QIONGHAI, Hainan: Amid rising tensions between the United States and China over trade disputes, Prime Minister Lee Hsien Loong has urged caution over the impact of trade tariffs for all countries big and small.
PM Lee was speaking on Tuesday (Apr 10) at the opening of Boao Forum for Asia Annual Conference, which is often touted as Asia’s version of the Davos meetings, held in Hainan province.
At the conference attended by world leaders from Austria, the Netherlands, Pakistan, the Philippines and Mongolia, Mr Lee said that Singapore does not believe that unilateral tariffs is the correct solution as they are not compliant with the World Trade Organisation’s (WTO) rules.
“More fundamentally, as economists point out, the focus on bilateral trade imbalance between the US and China is misplaced. What matters to a country is not its bilateral trade balance with a specific trading partner, but its overall trade balance with the rest of the world. Furthermore, the cause of a trade deficit is an imbalance in the domestic economy, in particular when a country consumes more than it produces,” PM Lee said.
Mr Lee also said that China has responded to United States’ trade salvos accordingly and is “careful and calibrated”.
“Nevertheless, there is now a serious dispute. Everyone still hopes that before these tariffs are implemented, the two countries will be able to work out an accommodation and head off further escalation,” he added.
AdvertisementAdvertisementHowever, if a trade war does happen, Mr Lee said that it will undermine the multilateral trading system which has underpinned global prosperity.
A TRADE WAR WILL STRAIN CHINA-US TIES BEYOND TRADE
Mr Lee said that there has been broad political support in the US towards unilateralism and protectionism. He added that trade arrangements and concessions made in the past when China was only 5 per cent of the world’s GDP are less readily accepted today when China makes up 15 per cent of the world’s GDP.
He added that Asia has also outperformed the global economy as individual economies liberalised and opened up and has to remain open and connected to one another.
“The multilateral WTO system must hold up as the basis for global trade and commerce. This cannot be taken for granted. To keep this international framework in good order, countries will have to adjust with the times, to account for changes in the strategic and economic balance,” Mr Lee said.
China’s role in the international economy is now larger, and this has shifted the overall strategic balance, he said.
“US companies that previously advocated for China when it joined the WTO now feel disadvantaged doing business in China. They perceive that the playing field is not level for all companies, in terms of market access or investment restrictions, especially in technology sectors,” he said.
The pressures are not new and have been mounting for some time, he said.
Mr Lee also said that China and the US have the “most important bilateral relationship in the world” and a trade war must damage these ties in many areas such as cooperation on climate change, non-proliferation, regional security and denuclearisation of the Korean Peninsula, which China has played a role in.
If the disputes escalate and destabilises US-China relations, the consequences for the world could be catastrophic, he said.
“For what is ultimately at stake is war and peace, the security and stability of the world,” Mr Lee added.
It does well for China’s fundamental interests to contribute more to strengthening multilateralism in keeping with its larger weight in the world now, Mr Lee said.
“It is vital that China does so now, at this testing moment in international relations. I am confident that China will handle this challenge well, safeguard its own interests, and keep the global system open and inclusive,” Mr Lee said.
“This will create an international environment that enables China to attain its two centenary goals, and other countries to grow and prosper in a stable and peaceful world,” he added.
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