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MFA Press Statement: Edited Transcript of Minister for Foreign Affairs Dr Vivian Balakrishnan's Remarks on "Seeking Opportunities Amidst Disruption - A View from Singapore" At the Center for Strategic and International Studies (CSIS), 15 May 2019

16 May 2019

Introduction
 
1. Thank you Mike for that introduction. I am a returnee to CSIS and I need to begin with an apology for standing you up last year. There was this ‘minor distraction’ which necessitated me rushing off to Pyongyang before Chairman Kim and President Trump met in Singapore.
 
2. I am always reminded it is very important to get your bullet points out there straight away. So, my key points. First, the accelerating technological, and especially the digital revolution, is actually the prime cause of the disruption in jobs and middle-class wage stagnation which we are confronting all over the world. So, first point.  It’s the technology. Second point, while globalisation and free trade is not the cause of the disruption, it actually has accelerated that disruption in jobs and middle-class wages. Third point, and this is a political point – that globalisation must be accompanied by an equal measure of domestic reform. By that, I mean reform in education, training, social security, healthcare and the economic structure of our societies itself. Because without this accompanying reform, our people are going to feel unable or ill-equipped to deal with the global competition, our economies will slow down due to the barnacles that will collect with time, and the body politic will lack the confidence to face these challenging times. So, these three points – technology, globalisation, and the need for domestic reform.
 
3. The key point which I want to leave with you today is that free trade and globalisation are not zero-sum games. And you can figure out where I am going with this theme. All of us need to work together. The scale and the transboundary challenges that we confront today – climate change, cyberspace, outer space and pandemics – all of these issues of the global commons, demand more cooperation, not less. We need to double down on multilateralism and all of us need to contribute actively to shaping these new norms that will govern our global commons. Defining these rules through a multilateral process in which all States can engage as equals, is essential in order for us to build that global consensus; particularly for a small, tiny, city-state like Singapore, in order to strengthen the rule of international law. So let me offer therefore my perspective as a representative of a little red dot in the heart of Southeast Asia.
 
Singapore-US relations
 
4. Singapore did not fight for independence. We did not believe we would be viable. Nevertheless, 54 years ago, we were cast off by our northern neighbour and, with our backs to the wall, the pioneer leaders made a series of what in retrospect were inspired decisions. The first was to run a democratic system instead of a communist system. And remember, this was in the mid-60s. The second was to run an open economy. Well, basically because we had no choice. We were cut off from our hinterland. The third was to invest assiduously in our people – education, training, a very hardworking and disciplined workforce. The fourth decision, 54 years ago, was to invest in first-world infrastructure when we were still a third-world country – ports, airports, facilities – aimed for first-world standards. The result of all this is that our per capita GDP grew from US$500 to today, it is in excess of US$50,000. But having enumerated the local factors, there is one external factor that is worth emphasising. The political environment in the Asia Pacific, in particular, amongst the original members of ASEAN – Singapore, Malaysia, Indonesia, Philippines and Thailand. We had the benefit of a stable pro-growth economic and political environment. And a key reason for that, actually, was the United States of America. 
 
5. Since the end of WWII, America has helped to keep the peace in our region, and again, if you take your mind back to the 50s and 60s, the stand and the sacrifice that America made in Korea and Vietnam provided the rest of us in Southeast Asia time and space to prove that open market economic integration works, and Singapore became a global city, a key node in the emerging global value chains, before the word ‘globalisation’ became fashionable. Because of this experience, Singapore has never shied from publicly articulating the value of a continued and sustained American presence in our region. Another way of putting it, we have viewed America as a benign hegemon, a positive force for good and we have been a beneficiary of this presence.
 
Trusted Economic Partner
 
6. Since independence, we developed a mutually beneficial economic relationship with the US. It has grown and matured, and is based on mutual respect, trust, the rule of law, respect for intellectual property and fair and open market access. The US-Singapore Free Trade Agreement (FTA) was in fact the US’ first bilateral agreement with an Asian country. It was ahead of its time, and even now after 15 years, it remains a high-performing FTA that continues to benefit both countries. Every time we see President Trump, we remind him that the US consistently runs a substantial trade surplus against Singapore. I emphasise that – a substantial trade surplus against Singapore. In 2018, this stood at around US$18 billion. But we also emphasise to the President that we are not complaining. That is a subtle hint that we don’t look at bilateral trade balances in isolation.
 
