Three simultaneous crises posing ‘changes and shocks’ for Singapore: Lee
Published on: Saturday, April 22, 2023
By: Malay Mail
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Lee said that the global multilateral trading system is “under siege” and that this has very serious implications especially for small and open economies such as Singapore.
SINGAPORE: Countries around the world are now in a “vicious circle” of trade and hostility where they are less likely to trust others to play by the rules, Prime Minister Lee Hsien Loong said. “What we have now is unprecedented,” he said in Parliament (April 19), noting how an ongoing “hot war” in Europe, deepening hostility between the United States and China, and protectionism undermining the multilateral trading system are creating a troubled environment.
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“These three simultaneous crises will set in train a whole series of changes and shocks that will severely disrupt the world, our region and Singapore.”
Lee said that the global multilateral trading system is “under siege” and that this has very serious implications especially for small and open economies such as Singapore.
He added that although there was a “broad international consensus supporting globalisation” over the last few decades, things have now changed.
“All over the world, countries are prioritising domestic and national security considerations and no longer talk about trade being win-win.
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“Too often, when countries quarrel, their bilateral trade becomes embroiled in the disputes and they impose restrictions on imports or exports.
“They seek to inflict maximum political pain while blandly denying any hostile intent.” There is a vicious circle where countries “trust others less and less to play by the rules”.
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“Therefore, they are increasingly going their own way and ‘on-shoring’ or ‘friend-shoring‘ supply chains. This then triggers a tit-for-tat response from the other side.”
The world is headed once again to a place where protectionism is the default and trade rules are secondary.
This is akin to what happened between the First and Second World Wars, he said.
“The economic cost to the world will be very high.”
For instance, the International Monetary Fund recently estimated that fragmentation of the global economy could in the long run reduce global gross domestic product by 7 per cent.
This is just a conservative estimate and that the reality is probably worse, he added.
“Deglobalisation will also have an impact on the exchange of ideas and innovation, technology development and diffusion, as well as capital flows and cross-border financing.
“All these are vital for economic growth, especially for an open economy like ours.”
Lee noted that after more than a year, the war in Ukraine is deadlocked, with “no good outcome in sight”.
There is also the danger of the war escalating, as the United States and countries in the North Atlantic Treaty Organization (Nato) are supplying Ukraine with more sophisticated military equipment.
“If the Ukrainians, using these Western-supplied weapons, make a breakthrough on the battlefield, we cannot predict how Russia may react,” he said.
The ongoing war means that the world will continue to feel the pinch from higher prices due to disruption to global energy, food and fertiliser supplies.
There will also be significant implications on international relations.
For instance, the Russian invasion of Ukraine has presented a “difficult problem” for China.
China would prefer not to aggravate Europe or the US by providing military aid to Russia, but at the same time, it is also hard-pressed to condemn the invasion, since it shares a very long land border with Russia, and “has to consider its own substantial relations with Russia”.
Thus, the war has made it difficult for China to improve relations with Europe, and also complicated its “already very troubled ties” with the US.
The third big issue of US-China relations has also been on “everyone’s minds” during Lee’s recent visit to China, and meetings with US visitors, he said.
The “most dangerous flashpoint of all” is Taiwan, he cautioned.
“Singapore is good friends with China, and we are also old friends with Taiwan. Singapore rigorously upholds our ‘One China’ policy and continues to support the peaceful development of cross-strait relations.” China considers Taiwan as the most important issue and the One-China principle is the “reddest of its red lines”, Mr Lee added.
“But in the West, an alternative narrative is gaining currency: That the problem in cross-strait relations is a broader ideological issue of democracy versus autocracy.”
This narrative has emerged although most countries have officially adopted One-China policies.
“This difference of views is very worrying,” Mr Lee said, noting that tensions over Taiwan are now high and that all sides are making moves, responding to one another.
For instance, after Taiwan’s President Tsai Ing-Wen met US House Speaker Kevin McCarthy during her stopover in the US, China launched three days of extensive military exercises all around Taiwan.
“The risks of a miscalculation or mishap are growing,” Lee said.
The prevailing view in America is that their efforts to work out a cooperative relationship with China have failed, and China’s growing strength and assertiveness is becoming “a grave threat to US interests and values”.
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