I really need to thank Danny (Quah) as well as Adam (Posen) for that excessively generous introduction. Let me welcome all of you to Singapore, especially for those of you whom this is your first time, and especially Americans. Think of Manhattan being ejected by upstate New York, and then having to issue your own currency; having your own Army, Navy, Air Force, airport, port, power generation facilities; and (having) to establish a network of Free Trade Agreements across the globe. What you see in Singapore is a tiny city-state that only exists as a conscious act of desperate imagination. I hope you will not just spend your time confined in a hall like this, but go out there and kick the tires and see whether this place works. The next point I want to make is that it is very daunting for an ophthalmologist. I can claim some knowledge of science, medicine, and surgery, but to face an audience of bankers, economists, and investors, and to touch on a topic like this is daunting. But nevertheless, I will give it a go.
2 I am also very conscious that in this day and age, attention spans are very limited. So, if you forget everything I have said, just remember three words. The first word – trust. The second word is fracture. The third is Newton’s third law of motion. Just bear that in mind. Everything else I am providing is just some beef on that framework.
3 First, I believe the theme for this conference is entirely apt. The global order as we know it is severely stressed. Just think about the COVID-19 pandemic, which we are actually only just emerging from, and it is not yet over. The war in Ukraine rages on. We witness big power not just contestation, but confrontation. Persistent supply chain disruptions – still not fully resolved. Hyper divisive domestic politics – you just need to pick up your handphone to see that. We are witnessing probably an era of higher and prolonged inflation which nobody below the age of 40 has lived through in his lifetime. Of course, we also have, hanging over this, the potential for a concurrent food, energy and water crisis. We should also remember climate change and the conference which is going on right now in Sharm el Sheikh in Egypt.
4 Particularly for us, the febrile relationship – and I say this knowing the Ambassador of China is here with us – but let me put this as delicately as possible. The febrile relationship between the United States and China is of great concern to us – I think not just to Singapore, but indeed to all countries in the world. I would characterise the relationship as one in which currently there is an almost complete lack of strategic trust. If you think about that, it means you have to assume the worst of each other. In assuming the worst of each other, this inevitably raises the risk of miscalculations and of an escalatory spiral at best, or at worst, an outright collision and conflict.
5 I think it is useful for us to take a step back and ask ourselves how we got here. So, bear with me. The United States was the ultimate winner of the Second World War, as well as the First World War for that matter, and really was the ultimate heir and achieved the zenith of the last Industrial Revolution. Especially after the Berlin Wall came down and the Soviet Union imploded, the United States was the undisputed unipolar hyperpower. But the United States was somewhat unique at its moment of victory, both after the war and even at the unipolar moment. If you think about the Marshall Plan and what the United States did to rebuild its enemies during the Second World War – to rebuild Germany in Europe, and also to provide the platform for Japan to rebuild. In addition to that generosity, to also envision and underwrite, in cash and blood, a multilateral world order, including the United Nations and the Bretton Woods institutions of the WTO (World Trade Organisation), World Bank, and the IMF (International Monetary Fund), it basically set up a world which was not based on ‘winner takes all’. It was one that was based on liberal economic principles, free trade, (and) global supply chains. It established a global network of bilateral and multilateral alliances. On the part of the United States, that enabled it, at a time when it was about 40% of global GDP (gross domestic product), to benefit, because for every extra dollar that the world generated, 40 cents accumulated to the United States. The United States enjoyed a period of unprecedented economic growth, including growth of the middle class. You could argue that the introduction of the G.I. Bill (the Servicemen’s Readjustment Act of 1944) after the war and educating a whole swathe of people who populate the middle class were domestic successes. But on the international stage, it led an international system and promoted peace, stability, and values generally aligned with American interests. So, America had both hard and soft power. To be fair, the rest of the word, especially small city-states like us in Southeast Asia, benefited from those five decades. In the case of Singapore, our per capita GDP grew from about US$500 57 years ago – it went up more than a hundredfold. It is also worth remembering and often forgotten nowadays that the United States cumulatively has invested more in Southeast Asia than it has cumulatively invested in India, China, and Japan combined. Most people are not aware of this fact. Of course, a large proportion of that investment in Southeast Asia is actually here in Singapore.
