Singapore prime minister warns of turbulence ahead in 'post-American' order | FT Interview

Key Concepts

• Multi-polar World Order: A global system characterized by multiple centers of power, as opposed to a unipolar (one dominant power) or bipolar (two dominant powers) system.
• Post-American Order: A global landscape where the United States' influence and role as a global insurer are diminishing.
• Global Commons: Shared resources and systems that are essential for all nations, such as the environment, trade, and security.
• Multilateral Architecture: The framework of international institutions, agreements, and norms that govern relations between states.
• Spheres of Influence: Regions or areas where a particular country or power has dominant political, economic, or military control.
• ASEAN (Association of Southeast Asian Nations): A regional organization of ten countries in Southeast Asia that promotes intergovernmental cooperation and economic, political, security, military, educational, and social integration among its members.
• FDI (Foreign Direct Investment): An investment made by a company or individual from one country into business interests located in another country.
• WTO (World Trade Organization): An international organization that regulates international trade.
• Plurilaterals: Trade agreements or arrangements involving a subset of WTO members.
• FTA (Free Trade Agreement): A treaty between two or more countries to reduce barriers to imports and exports among them.
• CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership): A trade agreement among 11 Pacific Rim countries.
• Gen Z Movement: A term referring to the generation born between the mid-1990s and early 2010s, often characterized by their engagement with social and political issues.

Summary

The Transition to a Multi-polar World and Singapore's Response

Singapore, described as perhaps the most globalized country, is navigating a significant transition to a multi-polar world and a post-American order. Prime Minister Lee Hsien Loong emphasizes that this transition is inherently messy and unpredictable due to America's stepping back from its role as a global insurer, leaving a vacuum that no other single nation is willing or able to fill. In this environment, where old rules no longer apply and new ones are unwritten, Singapore believes it cannot afford to be passive. Instead, proactive measures are necessary, including investing in tackling global commons issues, building new trade connections, and maintaining trade liberalization momentum. Singapore aims to pursue these goals with like-minded countries, even if the US is not immediately involved, hoping they will join later. The core argument is that immediate action is required to lay the foundations for a new multilateral architecture.

Structural Changes in the World Order

Singapore firmly believes that the current shifts are not temporary but reflect deep structural changes in the world order. This perspective is rooted in the observation that the sentiment in America, which feels it has not benefited from the global order it helped create, is likely to persist beyond the current administration. While acknowledging that some of Donald Trump's points about free-riders might be justified, leading countries to invest more in their own security and stability (as Singapore consistently does), the concern is that this could lead to a weakening of the global order. The Prime Minister explicitly states, "there is no going back. There will be a new multi-polar world."

Navigating Multi-polarity and Spheres of Influence

The emergence of multi-polarity raises concerns about potential spheres of influence, which would be detrimental to Singapore. The preference is for a world where ASEAN can serve as a platform for open and inclusive engagement with all major powers, rather than one characterized by exclusionary blocs.

ASEAN's Role and Integration

Despite the complexities of Southeast Asia, ASEAN has been instrumental in maintaining relative peace and avoiding major conflicts since the end of the Vietnam War. While not perfect, ASEAN is deemed indispensable. There are ongoing plans to accelerate ASEAN integration to create a more attractive and competitive single market. Notably, tariffs imposed by the US have catalyzed ASEAN leaders to pursue this endeavor with greater urgency.

Impact of US Tariffs and Trade Relations

The US tariffs have undeniably impacted America's standing in Southeast Asia, with some countries experiencing high tariffs. However, it is recognized that America remains the largest investor in the region, while China is the largest trading partner. Southeast Asian countries generally wish to maintain good links with the US, leading to negotiations that have resulted in slightly lower tariffs for some. The concept of 10% or 20% tariffs becoming the "new normal" is viewed with concern, as the ideal remains zero percent. Discussions are ongoing with the US regarding potential exemptions for semiconductor and pharmaceutical tariffs, with some American pharmaceutical companies in Singapore already securing exemptions by investing back in the US.

