SINGAPORE, May 23 — Singapore is poised to join an economic framework for the Indo-Pacific region that will be launched by the United States this week, with Prime Minister Lee Hsien Loong saying it reflects an “intent to cooperate on economic issues which are relevant” to the region.
“Singapore is planning to join. It is not quite a substitute for the TPP, but it is a forward-looking agenda,” Lee said, referring to the Trans-Pacific Partnership — a free trade agreement which the Donald Trump administration withdrew from in 2017.
“We support it, because it is a valuable sign that the Biden administration understands the importance of economic diplomacy in Asia. And we hope that one day the political situation in America will enable them to resume talking about a free trade agreement in some form, and talk about market access.”
Lee made the comments in an interview with Japanese news media outlet Nikkei Asia on Friday (May 20), which came about a week after he said that Singapore welcomed the framework.
During the interview, he was also asked about the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), China’s engagement in the region, and the Russia-Ukraine war — a topic he had touched on when he was in US last month — as well as the global economy and inflation.
Slated to be launched by US President Joe Biden on Monday, the Indo-Pacific Economic Framework is part of the US’ economic strategy in the region and has been touted by analysts as a means to counter Chinese influence in the region.
The framework will allow negotiations for areas in four economic “pillars”: Fair and resilient trade, supply chain resiliency, clean energy and anti-corruption.
While the details of the framework have not been negotiated, Singapore will “try to work out something as substantive and mutually beneficial as (it) can”, said Lee.
Singapore is interested in negotiating in the areas of digital economy, green economy cooperation, sustainable energy, sustainable finance and carbon trading rules, he added.
Besides Singapore, other countries such as Thailand, South Korea and Japan have also said that they will join negotiations for the framework.
Singapore would prefer the US to have a free trade arrangement with Asian countries, but the US’ proposed framework reflects an intent to cooperate on economic issues that are relevant to the region, said Lee.
“(The framework) includes supply chains, the digital economy, green economy cooperation; these are positive things which are of interest to countries in the region and keep the US engaged, therefore we support it,” he added.
CPTPP membership based on consensus
The membership of China and Taiwan in the CPTPP, which Singapore currently chairs, will be decided by consensus among the current members, said Lee, in response to a question on how Singapore would deal with their applications.
“That means the Chair will consult the member economies, and they will have their views, and if there is a consensus to start the accession process, it will begin,” explained Lee.
The CPTPP is a free trade agreement among 11 countries which succeeded the TPP after the US’ exit.
Both China and Taiwan applied to join the agreement last September.
Lee said that he expects the consultation to take a while as the members have differing views and may have separate discussions with China and Taiwan first before they inform Singapore of their stand.
Chinese engagement in the region
Responding to a question on the balance of economic and military power in the region, Lee said that regional countries “generally welcome” trade with China as they want to take advantage of the opportunities presented by China’s growth.
Lee pointed out that China has been engaging the region systematically, such as through its Belt and Road Initiative, a development project connecting Asia to Europe, and Global Development Initiative aimed at supporting developing countries through international cooperation.
Singapore is supportive of these engagements, and is also a member of the Group of Friends of the Global Development Initiative, said Lee.
“We think that it is positive, because it is far better that China is prospering and engaged in the region, than that it is operating on its own, outside the rules which apply to everybody else, not properly integrated and coordinated with the rest of the region,” said Lee.
“Or alternatively that it is unsuccessful, poor and troubled. That can cause a lot of difficulty for the region, too.”
Russia-Ukraine war
Turning to the Russia-Ukraine war, Lee said that framing the conflict as a “democracy versus autocracy” or as “good against evil” will make for a never ending war and is not a wise step to take.
What is at stake is the international rule of law and the United Nations (UN) Charter, which is why Singapore is taking a stance against the war, he added.
The UN General Assembly’s overwhelming vote to condemn Ukraine’s invasion shows that countries in the world stand up for the international order, said Lee.
It is also important for countries to uphold existing international frameworks such as institutions like the UN or the International Monetary Fund, said Lee, responding to a question on measures that can be taken to maintain the rules-based order.
Secondly, countries also have to abide by the international rule of law such as the UN Charter and the UN Convention on the Law of the Seas, he said.
Thirdly, Lee said that the international community must not just depend on rules, but also on a balance of power between different forces and work with different interests.
This is because countries have some areas where they can cooperate together, but other areas where they can balance each other off.
“Within that balance, it is possible for many other countries to find a perch, and to work with multiple parties,” said Lee.
‘Drastic measures’ needed to lower inflation
But even before the war, the continued generous use of stimulus measures despite the economies in the US and Europe visibly recovering from the Covid-19 pandemic has contributed to a spike in inflation, said Lee.
Banks want to keep inflation under control, but the difficulty now is that inflation is quite high, he added.
As such, “drastic measures” are required to bring inflation back down and prevent inflationary expectations from taking root, even at the risk of causing a recession, he said.
“You will have to take that risk because if you do not act against inflation, that will become a very serious problem for the world,” said Lee.
For Asia, particularly the emerging economies, another problem is food and fuel prices, which Lee foresees will cause them inflation as well as hardship.
“Some countries are in a crisis, for example Sri Lanka. But there are specific problems there,” he said.
“Overall I think that the emerging markets will be (having) economic hardship in their societies, but the judgement is that we probably will not have an emerging markets financial crisis.” — TODAY