7. In 2017, Singapore was the US’ second-largest Asian investor, and in fact, we were the top Asian investor in commercial property in 2018.  US exports to Singapore and Singapore investments in the US support more than a quarter of a million American jobs. In 2017, US foreign direct investment in Singapore amounted to US$274 billion.  This represents about 80% of the total US foreign direct investment in ASEAN, which totals around US$328 billion. Incidentally, this figure of US$328 billion means that America has invested more in Southeast Asia than America has invested in India, China, Japan and Korea combined. This is another factoid which we constantly remind the Administration of, because the point here is that America has real skin in the game, and America has been a welcome positive presence in Southeast Asia.
 
Major Security Cooperation Partner
 
8. On the defence front, when the US was asked to leave Subic Naval Base and Clark Airbase, in the late 80s, Singapore stepped up and under the 1990 MOU, we offered to host a logistics command post. This was the basis of the “places not bases” concept that the US has in fact replicated in other regions, including Thailand. We have been a “Major Security Cooperation Partner” of the US since 2005. Our facilities have served as a transit point for US ships and aircraft through the region in order for them to refuel, resupply and repair. Today, US forces remain the most frequent foreign visitors to Singapore’s military facilities. I should add that Chinese and Russian ships also transit through Singapore. The US military and the Singapore military exercise both bilaterally and multilaterally. We enjoy a high degree of interoperability. Singapore’s Air Force has three detachments in the US, two in Arizona and one in Idaho. This allows us to train our pilots in a much bigger, and less congested airspace, more than what we have at home.  In fact, the other factoid is, if you ever ask, “Which country has the most number of foreign troops based in continental US?”, the answer is Singapore. This again illustrates the deep reservoirs of trust and goodwill between our two nations. Speaking of the Air Force, in order to replace our fleet of F-16s, we are also looking at the initial acquisition of four F-35 Joint Strike Fighters, with the option of subsequent purchases if we decide to proceed. The robust economic, defence and strategic relations between the US and Singapore are a prime example of the partnerships that form the bedrock of continued and sustained US engagement in our region. I have taken some pains to elaborate on these points because sometimes, these things are taken for granted and people do not realise just how deep the engagement has been.

Rise of Asia
 
9. But let’s zoom out beyond Singapore. We all recognise that the regional architecture has been transforming over the last couple of decades. In fact, while I’ve said that Singapore has benefited from the American presence in Asia, actually Singapore was not the chief beneficiary. The biggest beneficiary of this Pax Americana in Asia is China. Today, China is the second-largest economy in the world. China is ASEAN’s biggest trading partner. Most countries in my part of the world, including allies of the US – such as Australia, Japan and the ROK, also have China as their largest trading partner. China’s share of the global GDP has tripled. When it first joined the WTO in 2001, it was about 5% of global GDP. Today, it has tripled to 15% or 16% of global GDP. It ranks amongst the world’s fastest growing economies, and in 2010, China overtook Japan to become the second largest economy.
 
Erosion of support for globalisation
 
10. The third key change is that the consensus on the benefits of globalisation and free trade, and the need for a multilateral approach to global challenges, has eroded. This consensus has eroded due to middle class wage stagnation, job erosion and rising inequality, particularly in already developed countries. There was a time when you did not really have to make an argument for free trade. It was assumed to be an unalloyed good. Today, there is an active debate all over the world. The current debate within the US reflects a perfectly legitimate political question which is – why should America continue underwriting a world order that it feels benefits others more than the US? This is a perfectly legitimate political question that American voters have posed. Exacerbating the problem is the fact that post-WWII multilateral institutions – the UN, IMF, the World Bank and even the WTO  have not kept up with the times in order to adequately address the pressing concerns of today, and to recognise that times have changed.
 
11. We recognise that the WTO is not perfect. However, we believe it is even more important now to recognise that the WTO and free trade has underpinned global stability, growth and prosperity since its establishment. In other words, the peace and prosperity that we have enjoyed has been due to the fact that we have a world which in the past seven decades, was converging on economic integration and lower trade barriers. That is why we continue to state that it is not constructive for countries to block core functions of the WTO, including the Dispute Settlement Mechanism, for example, by delaying the appointment of new judges to the WTO Appellate Body.
 
