Speech by Mr Lee Hsien Loong, Prime Minister and Minister for Finance, at the US-ASEAN Business Council, 12 July 2005 - Engaging a New Asia

Engaging a New Asia

Mr Matt Daley

President of the US-ASEAN Business Council,

Members of the US Senate and House of Representatives,

Excellencies,

Ladies and Gentlemen

May I thank Secretary Elaine Chao for her generous introduction and warm remarks. I also thank Senator Richard Lugar for his perspective on the US-Singapore bilateral relationship and the US role in Asia. Let me also acknowledge the US-ASEAN Business Council which has been a strong friend and supporter of ASEAN, never losing faith in the region even during the difficult years of the financial crisis. Thank you for organising tonight's dinner. I am honoured by the presence of so many friends of Singapore - especially Senator Kit Bond and Congress­man Solomon Ortiz, the Co-Chair of the Singapore Caucus in the House of Representatives. I am happy to be back in DC among all of you.

America has long been Asia's friend. Since the Second World War, you have helped to keep the peace in the region, and to provide the stability and security that underpinned the growth and development of many countries in Asia. You defended the region not only with words but with action. In doing so, you bought fragile new countries precious time to consolidate and prosper, and made a decisive contribution to Asia's progress.

Today, with the Cold War over, America has many priorities worldwide, not least to complete its work in Iraq. But Asia still merits America's close attention and engagement, because America continues to play a vital role in Asia's stability and prosperity. Asian countries also want America to be involved in the region, and are keen to engage America across a broad front.

Economic Engagement

In the economic arena, a dynamic and vibrant Asia brings tremendous opportunities. The central reality in this new Asia is the emergence of China and India. China's economic weight is increasingly being felt in the global economy. It is the third largest trading partner of the US, and the top trading partner of many Asian countries, including Japan, South Korea, and several ASEAN countries. China's domestic market is growing rapidly. Chinese companies are upgrading their business and technology, and starting to invest abroad. Lenovo has acquired IBM's PC unit, and Chinese companies are currently bidding for Unocal and Maytag. These moves reflect a further step in China's integration with the world economy.

India is also on the ascent. The Indian economy is slowly but steadily being liberalised. Tariffs have come down, and economic sectors are being freed from the dead hand of government restrictions and red tape. This month, Singapore and India concluded a Comprehensive Economic Cooperation Agreement (or CECA). This is a comprehensive free trade agreement, covering goods, services as well as double taxation. It is the first such agreement that India has signed with any country. It sends a strong signal that India is committed to continuing economic liberalisation and market reforms, and heralds further moves by India to engage the outside world.

Overall, Asian countries see the emergence of China and India as a major plus. It means fiercer competition, but it also opens up many opportunities. China's export industries now rely significantly on materials and components supplied from other Asian countries. China's growing domestic market is also pulling in imports from other countries, and opening up opportunities for foreign investors.

China has been skilfully deploying soft power to engage the region and cooperate with its neighbours on a win-win basis. For example, it is negotiating a free trade agreement with ASEAN, and has given concessions for ASEAN agricultural products to enter Chinese markets through an "Early Harvest" package. India's expanding economic links to the region, especially Southeast Asia, will complement China's, and make the region less dependent on a single country. Together, China and India are twin engines giving the whole region an extra boost.

America should also see the emergence of these two giants as a positive development. The US must engage China and India constructively, develop a broad relationship with them, and through trade and investments give them a strong stake in building good relations. Already American consumers are gaining from highly efficient Chinese producers of consumer goods, such as those which supply Walmart, and US companies are saving costs outsourcing business processes to India. Beyond economics, the US gains from an Asia which is stable and prospering, and which is bound by an international system of rules that promotes peaceful evolution and engagement.

But as the three countries adjust to a new balance, frictions will from time to time be inevitable. Lately, US-China relations have been troubled by issues like the trade imbalance, textile exports and CNOOC's bid for Unocal, which have become politicised and emotional. It is in the interest of both countries, and of the rest of the world, to address these issues calmly and rationally. The world is watching how the US deals with them. If it takes a considered, long term approach, upholding its commitment to free markets, free trade and international rules, it will preserve its larger interests in Asia and set a valuable precedent for China and all other countries. But if it yields to short term political pressures and turns protectionist, the damage to US interests in Asia and its standing worldwide will be long lasting.