Supply Chains and Export Controls

Singapore, as a logistics hub, is experiencing disruptions in supply chains due to US pressure to remove Chinese elements. While overall trade flows continue and are being reconfigured, Singapore aims to remain a relevant node by adapting to new trade patterns. Regarding US pressure to prevent advanced chips from reaching China, Singapore's position is clear: it is committed to maintaining the integrity of its business environment and will not tolerate businesses violating its laws or circumventing export controls. Robust arrangements are in place to allow the US government to investigate companies of interest in Singapore, with similar arrangements offered to other countries.

Economic Resilience and Emerging Slowdown

Despite the imposition of tariffs, economic growth has not yet suffered significantly, attributed to the actual rollout of tariffs being less severe than initially indicated, front-loading of activities, and the resilience of the economy driven by AI and new technologies. However, Singapore, acting as a "canary in the coal mine" due to its openness, is beginning to feel a slowdown in the second half of the year, with businesses holding back on investments and hiring due to uncertainty.

Navigating US-China Tensions

The US-China relationship is identified as the most consequential and dangerous fault line in international relations. Both countries are seeking to insulate themselves while remaining deeply intertwined economically. The dynamic of "mutually assured destruction" is observed when one economy imposes controls, leading the other to seek alternatives. The US's controls on chips motivate China to develop workarounds and technological self-reliance, while China's controls on rare earths prompt others to seek alternatives. The expectation is that a new modus vivendi, a way for the US and China to coexist and compete, will eventually emerge. The hope is for a trade deal, even if not a strategic agreement, to provide guardrails for the economic relationship and prevent a damaging full decoupling.

China's Rise and Global Role

There is a growing confidence in China's developmental model, and its rise is a source of unease globally due to its scale and different economic and political system. It is recognized that China will not converge with Western norms and will find its own path. While still a middle-income country, China is a technological leader in several areas. The world must accept that China is not just a rising power but a "risen power," demonstrated by its actions like forgoing special and differential treatment in the WTO and doubling down on support for global institutions. China is seen as a key player and potential leader in the new global system.

Singapore's Balancing Act and Multilateralism

Despite China's growing role, it is not yet able or willing to replace America's global leadership. Singapore, therefore, finds itself in a messy period of transition. To navigate this, Singapore will work with like-minded countries to preserve and reinforce multilateral frameworks. This involves reinvigorating existing institutions like the WTO, potentially through plurilaterals, and pursuing new path-finding initiatives. The "Future of Investment and Trade Partnership" with the UAE is an example, bringing together trade-dependent economies to push for new ideas in facilitating investment, standardizing rules, and leveraging technology. The goal is to multilateralize these initiatives within WTO precepts.

Investment Strategies and Europe's Role

Singapore's investments are not scaling back despite increased macro risk premiums in the US. The focus remains on individual company dynamism and growth prospects, with continued investment in leading-edge technologies and American enterprises. However, investments are diversified globally, including in Europe and Asia. Europe is seen as a key player in the multi-polar environment, and Singapore is keen to forge closer links, exploring opportunities for a more formal partnership between the CPTPP and the EU, which together account for a significant portion of global trade. The aim is to keep trade arteries open and create new ones.

Domestic Changes and Youth Anxiety

The changing global order and the emergence of youth movements globally are connected. Growing anxiety among young people worldwide, manifesting in various forms like "lying flat" in China or the "Great Resignation" in the West, is observed. Singapore also feels this anxiety, and the government's focus is on providing assurance and confidence to its youth for a better future.

The Hardest Challenge: Party Management and Renewal

The hardest challenge faced by the Prime Minister has been managing people within his party. This involves the difficult task of renewing the team for elections, which requires making tough decisions about dropping members to ensure the party's long-term success. This process of individual conversations and conveying difficult news has been painful but necessary for renewal.