12. Many countries still view rules-based multilateral system as key to maintaining their economic dynamism, and remain committed to multilateral trade and economic cooperation. But if these multilateral institutions and trading frameworks are allowed to erode, then naturally, alternative solutions in new systems and architectures will emerge. Already, we see the presence of this in Asia. We have seen the emergence of the Asia Infrastructure Investment Bank. You see the emergence of the Belt and Road Initiative. The question is, how do we best incorporate these new institutions and processes into the existing regional and international architecture? And to do so in a sustainable and peaceful way, instead of it leading to a clash or to a breakdown in these key pillars that have sustained peace and prosperity for seven decades?
 
13. From Singapore’s perspective, because we still believe in multilateralism, and we still believe in free trade, we have continued to press ahead. So although America pulled out of the TPP, fortunately Japan stepped up to the plate, managed to corral all the other eleven. We changed the name to CPTPP, we’ve signed it. I think seven of us have ratified it, and the CPTPP came into force at the end of December last year. Similarly, we are pursuing negotiations for the RCEP – the Regional Comprehensive Economic Partnership, which includes all ten ASEAN countries plus India, China, Japan the Republic of Korea, Australia and New Zealand. This will, I believe, be the world’s largest free trade agreement. Obviously, not at the same level of ambition as the CPTPP, but nevertheless in terms of scale, it’s significant, and we hope that there will be a breakthrough later this year once these inconvenient things called “elections” are over. We are waiting for the Indian election to be settled. Well, the elections in Indonesia are over, so we hope they can then focus on these negotiations. Now, these new arrangements can impose uncomfortable requirements in certain countries. And it may require difficult internal reform. Let me give you an example. In the case of the CPTPP, Japan had to take a politically difficult decision to open up its agriculture sector. Vietnam had to update its labour and environmental standards. Nevertheless, their willingness to take these hard decisions shows that the region has signalled our commitment to greater trade liberalisation and economic integration, and we continue to leave the door open, and to keep reminding the American leadership that we hope you will come back and assume your leading place at the table.
 
14. As the centre of gravity, of economic balance, shifts, I would argue that the best way for the United States to safeguard its own enlightened long-term self-interest is to keep its seat on this table, and to actively contribute to the shaping of norms that govern the global commons. And to remind itself that in fact for seven decades, this system was envisioned by, and underwritten by the United States, and the United States remains a welcome presence.
 
A race for technological leadership
 
15. Let me move on to the race for technological leadership. We believe that in this arena, US leadership will be even more crucial as we undergo this technological revolution. Machine learning, artificial intelligence, big data and other disruptive technologies are radically transforming our economies, our societies, and even our politics. Many of these technologies began in the United States. The United States continues to have the expertise, the innovative capacity, the talent, the institutions, including the rule of law, that will ensure, or certainly help to ensure that these technological changes will benefit as many people as possible and to do so in a fair and ethical way. The United States is by far the country with the most advanced and innovative technology, and countries all over the world will want to jump on this bandwagon. The question is: are we going to split into two separate bandwagons, on two different journeys, or will we continue this journey of integration, but on commonly accepted rules by consensus?
 
US-China relations
 
16. The protracted US-China trade talks have created great uncertainty and volatility for our markets, especially for those of us in Southeast Asia. In the case of Singapore, because our trade is three times our GDP, any disruption of global trade will have a disproportionate impact on us. How the competitive dynamics between the United States and China play out in trade, in technology, or security, will impact all of us disproportionately. And Southeast Asia, which stands at the intersection of major power interests, is viewing this duet with great concern, maybe even grave concern. And one point is that for us in the middle, and especially for smaller countries, we do not wish to be forced into making invidious choices. So we hope that both sides will work out a strategic response that will take into account China’s increasing influence and weight in the international arena, and that both sides will find the way to accommodate each other’s legitimate interests.
 
17. The United States has described China as a “revisionist power”. I think this was in the December 2017 National Security Strategy paper, and China has been described as a “strategic competitor” in your 2018 National Defense Strategy paper. Some have bandied the concept of a “G2” or a “grand condominium of the world”. This to my mind, is not necessarily a preferred state of affairs, because by definition, a G2 excludes everyone else.  On the other hand, viewing China purely as an adversary to be contained, will not work in the long term given the entire spectrum of issues that will require cooperation between the US and China. Without active cooperation between the two superpowers, all the global challenges of the next century cannot be solved.  So competition with China is inevitable, but it does not have to be a zero-sum game. Constructive competition should take place within the bounds of established international norms and an adherence to international law.
 