US-India relations, on the other hand, are warming up. The US is India's top trading partner. Both countries have entered into a Strategic Partnership and Prime Minister Manmohan Singh is visiting Washington next week. Some commentators have surmised that the US and India are coming together to contain China, but India will make its own calculations. As Indian Prime Minister Manmohan Singh said recently: "The world is large enough to accommodate the growth and ambitions of both our countries. I don't look upon our relations with the US as meant to rival China. I look forward to enhanced cooperation with China."[1] Indeed, the bilateral trade between India and China is growing rapidly.

Important as China and India are, the US cannot just focus narrowly on these two countries in Asia. It must nurture diversified interests in Asia, and continue to engage other countries, including Japan, Korea and the ASEAN countries, with which it has had long and productive relationships. Strategically located between China and India, ASEAN is well placed to tap the growth of both giants. Economically, ASEAN's credentials are compelling: it has about a tenth of the world's population (550 million), and a combined GDP which is the third largest in Asia. The US needs to work with ASEAN countries, both as a group and individually, to seize the many opportunities in Southeast Asia, and to influence a strategic region which contains rich mineral resources, vital sea lines of communications, and large moderate Muslim populations.

In 2002, President Bush launched the "Enterprise for ASEAN Initiative". Since then, the US has concluded a FTA with Singapore. This had been started by former President Clinton, but was signed by President Bush - a truly bipartisan initiative. Our FTA has contributed to a rapid expansion of bilateral trade, and stimulated other countries to embark on similar agreements with the US, as indeed was Singapore's intention.

The US is also strengthening relations with other ASEAN countries. President Susilo Bambang Yudhoyono's recent successful visit to Washington will further cement the relationship with Indonesia, the biggest country in ASEAN and a key to the stability of Southeast Asia. And the visit of Prime Minister Phan Van Khai of Vietnam marks a new stage in America's relations with a dynamic, rapidly growing country, still in its early stages of economic reforms and take-off.

ASEAN countries are keen to deepen our ties with the US. While we are growing links with China and India, we recognise that a continuing US presence is vital to the stability and prosperity of Asia, and that American MNCs can generate investments and jobs which Chinese and Indian companies cannot yet do. US-ASEAN linkages will also ensure that the growing cooperation among the Asian countries does not lead to a closed arrangement that splits the Pacific down the middle, but will instead evolve into an open regional architecture that is multi-connected and more robust.

Stability in the Region

The US is not only a major economic partner of Asia, but also a vital player in Asia's overall security environment. In the new strategic landscape, the US remains the dominant military power, still exercising a decisive and benign influence in the region. After the Boxing Day tsunami, for example, many countries provided assistance to Indonesia. But only the US had the means to despatch a carrier battle group, providing critical humanitarian relief through the USS Abraham Lincoln and the hospital ship USNS Mercy. Neither China nor India can perform this security role of the US in Asia for many years to come. Hence nearly all Asian countries welcome the US presence, though some are more ready to acknowledge this explicitly than others.

In particular, the US plays a key role in managing the potential trouble spots of Asia. One hotspot is the cross-strait situation between China and Taiwan. Last year, there seemed a real danger that Taiwan might make a move towards independence and so provoke an armed conflict with China dragging in the US. But today the tension has eased. China has passed the Anti-Secession Law. The US has categorically stated that it supports One China and does not support Taiwanese independence but it will not condone an unprovoked attack on Taiwan. Japan has stated jointly with the US that it seeks a peaceful resolution of cross-strait situation. The stakes have been raised all round, which paradoxically has had a stabilising effect.

Another hotspot is the Korean Peninsula. The Six Party talks provide a framework to deal with the problem of North Korea's nuclear capabilities. North Korea's brinksmanship makes negotiations extremely difficult, but its economy is parlous and its position is not unassailable. Among the countries involved in the talks, China has the closest relationship with North Korea. China shares the US objective of a non-nuclear Korean Peninsula, though it does not want to see regime change there. The US must continue to work with China and the other parties in the Six Party talks, to develop a broader consensus on the approach to take, and apply the right mix of incentives and pressures to get North Korea to cooperate in defusing the problem. Secretary Condoleeza Rice's current visit to Asia no doubt has this important objective in mind.

