Singapore Prime Minister Lee Hsien Loong: The world will not split into two, but neither can it return to the past

John Micklethwait (JM): Thank you for talking to Bloomberg and the New Economy Forum. The last time that we spoke, you talked very eloquently about Singapore's role in Asia and about the rising power of China and about some of the difficulties of being an ally of America in this particular region. And I wondered from all those perspectives, what should President-elect Joe Biden - assuming that he has indeed won - do in terms of a policy towards the region and towards China in particular?

PM Lee (PM): I think his first priorities will be domestic. He has got many urgent things to deal with, starting with Covid. Asia is a very important part of the world for America, and China particularly. I hope that he will be able to focus his mind on developing a framework for an overall constructive relationship with China. That means one where you are going to be competing, where there will be issues to deal with, but where you do not want to collide and will try very hard to develop the areas of common interest and constrain the areas of disagreement. Within that framework, deal with trade, security, climate change, non-proliferation, North Korea - all the many issues which the two biggest powers in the world have to focus on. Amongst those will also be issues which will be of concern to all the rest of us in Asia, who are watching carefully to see how things will develop. Because the last four years have been quite a tumultuous ride.

JM: Do you think that Trump has done permanent damage to or changed the way that America is viewed in the region?

PM: I think that there will be some long-term impact on perspectives on America, and on how America views itself. It did not start with Trump, but over the last four years, there has been a clearer shift. When you talk about putting America first and making America great again, it is a more narrow definition of where America's interests lie than has hitherto been the way US administrations have seen things. Previous administrations have seen America as having a broad interest in the stability of the region and the well-being of its partners, in the tending of its alliances with allies, in fostering an overall environment where many countries can prosper in an orderly scheme, and America is part of that scheme and subjects itself to the same rules and - discipline is a strong word to apply to a superpower - but presents itself as complying with an order, which is in the interest of more than itself.

It will take some time for America to come back to such a position, and for others to be convinced that it is taking such a position. It may never come back all the way, certainly in the short term and certainly in terms of its relationship with China.

I cannot speak for the whole administration, but I think there are some elements in the administration who definitely did want to make moves which would be very difficult to reverse by the subsequent administration, and which will set the tone for the relationship for a long time to come.

Once you impose punitive tariffs, once you put them on, whatever their merits, no successor government can just say those were the wrong things to do and I take them away. You have to deal with it, but you are dealing from a new starting point. There are many other steps which are even more sharp in that way. On technology, the definition of how you see the other party - whether it is a competitor, whether it is a challenger, whether it is a strategic threat, whether it is a mortal enemy - these are statements which have consequences.

JM: On that particular point, do you think that there is a possibility that Biden generally could end up being somewhat tougher in terms of everyday things than Trump was. To the extent that Biden is more likely to complain to China about human rights. And you have also got this side of the Democratic Party for whom things like labour rights, environmental rights matter enormously? In some ways, despite being predictable, he could be tougher?

PM: It is possible. He knows Xi Jinping very well because they spent many hours together. Xi visited the US and he (Biden) visited China too. They have engaged one another. That personal engagement at the top is important. Equally important is how each country sees the other and the intentions of the other, and whether they see the possibility of being able to work together to mitigate the inevitable contradictions which are going to arise between them.

It is not always easy but it is possible. It has historically happened with many administrations, who will make very fierce statements on the campaign trail. Once you become the administration, you have to deal with realities, and you have to pivot. Bill Clinton did that. He is the one who (as a candidate) talked about coddling dictators from Baghdad to Beijing, but (as president) he did business with China.

I hope that something like that can happen with the next administration, but I think it is harder because the consensus to see China as a strategic threat is almost becoming received wisdom and unquestionable in the US, in Washington. It will be very difficult for any administration, whether it is Biden or on the other side Trump, to disregard that and then just proceed as if the last few years had not taken place.

JM: What about on the other side? You are one of the people of America's allies who understands and knows China best. Do you think that the Chinese attitude - we talked a lot about the American attitude - do you think the Chinese are prepared to do bargains about this? It takes two to tango.

