Trump’s trade war pushes Singapore to China

Singapore’s Prime Minister Lee Hsien Loong’s recent five-day trip to China signaled strongly rebounding ties with Beijing and the trade-reliant city-state’s unease with America’s moves to instigate a potentially destabilizing trade war.

In an address to the Boao Forum for Asia (BFA), a talk shop held last week in China’s southern island province of Hainan, Lee spoke candidly on the prospect of souring Sino-US ties, in terms of both trade and global security.

While Lee said that a US-China trade war was “still far from inevitable”, the premier underscored the need “to be prepared psychologically” for such a turn. Strained ties between the rival powers, he noted, “would make it very difficult for all the countries in Asia who are trying very hard to become friends with both, or stay friends with both.”

Lee, a key US strategic ally and staunch advocate of free trade multilateralism, praised China’s leadership’s cautious response to the threat and attempts to defuse the standoff prompted by the Trump administration’s threats to impose tariffs on as much as US$150 billion in Chinese goods.

Beijing has responded with its own proposed retaliatory duties on US goods, targeting mostly agricultural shipments. After meeting with top Chinese officials, Lee told Singapore media that China’s leaders were “trying their best to think through how this can be resolved, trying to protect their position because it’s not possible for any country to be in this situation and not have any response whatsoever.”

Beijing would “have to respond” to US measures, he said.

Fears of an escalating trade war subsided somewhat following Chinese President Xi Jinping’s keynote address to the BFA that promised to open his country’s economy further and lower import tariffs on products including cars.

Lee said Singapore does not believe that imposing tariffs is a solution to the tensions, though he acknowledged American gripes regarding record trade deficits and limited access to parts of the Chinese market.

The premier called on the two sides to resolve their trade disputes within the framework of the World Trade Organization (WTO). Lee met with Xi on the sidelines of the BFA summit to reaffirm both countries’ “special and forward-looking” friendship and highlight recent progress made in various government-to-government initiatives.

The trip, Lee’s second visit to China in seven months, underscored the fact that Sino-Singapore ties have substantially recovered from a rupture in 2016.

Those tensions centered on Lee’s comments in support of a July 2016 ruling by the Permanent Court of Arbitration in The Hague that rejected China’s claims in the South China Sea by ruling in favor of the Philippines’ sovereign rights to contested waters.

At the time, Lee’s comment earned a strong rebuke from a top Chinese foreign affairs official.

Ties were further strained when Hong Kong seized nine Singaporean infantry carrier vehicles in route from Taiwan in November 2016 after being used in military exercises, a longstanding policy which Beijing grudgingly tolerates. China returned the vehicles two months later.

Lee’s absence from a high-profile forum on China’s Belt and Road Initiative (BRI) in May 2017, attended by 29 other national leaders, marked a nadir of Sino-Singapore bilateral ties. The falling-out could be attributed to differences on several key security and strategic issues tied to US-China competition for regional influence and dominance.

Though many regarded Lee’s last visit to China in September 2017, just weeks before the ruling Chinese Communist Party’s 19th Party Congress, as a sign of improved ties, others cautioned that it would take more to completely reset relations. Singapore has since appeared to err toward a more cautious neutrality.

Lee, a persistent advocate of a robust US presence in the Asia-Pacific region, has nonetheless appeared to distance himself from the proposed “quadrilateral” regional grouping of the US, India, Japan and Australia. In a recent media interview, he cautioned against “rival blocs forming” that would require “countries having to take one side or another.”

Singapore currently presides over two leadership roles in the Association of Southeast Asian Nations (Asean) regional grouping: it is both the bloc’s chair as well as the state coordinator of Asean-China dialogue.

Some observers believe Asean’s lack of cohesion obliges Singapore to take a more neutral approach to touchy regional geopolitics as the group’s rotating chair.

Singapore’s opposition to the unilateral imposition of tariffs and its receding confidence in America’s commitment to the Asia-Pacific under the Trump administration are both factors that could prompt a reevaluation of the city-state’s strategic orientation amid an ascendant China-led regional order.

Singapore’s leaders were noticeably uncomfortable with Trump’s “America First” rhetoric during the long tumult of the 2016 US presidential campaign, with Lee since gently branding Trump’s attitude as being “a radically different approach towards trade.”

Lee also believes the most critical issue facing Asean remains “the political and strategic resolve” of the US and its capacity to “project a reliable and constructive presence as a Pacific power.” Singapore’s leadership is now clearly discouraged by Trump administration moves that are seemingly non-compliant with WTO rules.

Despite Trump’s recent U-turn and openness to the possibility of joining the once US-led multilateral Trans-Pacific Partnership trade agreement, it remains unclear to what extent the pact’s participants would be willing to entertain Trump’s demands that it be amended to give stronger benefits to the US.

Eleven countries, including Singapore, signed the revised Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) last month. The multilateral trade deal was negotiated during US President Barack Obama’s tenure, but was not ratified by the US Congress.

The US withdrew from the pact in a Trump executive order during the first week of his presidency.

Lee told the People’s Daily, the Chinese Communist Party’s official newspaper, during his visit that Singapore would “redouble” efforts to conclude the Regional Comprehensive Economic Partnership (RCEP), a China-backed free trade agreement among 16 Asia-Pacific countries that excludes the US.

Under Lee’s watch, the city-state has also been a key proponent of Beijing’s ambitious Belt and Road Initiative (BRI), a global plan to establish physical and financial infrastructure that includes big plans for Southeast Asia.

Singapore is also a founding member of China’s Asian Infrastructure Investment Bank (AIIB), a new rival to the World Bank and Asian Development Bank.

It has now taken a further step toward becoming a key BRI financial center and legal hub. The two nations signed a Memorandum of Understanding during Lee’s visit that would pave the way for both to support the financing needs of third-party market ventures developing infrastructure as part of BRI.

Singapore is also one of the world’s largest offshore centers for trading China’s renminbi currency and is already a top destination for foreign direct investment linked to BRI within Asean.

Should the Trump administration follow through on a trade conflict with China, it would likely hurt political relations with Singapore and other Asean countries vested in growing economic ties to Beijing. It would also likely be a boon for China’s vision of a post-American regional order.

(ASIA TIMES)