SINGAPORE - Small states like Singapore can do little to influence the big powers, but they are not entirely without agency, said Prime Minister Lee Hsien Loong on Friday (May 31).

Mr Lee noted that there are many opportunities for smaller countries to work together to deepen economic cooperation, strengthen regional integration, and build up multilateral institutions.

"This way, we can strengthen our influence as a group, and advance a collective position on issues that matter to us, be they trade, security or technology," he said in his keynote address at the 18th Shangri-La Dialogue.

In an expansive speech that set the historical geopolitical context for US-China relations and its impact on the international environment, Mr Lee touched on the need for countries to strive for regional or plurilateral arrangements, while seeking to strengthen global multilateral institutions.

Mr Lee said these are far from perfect today.

"The WTO (World Trade Organisation) is one of the major institutions in the post-war global order, but now it is almost paralysed, and urgently needs reform," he said.

He noted that multilateral global deals like the Uruguay Round are no longer practical, when agreement requires a full consensus among 164 member countries of hugely diverse interests and philosophies.

The WTO was also designed for an agricultural and manufacturing-based world economy, but the world has moved on to services and now increasingly digital and intellectual property, which need much more complicated rules, added Mr Lee.

Mr Lee said the US has lost faith in the WTO.

"It prefers negotiating bilateral deals one on one against smaller countries in trials of strength. It gives more weight to the US' direct benefits in the disputes at hand, than to its broader interests in upholding the multilateral system. And this has caused concern to many of the US' friends and allies," he said.

But Singapore cannot afford to adopt the same point of view, he said, as being small, the Republic is "naturally disadvantaged" in bilateral negotiations. "We need to reform and strengthen multilateral institutions, not cripple or block them," he said.

Confining itself to a bilateral approach means Singapore forgoes win-win opportunities which come from countries working together with more partners, said Mr Lee.

"When groups of countries deepen their economic cooperation, they will enhance not just their shared prosperity but also their collective security. With more stake in one another's success, they will have greater incentive to uphold a conducive and peaceful international order which will benefit many countries big and small," Mr Lee said.

Short of universal trade agreements, countries should at least strive for regional or plurilateral arrangements. "This may be a second best solution, but it is a practical way to incrementally build support for lower trade barriers and higher standards, which can then be adopted by other countries," he noted.

Mr Lee said this was the rationale behind the Trans-Pacific Partnership.

The US was originally on board the deal, but later withdrew from it, with the remaining 11 members later signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is now in force.

Mr Lee said he is glad that more countries - including South Korea, Thailand and the UK - have expressed interest in joining the CPTPP and China is also watching the trade pact closely. "They are not ready to join now, but I hope that they will seriously consider doing so sometime in the future," he added.

He also expressed hope the US would one day become a member of the partnership it had a leading role in designing.

Turning to the Regional Comprehensive Economic Partnership (RCEP), which covers North-east and South-east Asia, India, Australia, and New Zealand, Mr Lee said that its "inclusive configuration minimises the risk of the RCEP being misperceived as a bloc that excludes the US and its friends".

With a wide range of participants, the RCEP's standards are naturally less ambitious than the CPTPP's and the deal is also much harder to negotiate, said Mr Lee.

"Nonetheless, I hope the participants can take the final step to complete the RCEP by this year, or if not, as soon as the election schedules of the key players allow," he added.

Mr Lee said that regional cooperation goes beyond trade; citing Asean, he said that the 10-member bloc has become an "effective regional partner of other countries, and enabled its members to project a stronger external presence as a group".

Noting that Asean works on the basis of consensus, Mr Lee said it "makes more progress in some areas than others, because Asean members are not immune to the strategic forces which pull us in different directions".

"Despite its limitations, Asean has contributed greatly to the well-being of its members and the security of the region, and Asean's partners recognise the value of Asean Centrality," he said.

New platforms for regional cooperation have emerged, notably China's Belt and Road Initiative (BRI), said Mr Lee, which Singapore supports and views as a constructive mechanism that engages China positively with the region and beyond.

Mr Lee said this is why Singapore is an active participant working, for example, with the World Bank to promote financial and infrastructure connectivity and providing supporting professional and legal services to BRI countries, among others.

"Of course the substance of the BRI, and the way in which the BRI is implemented, are very important. The specific projects must be economically sound and commercially viable, and must bring long term benefits to its partners.

"This has not always been the case; some BRI projects have run into significant problems. Overall, the BRI must be open and inclusive, and must not turn the region into a closed bloc centred on a single major economy," Mr Lee said.

As Asian countries deepen their links with China, they also need to grow their ties with the US, Europe, Japan and others. "In other words, the BRI should help China to integrate with the world. The end result should be to strengthen globalisation, and not to divide the world into rival spheres of influence," he added.

Mr Lee said he believes China appreciates this. At the recent BRI Forum in Beijing, Chinese leaders stated clearly that the BRI would be "open, green and clean" and China's Finance Minister Liu Kun also set out debt sustainability requirements for projects.

"In the nature of such reassurances, the test will be how these statements of intent are implemented in practice, but these are steps in the right direction," Mr Lee added.

When other initiatives are proposed for regional cooperation, Singapore's attitude towards them is consistent.

"We support regional cooperation initiatives which are open and inclusive platforms for countries to cooperate constructively, and deepen regional integration. These initiatives should strengthen existing cooperation arrangements centred on Asean," said Mr Lee.

"They should not undermine them, create rival blocs, deepen fault lines or force countries to take sides. They should help bring countries together, rather than split them apart."

During a question-and-answer session following his keynote, Mr Lee was asked what small countries can do to avoid taking sides.

Mr Lee replied that these countries should try their best to be friends with both the US and China, and to maintain relationships with both, and to develop ties, such as in economic, trade, and diplomatic relations.

"But to actively avoid taking sides actually also requires actively not being pressured to take sides," Mr Lee said, to chuckles in the audience.

"And unfortunately, when the lines start to get drawn, everybody asks: Are you my friend or not my friend? And that makes it difficult for the small countries.

"We must expect sometimes to be asked these questions, and the answer is: Well I am friends with you, but I have many friends and that's the way the world has to be. And if it were not, I think it would be a much unhappier world."