6 But Singapore and the other Asian countries were not actually the biggest beneficiaries of Pax Americana. Because, in fact, there was a certain large continental-sized country and economy, which 40 years ago embarked on reform and opening. But before we get to reform and opening, let us go back another thousand years. A thousand years ago, that country – and obviously, I am referring to China – probably constituted at least 30% of global GDP. A thousand years ago, they had achieved four great inventions: the compass, gunpowder, paper-making, and printing. This was at a time when Europe was still in the Dark Ages, and modern America was not yet founded. China did make an intellectual and strategic mistake because it then assumed it had reached the zenith of civilisation, closed its borders, passed a law that no Chinese ship would have more than two masts, (and) in fact, it burnt its imperial fleet. Consequently, it missed out on the Industrial Revolution. The Industrial Revolution began in Europe, the UK (United Kingdom), and as I said, later on across the Atlantic, the ultimate heir: the United States of America. In Asia, because we were cut off from the science and technology of the Industrial Revolution, we were colonised. Within Asia itself, the first country to embark on modernisation was Japan. We saw that during the Meiji Restoration. It is no accident therefore that (when) the hostilities broke out between Japan and China, Japan prevailed because of its industrial and economic, and therefore military, might. So, we need to remember that China, because it missed the Industrial Revolution, had to endure more than a century of humiliation. But China never forgets its sense of history or its place in the world, and quite naturally and legitimately wants to reclaim its place in the world.
7 In the recent 20th Party Congress (of the Communist Party of China), (PRC) President Xi Jinping referred to science and technology as foundational and strategic pillars, and he emphasised the need for China to build self-reliance and strength in these two areas. This notion of self-reliance and the pursuit of domestic strength is not a new phenomenon, given China’s earlier historic achievements in science and technology. Over the past decade, quite naturally and to be expected, China has strengthened its domestic capabilities in key high-tech sectors, including advanced robotics and AI (artificial intelligence). It has also expanded its advanced manufacturing base. It is no longer just the manufacturer of the world, but it is an advanced manufacturing centre in the world. We sometimes forget that China is not alone in its focus on manufacturing and the concept of “Made In”. There was “Made in China 2025”, but it is worth remembering, for instance, in India, Prime Minister (Narendra) Modi had this concept of “Made in India”, and he launched this in 2014. Sometimes when my American friends complain about this apparent attempt at autarky and self-reliance, we forget that it is not confined to China. In fact, today, we also have “Made in America”. That is not new either. If you go back to the 80s, there was “Made in Japan”.
8 Now, let me come to China’s reform and opening up 40 years ago, and more recently, 20 years ago, its accession to the WTO – this turbo-charged its spectacular growth. Here is where a strategic misperception occurred on the part of the West. It was correct for the West and the United States to support China’s accession to the WTO. But the West was wrong when it wishfully believed or hoped that economic openness would invariably lead to Western-style political reforms. Another way of expressing it is that you expected societies elsewhere to be recreated and reformed in your image simply because of economic liberalisation and access. But China believed that perestroika did not necessarily have to come with glasnost. I have made this particular reference to perestroika and glasnost for this very specific reason, because the country that has done the most extensive studies into how and why Soviet Communism collapsed, the country that has studied this most intensively, is China. In particular, the Communist Party of China, which has no intention of repeating the trajectory of Soviet Communism. Hence, we often hear references to “Socialism with Chinese characteristics”. I say all this so that we try to relieve our obsession with ideological labels, and to understand how and why countries and leaders adopt certain postures. Now, we live in a world where there is a prospect or a potential for China to actually surpass the US (United States), at least in nominal GDP terms. After all, it has a much larger population. But it means the United States, for the first time ever, is facing a peer competitor that is able and willing to compete in all dimensions. The challenge posed by China far exceeds that which America faced with its own immediate neighbours, and even compared to Europe. So, in a sense, you are in uncharted waters. The US – or at least some of my friends in the US – have perceived China’s growing economic strength and what is referred to as Civil-Military Fusion as a threat because it potentially enables China to reshape the international order to its advantage. The result of all this is that breakdown, that erosion of strategic trust between both parties.
