WTO, then US President George Bush said that "China is a strategic competitor, but that does not mean we cannot find areas in which we can partner".

The US and China will compete where they must, but it is critical that there are safeguards in place to ensure that competition does not veer off course into conflict.

Any clash between the world's two largest economies will only be to the detriment of themselves and the world.

Alongside competition, it is crucial that they also cooperate where necessary. There are many areas of complementarity in economic development between the two largest economies which are at different stages of development.

By working together to exercise global leadership to tackle shared challenges, and tapping on their vast resources of talent, capital and innovation, they can lead the charge on international progress and development.

This will enable the world to better address the climate crisis and realise the UN Sustainable Development Goals by 2030.

The future is complex and uncertain, but there is opportunity to build a future for a better world.

Small states and building blocks

Small states in particular feel the constraints and pressures of global challenges more than others, whether of great power competition, natural disasters and health crises, or other transnational threats.

This is why we must continue to strengthen a rules-based multilateral system so that all countries, big and small, will have their voices heard and their sovereignty respected.

As the world evolves, so too must the global rules and norms that govern our actions. However, the process of refreshing these rules is often protracted, especially when global leadership is being contested.

Individually, each of us may not be able to shape the course of global action. But by working collectively, we do have agency, and we can create new building blocks for meaningful change.

One important area where Singapore has made an impact is global trade.

In 2000, we concluded our first bilateral FTA with another small and like-minded partner - New Zealand.

One important area where Singapore has made an impact is global trade. PHOTO: ST FILE

Building on that, Singapore and New Zealand, along with Brunei and Chile, went on to start the Trans-Pacific Strategic Economic Partnership Agreement - hence establishing the P4.

This eventually evolved into the CPTPP.

The CPTPP signalled the desire for greater economic integration and the further liberalisation of trade and investment at a global level.

It also pioneered commitment to higher standards in areas such as e-commerce and intellectual property rights.

More economies have applied to join since, and this has catalysed momentum for global change.

Digital trade has now become a new source of economic growth. We need greater collaboration to harmonise standards, enable trusted flows of data, and allow cross-border transactions to take place seamlessly.

To advance these emerging areas, three of the P4 countries - Singapore, Chile and New Zealand - came together to establish the Digital Economy Partnership Agreement or Depa.

Depa is a building block for new forms of economic engagement and trade in the digital age.

But more than economic advantages, Depa has become strategically important for rallying cooperation in a period of greater fragmentation.

We welcome more like-minded countries to be part of this effort to build a new consensus around the digital economy.

It is noteworthy that China has recently indicated that it wishes to join the CPTPP and Depa.

The example of P4 shows how a few determined small states can, over time, create building blocks to catalyse meaningful change in global trade.

With conviction and perseverance, like-minded countries can come together to create momentum for global convergence. This approach applies as much to trade as it does to other common challenges.

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