Singapore and the US have always shared a common vision of promoting stability, security and prosperity in Asia. Singapore has consistently supported a strong US presence in the region. While we are not treaty allies, we cooperate on many security matters. Singa­pore strongly supports US efforts in the global war on terrorism and in countering the proliferation of weapons of mass destruction. We also support the war in Iraq, and are happy that the successful elections in January have prepared the way to a constitution and a democratically elected government for Iraq. This is why we deployed ships, aircraft and training teams to support the coalition mission, and currently have a KC-135 tanker there.

Back in 1990, Singa­pore signed a Memorandum of Understanding (MOU) with the US, allowing US military assets, ships and aircraft to use facilities in Singapore. Senator Richard Lugar, who had visited Singa­pore the year before, was instrumental in bringing this about. Today, our two countries took another step towards broadening and deepening our security relationship when President Bush and I signed a Strategic Framework Agreement (SFA). The SFA defines Singa­pore as a Major Security Cooperation Partner of the US. It will expand the scope of our defence and security cooperation. It will help to anchor the US presence in Asia, and enhance the region's stability.

War Against Terrorism

One important area of security cooperation is in the war against terrorism. The terrorist attacks in London remind us that the threat remains urgent and deadly, even though the Taleban have been ousted in Afghanistan and many Al Qaeda leaders have been killed or captured. In Southeast Asia, Al Qaeda's affiliate is the Jemaah Islamiyah (JI), which perpetrated the Bali bombing and other deadly attacks in Indonesia. The JI's operational capacity has been disru, pted by arrests and detentions in Indonesia, Malaysia and Singa­pore, but the JI is morphing into a loose web of dispersed individuals highly resistant to penetration and detection, and still fanatically determined to die for their cause. They are also tapping into other groups in the region to provide manpower and support.

While combating the terrorist threat on land, governments cannot ignore the threat at sea. We know that terrorists have been studying maritime targets across the region. Every year, 50,000 ships carrying 30% of the world's trade and 50% of the world's oil pass through the Malacca Straits. If this vital artery were disrupted, it would have immediate and far-reaching economic and strategic repercussions. Securing the Straits requires political resolve and cooperation. The responsibility is shared among the littoral states, which have primary responsibility over maritime security, as well as the major user countries and international organisations like the International Maritime Organisation (IMO). The US has a deep strategic interest in the Malacca Straits, and I am happy that when I met President Bush today, he pledged US support for the region's initiatives for maritime security.

On land or at sea, our collective response to the terrorists must be resolute and implacable. But we cannot defeat terrorism through military operations alone. Ultimately, the fate of extremists who claim to act in the name of Islam will have to be decided by Muslims themselves, by reference to their own values and interests. In Singapore, when the Government acted against the JI threat, we simultaneously reached out to reassure our Muslim community that our target was the terrorists, and not the community at large. As a result, Muslim leaders spoke out unequivocally to condemn the terrorists and their extremist ideology. This was crucial in maintaining mutual trust and confidence among Singaporeans, and preserving the basis of our multi-racial, multi-religious society.

Unfortunately, right now many moderate Muslims worldwide are reluctant to condemn and disown the extremists, lest they be regarded as supporting the enemy. The sources of Muslim anger and distrust of the US are historical and complex, but they have been accentuated in recent years by Muslim perceptions of American unilateralism and the feeling that American policies in the Middle East are one-sided. The US cannot expect to persuade or win over the extremist groups who have already hardened their attitudes and are fundamentally opposed to it. But with the right policies, the US can still reach out to moderate, mainstream Muslims who form the vast majority of the Muslims in the world.

In Southeast Asia, America's swift and effective response to the tsunami disaster made a difference to attitudes, particularly in Indonesia, the world's largest Islamic country. This has to be sustained over time, in order gradually to win over a group which should be an important ally, and not only in the war on terror. This will be a test not of America's military hardware and equipment, but of your other great strengths: openness, generosity, and compassion, characteristics which have earned America admiration and respect all over the world. You must draw on them now to win over public opinion, correct misperceptions, and build trust and credibility in the Muslim world, including the moderate Muslims in Southeast Asia.

Conclusion

I am confident that Americans can rise up to the challenge and opportunities in Asia. We applaud your commitment to greater economic and security cooperation in the region. America has always been a powerful beacon, inspiring the world with the ideal of the equal dignity and worth of humanity, and the promise of a peaceful and benevolent power. America must continue to be that beacon of hope for the world, and for all of us in Asia. Together, we can build a better world, and share the promise and prosperity of a new Asia.