9 Recently, another good friend, (US) National Security Advisor Jake Sullivan, delivered a speech. I think it was in September in Washington (D.C.). He spoke of revisiting the longstanding premise of maintaining relative advantage over competitors in certain key technologies, and said that would not be enough, and instead America has to shift to maintain “as large of a lead as possible” in foundational technologies such as advanced logic and memory chips, to power US strength around the world. The US is concerned that advancements in critical and emerging technologies can transform and empower foreign militaries, and ultimately impinge on US national security. Indeed, the more recent announcements on controls on US exports of high-end AI chips and associated semiconductor manufacturing equipment. Actually, this is all but a declaration of a technology war. Such export controls are not new - they just are an expansion of policies. For instance, the Foreign Direct Product Rule, which was introduced under the previous Administration of (US) President (Donald) Trump, and which had barred companies from supplying Huawei with US technology. But this is just the tip of the iceberg, and there are reports of plans by the US to implement similar export controls, beyond chips and semiconductors, to other foundational technologies such as AI software and quantum computing. There may even be further measures, such as a screening mechanism to restrict outbound US investments into sensitive technologies in China.
10 On the other hand, China. I speak now from experience, because even despite COVID-19, I have been there three or four times, and speak regularly to my counterpart (PRC State Councilor and Foreign Minister Wang Yi) there. He will regularly remind me that from the Chinese perspective, it is legitimately seeking to make progress and deliver the fruits of technological and economic development for 1.4 billion people. Like the United States, China also considers technological self-sufficiency to be a matter of existential importance. Even as President Xi and other senior Chinese leaders denounce protectionism, decoupling, and unilateral sanctions, they continue to reiterate the importance of building China’s own global network of partnerships, and making China’s industrial and supply chains more resilient and secure.
11 I am describing these positions not to support or to take either side, but just describing them in stark terms. The point I am trying to make is if you see therefore how inevitable the absence of strategic trust, you actually have the dynamic that leads to a self-fulfilling prophecy that fractures science, technology, and the economy. It is self-fulfilling. The question, then, is what its consequences for the rest of us are, because we do not make decisions in Washington (D.C) or Beijing, but their decisions affect us.
12 The current situation is somewhat reminiscent of a Thucydides Trap. The absence of strategic trust will lead both sides to always assume the worst. (The) conditions are set - they are a self-fulfilling and mutually escalatory dynamic. This will almost certainly lead to a mutually escalatory, vicious downward spiral. Both sides may unfortunately conclude that science, technology, and supply chain interdependence are risks, or maybe even liabilities. Each side seeks to reduce its mutual interdependence to improve their own supply chain resilience. The experience of the COVID-19 pandemic accentuated this search for resilience. As I said just now, this bifurcation will have profound implications for the rest of us.
13 First, bifurcation will hinder diversification strategies, it will increase concentration risks, it will reduce resilience, it will exacerbate supply chain disruptions, (and) it will be inflationary in its own right.
14 Second, incentives for scientific collaboration and innovation will diminish, as even scientists will suddenly be limited by passports and their ability to collaborate. Since the Renaissance in Europe and the Industrial Revolution, the entire globe has worked on a single technology stack: basic science, applied science, technology, goods, and products. Because we have all worked on that single stack, progress has been accelerated in the last century or two. It has been deflationary, and that is why when you look at the IT (Information Technology) industry, or if you look at chips for instance, costs have come down and more power has accelerated. A fracture of this common technology stack will be inflationary.