PM: Yes, it does. This is a bilateral relationship. I do not think the Chinese want a collision. I think they know they are not ready for a collision. But I am not sure that they are prepared to give a lot of ground, and their principal consideration will be a domestic one, rather than the international balance. Intellectually, and in an abstract sense, they will agree when you tell them that they used to be 4% of the world's trade and are now 13% or so. The rules which were settled when you were 4% have to be updated now that you are 13%. You have to make certain changes. Changes to the overall balance of contributions to the overall system, and also changes to deal with particular grievances and issues which have arisen on specific problems, whether it is trade or whether it is security issues. In the abstract, I think they will agree to, if not to a shift, at least a change in the trajectory.

In practice, when push comes to shove and you have to negotiate a new dispensation, I think there are hard bargains. It is not clear that between the two sides, they will be able to move to a new position. I can understand the difficulty, because we are where we are, as a result of 30 to 40 years of liberalisation and reform and opening up. In the process, China has gotten more affluent, more powerful. The partners of China have also benefited from China's emergence as an economy, its connection to the world, its production of manufactured goods, its consumption of everything from aeroplanes to movies and financial services.

The Chinese narrative would be, it has been win-win, we should all rejoice, why does anything need to be improved? Actually, things have gotten better, yet many countries do feel that things do need to be adjusted. That adjustment will be very difficult to make.

JM: You have always been a great supporter of globalisation and things like that. One thing which worries me about the Regional Comprehensive Economic Partnership (RCEP)* is, if you look at for instance China's treatment of Australian exporters at the moment. It is punishing Australian exports for political reasons. Most people will look at that and say that is an infringement of what a trade bloc is about. But under this format, there are no tools for dealing with this. Do you think that is something that may come in the future?

PM: The way to deal with those kinds of issues is the WTO. I mean, the WTO does have rules - what restrictions you can impose, how you have to justify them, how to adjudicate them and appeal the adjudication. I hope with a Biden administration, the WTO will no longer be deliberately pushed to one side, as has been the explicit policy of the Trump administration.

The way the world has tried to think about trade since the Second World War and the creation of GATT (which was the WTO's predecessor), is to try and segregate trade from any other issues and disputes which countries may have, on the basis that trade is win-win. You have to have rules for trade, but the rules have to be objective and fair, and there must be some way to deal with the rules. That was the General Agreement on Tariffs and Trade (GATT) and then the WTO.

When countries treat trade like that, you can quarrel over many other things, almost come to blows, but let us try to insulate trade, because if I hit trade, I hurt myself, I hurt you as well. Unfortunately, the lines are grey and, it is not just in Asia but even on the other side of the Pacific, or in Europe, we have all sorts of issues. When it comes to phytosanitary or medical requirements, on wine, on bananas, on rock lobsters. Even between America and Canada, once in a while, strange things happen. They are always declared to have nothing to do with any other dispute and to be purely trade. Sometimes it is purely a trade issue, sometimes it is not.

The more countries avoid doing that, the more it will be credible when they say we believe in multilateral trade, and they believe in win-win development and cooperation with our neighbours. The penalty is not just what you can do with a slap on the wrist. Some of that is necessary, because otherwise why would you pull back? The price really is, in the longer term, the reputation of the countries and how they practice their trade diplomacy and their international relations with other countries. Whether they have a reputation for dealing above board and directly or whether when issues arise, a myriad of other problems spontaneously appears. Countries do have reputations to protect.

JM: Singapore has been one of the great successes of global trade. When you look at the world at the moment, there is a possibility of division into two internets; there is a possibility in the division into regional blocs with maybe things like RCEP becoming a sort of more regional variety. You talked about the WTO. Do you worry about a global world becoming a much more regional one?

PM: Regional blocs are a possibility, but I do not think it will split up all together. Because the trans-Pacific trade links and trans-Atlantic trade links are too substantial to be cut off, and to divide us into two worlds or three worlds. The risk of bifurcation of technology is there. In fact, it is not just a risk, it has already happened because, in China, you cannot get Google or Facebook or Twitter. They have their own equivalents.