18. As I noted earlier, the world, and certainly the Asia-Pacific, has experienced seven decades of peace and prosperity precisely because of the stability brought about by a world order envisioned and underwritten by the United States. Now think about it, if China has been the largest beneficiary of the system, it is highly unlikely that China would seek to directly undermine a system which has provided a formula for peace and prosperity in the region, and especially in Asia. However - and this is an important however - China will want to have a significant say in shaping these evolving norms, processes and institutions. And it is an entirely legitimate expectation on the part of China.
 
19. I just attended the second Belt and Road Forum in Beijing last month, together with my Prime Minister. In his speech at the Forum, President Xi emphasised China’s commitment to the continued opening up of the Chinese market, the import of more competitive products and services. He also committed to increase protection of intellectual property, to strengthen macroeconomic policy coordination with other major economies. China has openly addressed the questions raised about the intent and viability of the various projects under the Belt and Road Initiative. They have committed to work together with all partners in the spirit of openness, inclusiveness and transparency.  And I will accept those assurances at face value. At the same time, the success of the Belt and Road Initiative, will depend on how partners and stakeholders work together in order to shape and to implement these projects. And time will tell. As my Prime Minister said in Beijing last month, “how China performs its prominent global role, and how the international community adjusts to China’s growing influence, will determine whether all of us, and all our countries, can continue to enjoy peace and prosperity”.
 
US engagement of the region
 
20. So the point I’m leaving with you is that in Southeast Asia, we welcome both a sustained US presence and a peaceful rise of China. We are heartened that the United States has continued to engage ASEAN, has put ASEAN at the centre of its Free and Open Indo-Pacific strategy, and when I say centre I don’t just mean that we are geographically at the centre, but philosophically, diplomatically and strategically, ASEAN remains at the centre of the Indo-Pacific area. The countries in my region welcome the Trump Administration’s announcement of economic initiatives in digital economy, energy and infrastructure, cybersecurity. The US’ Indo-Pacific strategy seeks to strengthen America’s bilateral and multilateral cooperation with all countries in our region. We hope the US will continue to do more to plug the gaps in engagement that have been created by the disruptions of our times.
 
21. There is a strong argument to be made for the US to pursue a more active economic agenda in the region, in particular with ASEAN. The fact that ASEAN will continue to be a major source of global growth and demand, and will be a lucrative investment destination. I had already explained earlier that the United States has more invested in ASEAN than it has in India, China, Japan and Korea combined. The point is this – the growth prospects in Southeast Asia, which has not yet fully harvested the demographic dividend, means that a Southeast Asia with a combined GDP of US$2.55 trillion today, and a collective market of 630 million people, this market, this combined GDP, is set to grow in the next two, three, four decades. So the point is, it is an opportunity waiting and it is a part of the world where the US has occupied pole position for a long time.
 
Conclusion
 
22. So let me conclude by restating the obvious. We live in a rapidly evolving multipolar world, confronting a technological revolution, which in turn has disrupted society and economies, and in particular elicited concern and anxiety about jobs and middle-class wages. Successfully dealing with these challenges both domestically and internationally will be the central political challenge of our time. If America remains a confident, open and inclusive conductor, co-conductor, cheerleader of this new emerging global architecture, then a golden age awaits us. If on the other hand, for tactical, or for clearly misjudged strategic decisions, we see a world that bifurcates, that is splintered into rival blocs and even the internet becomes what some people have called “splinternet”, then we will fail to harvest the opportunities that this technological revolution opens up for all of us.
 
23. The US has built a large reservoir of goodwill, especially in my part of the world, and we believe the US remains well-placed to continue to reap the benefits of my region’s economic dynamism. After all, you sowed the seeds of security, prosperity, friendship based on mutual respect, a long time ago. My appeal to the United States, is to double down, and reap the rewards together.
 
24. Thank you. I thank you for your attention. I look forward to answering your questions in the time to come. Thank you all very much.
 
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