15 But that is not all. The technological decoupling will also further disrupt global systems, which in fact have been the enabler of peace, stability, and prosperity for the last 75 years after the end of the Second World War. We worry about a world that is more fractured, more divided, less prosperous, with built-in higher inflation, and frankly, less peaceful. We wait with bated breath in case there are miscalculations, accidents, collisions, (or) unintended consequences.
16 The question then is, what options are available for the rest of us? All of us are dependent on and want to engage the technological and economic stacks of both superpowers. The degree of overlap between both stacks – both in software and hardware – will depend to a large extent in the future on how much the United States and China are willing to engage and interoperate with each other. If they reach a modus vivendi, that would be ideal for a place like Singapore. Just follow the money – American investments here, our trade with China, our trade in services with America, (and) our investments in China. If they reach a modus vivendi and we harvest the fruits of artificial intelligence (AI), robotics, synthetic biology, energy transformation, and green development, it is a huge harvest waiting for us. But if they do not, or (if they) force us to choose one side or the other, we would be in a real tough spot.
17 One possible way for the rest of us is to try to conceive a world in which we can have a more open, inclusive, multilateral network of science, technology, and supply chains. You may recall during the Cold War, the Non-Aligned Movement (NAM) came about, basically to counterbalance the rapid bipolarisation of the globe at that point in time. Perhaps today, we are finding ourselves in a similar moment in history and a similar dynamic of geostrategic forces as we stare down the abyss into bifurcation, with profoundly damaging consequences for all of us.
18 But what does a non-aligned movement for science, technology, and supply chains look like? I think these are still very early days, but the attributes are: it has to be multipolar, open, and rules-based. There has to be a commitment to open science, the fair sharing and harvesting of intellectual property, and a system in which we will compete to be most innovative, reliable, and trustworthy, rather than be judged simply by which side or the other we have taken. I think these are early days, but I am just putting this on the table to say that the rest of us do have agency, and we will, to the maximum extent, refuse to choose sides.
19 Particularly in Asia, when we look now at what is happening in Europe, there was a line. It used to be the iron curtain. Even today's fight in Ukraine is, in a sense, about where the line is. In Asia, we are not interested in bifurcation lines across Asia. Our paradigm that we are offering is overlapping circles of friends. Every country – and there is great diversity in Asia – if you were to line all of us up in terms of proximity of economic and political comfort levels with America and China, we would all be on slightly different points of that spectrum. But I do not believe any self-respecting Asian country wants to be trapped, or to be a vassal, or worse to be a theatre for proxy battles. So, I am trying to make the argument for what the rest of the world wants. Whether we will actually achieve this? Only time will tell. Because as I said, the ideal scenario still remains that America and China work out their modus vivendi.
20 So, let me conclude. We stand at an inflection point in history. The loss of trust domestically leads to polarised, divided domestic politics. The loss of trust between the two superpowers leads to a dangerous, escalatory vicious cycle. The fracture of a common stack of science, technology, and supply chains is inflationary, disruptive, and dangerous.
21 Finally, I will end with Newton's third law of motion – every action has an equal and opposite reaction. I hope that our superpower friends bear this in mind, and also bear in mind that the rest of us do have agency and do have choices, and to the maximum extent (we) will seek to raft ourselves to each other in open, inclusive architectures. In typical Asian fashion, more circles, less lines, more balance. Thank you all very much. I look forward to some tough questions.
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Photo Caption: Minister for Foreign Affairs Dr Vivian Balakrishnan delivering remarks at the 2nd Next Step Global Conference on 9 November 2022
Photo Credits: Ministry of Foreign Affairs, Singapore
Photo Caption: Minister for Foreign Affairs Dr Vivian Balakrishnan delivering remarks at the 2nd Next Step Global Conference on 9 November 2022
Photo Credits: Ministry of Foreign Affairs, Singapore
Photo Caption: Minister for Foreign Affairs Dr Vivian Balakrishnan and President of the Peterson Institute for International Economics Dr Adam Posen during a dialogue at the Next Step Global Conference on 9 November 2022
Photo Credits: Ministry of Foreign Affairs, Singapore
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