There are legitimate reasons why you may be concerned about the provenance and ownership and control of the technology for vital parts of your information infrastructure, like the 5G system.

JM: You have finessed Huawei quite elegantly as I remembered it by giving them some access to Singapore.

PM: No, we did what we thought made sense for us. We have stringent security requirements and we stated them upfront. We invited the operators to bid. We did not rule anybody out. The operators made their own calculations, and they decided whom they would partner with. It is up to them. Our attitude is whoever's system I buy, and it is not going to be my system, because I do not have a Singapore 5G system, there could be vulnerabilities, there could be deliberate vulnerabilities, and there certainly will be intruders trying to come in even if there are no deliberate vulnerabilities. Some intruders are bound to come in. Therefore, absolute security is not to be had. We have to be practical about it. We will do what we can, and we will use the systems for the risks and purposes which suit them. If I really have something which I absolutely cannot risk compromising or losing information about, then I have to find some other solution. If I say I want absolute security, that is not to be had in this world.

JM: Do you think there is a way of putting the internet back together again?

PM: The ideal where the whole internet is one and everybody is instantly connected to everybody else, there is no gatekeeper along the way and it will heal itself and treat censorship as a flaw which you can build around, that was the original ideal. I do not think that is realistic. It is substantially connected, but there will be all kinds of gatekeepers as well as bad actors on it. You will be able to get through better than in the old days by calling IDD, but by no means will it be a seamless network.

JM: Do you think it (Covid-19) gives Biden an opportunity, assuming again that he becomes president. Do you think it gives him an opportunity to reach out to areas like Asia? This is the first big crisis, I think you can say since the Second World War, where America has not played a leading role. It withdrew from the WHO. It did not reach out to other countries in the way you might expect. Does that give him an opportunity, a way of bringing your region back to America?

PM: I hope so. The chance is there, but he has many priorities and Asia is but one of them. In Europe, he has many priorities too - trade as well as NATO. With Russia, he has issues to settle, and in the Middle East. I think he has a full plate. I hope that it will be a new direction for America, but do not forget that Mr Trump collected more votes than Barack Obama. He has not disappeared, nor the pressures which he represented, they have not disappeared from America's body politic either. That will be something which Joe Biden will have to contend with, deal with. Hopefully, we will be able to remove some of the bitterness and rancour and poison, and begin some reconciliation between the red and the blue Americans so that come 2024, the contest is not such a poisoned one.

JM: Conversely, to the Chinese, does this also offer an opportunity? If you look at these big challenges like Covid and climate change, these are things that happen to all humanity. They offer a potential bridge to open up a better relationship with America.

PM: I hope so. When Mr Trump was elected, some Chinese commentators, perhaps overly confident of their ascendance, thought that they saw a strategic opportunity - that America would now not have a coherent position in the world, and therefore they had the field open to them, and that they could expand their influence in the world. I think that they have since discovered that it is not really that much to their advantage to have America at sixes and sevens, and unable to have a coherent foreign policy vis-a-vis China and the rest of the world. It is better to have somebody there who may not fully agree with you, but understands his interest in a broad way and whom you can deal with.

With Biden, maybe they will decide that they want a new try. I hope so. It is not easy to do this. You remember when Mr Obama first came in and Hillary Clinton was his secretary of state. She met (Russian Foreign Minister) Sergei Lavrov and said perezagruzka (reset). It did not succeed in resetting relations, because both sides' principal considerations are domestic ones. The driving forces, the compulsions, their priorities, are domestic ones. If you want the outside world to be at peace, that is unlikely to drive your domestic policy or cause you to adjust your domestic attitudes to lead to a stable international order. That is why you end up with miscalculations and all kinds of unexpected developments in the world.

*The Regional Comprehensive Economic Partnership (RCEP) comprising the ten ASEAN countries (Indonesia, Malaysia, the Philippines, Thailand, Singapore, Cambodia, Laos, Myanmar Vietnam, Brunei) as well as China, South Korea, Japan, Australia and New Zealand, was signed on 15 November. Billed as the world's largest trade agreement, the RCEP makes up about 30% of the global economy. The US is not a member, while India withdrew from the agreement negotiations last year.

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