The trade conflict between the United States and China will not blow over quickly as it is driven by fundamental shifts in their domestic politics and economies, Minister for Trade and Industry Chan Chun Sing told the American business community yesterday.
He urged about 250 US and international business leaders to make a stand for a rules-based multilateral trading system and to continue investing in the region to set the pace for Washington, at the lunch discussion held by the American Chamber of Commerce in Singapore.
"Politics follows economics. You are the leaders of economics... the choices you make individually will inform Washington where their priorities go," said the minister.
Mr Chan spoke for 11/2 hours on the future of the US-Singapore relationship and the role of foreign investment, fielding questions from the American business community on how Singapore was affected by the recent streak of protectionism in the US.
Like Mr Chan, most of the business leaders reckoned that the trade tensions were unlikely to vanish after the US mid-term elections in November or even after a change in leadership, because of fundamental shifts in both the US and China.
For the US, the shift was a domestic backlash against globalisation and politicians tackling the issue of how to better distribute its benefits, he said.
China has changed dramatically since joining the global trading system 20 years ago and has to grapple with the responsibilities expected of an economic superpower, he added.
"The two giants will determine the fate of not just their domestic economies and systems, but also the trajectory of the world."
Singapore and South-east Asia are closely watching how the US carries out its Indo-Pacific strategy, particularly the US$113 million (S$155 million) economic programmes and US$300 million security cooperation schemes announced recently to deepen US engagement in the region. "If countries are unable to find certainty in a particular course of action, they'll calculate and come to their own conclusions on what they should do," said Mr Chan.
Singapore is responding to the trade conflict by working to boost its speed of innovation and diversifying its markets, he added.
He hoped that the European Union-Singapore free trade agreement could be signed and that substantive negotiations on the Asean-led Regional Comprehensive Economic Partnership trade pact could be concluded by this year .
He also hoped the revised Trans-Pacific Partnership, which Singapore is part of, but which the Trump administration pulled out from, can come into force in the early part of next year.
But Mr Chan acknowledged that Singapore may not have felt the full impact of the trade conflict yet.
"These are still the early days and many of you are still in a wait-and-see mode. You may have perhaps held back some of your investments, but in the short term are unable to make significant shifts in your investment pattern," he said.
The worst impact of a sustained trade conflict would be the global loss of confidence in investment and financial markets, he added.
Mr Chan said that to counter this, Singapore - with like-minded countries and companies - will keep making a stand for the global multilateral rules-based system.
He urged the business leaders, whom he called the movers and shakers of businesses in the region, to exercise their clout as their choice of where to invest "will cumulatively build up a picture of what the US stands for in this region".
He said: "It's not just you following Washington. It's also where Washington follows you because of your individual decisions, which add up."