Lord Green of Hurstpierpoint, Chairman of Asia House,
Mr Michael Lawrence, Chief Executive of Asia House,
Ladies & Gentlemen,
1. A very good morning to all of you.
2. We are all living in interesting times and there are three sets of decisions, three sets of choices that will probably determine our collective future. Let me start with the first - US-China relations.
US-China relations define the world
3. The key question is how US and China relate to each other and that will determine the global political backdrop for all trade and economic activities to happen. The current US-China trade friction is but a symptom that reflects more fundamental contradictions within their economies and societies – that’s my hypothesis. We cannot discuss the US-China trade friction and deficit without being cognisant of the challenges within their respective economies.
4. Let me start with the US. The US trade deficit cannot be seen in isolation without understanding the US’ fiscal policy and monetary posture.
5. The second internal challenge of the US is, how will it reconcile the differential growth rates between the coastal states that are benefitting much from globalisation and some of the other states that do not benefit as much. How the US will re-distribute the unequal spread of benefits from globalisation will be the second internal challenge.
6. Last but not least, for the US, it will have to decide how it can maintain its dynamism. And this dynamism has, for many years, been underpinned by its system of being open to global trade and talent flows.
7. The Chinese too have their fair share of challenges, and there are at least three. First, how will the Chinese re-balance their economy between an investment-led system and consumption-led growth. Second, how will the Chinese reconcile state-led capitalism with the need for market discipline. Third, how will the Chinese unleash the potential of its huge population without losing political control.
8. So the US and China relationship is at a cross-road. To resolve their bilateral relationships and bring it to the next higher plane and positive footing, both of them will need to seriously consider how they manage their domestic challenges, because failure to address their domestic challenges leading to a local backlash will bring about global consequences. And both the US and China, as the largest players on the geopolitical scene, have a choice to make.
9. To paraphrase former Vice President Joe Biden, both can decide if they want to demonstrate the power of their example, or to demonstrate the example of their power. So this set of questions will determine the future of the US-China relationship and set the global backdrop of what we have to overcome collectively as a global system. Let me move on now to the next set of challenges on the EU and the UK, beyond Brexit.
The EU and UK beyond Brexit
10. I can understand and I can appreciate that a lot of effort and attention, especially in the recent month, has been focused on how did we get to Brexit. But perhaps I will re-frame that perspective by asking another question. And perhaps that is a more important question. How does the EU, and for the matter the UK, want to relate to the world beyond Brexit? What happens after 30 March 2019?
11. The issue is this. Brexit or not, what role does the EU want to play on the global stage? Is it one of integration or is it one of isolation? Challenges there will be, and the EU has its fair share of challenges - immigration, differential fiscal posture and so on. All of us have our fair share of challenges but the question is, collectively, how does the EU want to relate to the rest of the world? Will the EU exercise leadership for the global trading system or will the EU be so wrapped up in its own internal challenges that it becomes isolated in its own problems?
12. The EU has a chance to exercise leadership even in Asia. As we speak, the EU has on its hands at least three free trade agreements - with Japan, Singapore and Vietnam. On one level, these free trade agreements are an expression of a desire to lower the barriers to trade. But that is just one level. On a more significant level is whether the EU sees itself working with Asia to integrate our production and value chains in order to leverage each other’s relative and comparative advantages. That is a statement of our collective determination, to come together to leverage the best from each other.
13. So we hope that the EU-Singapore FTA will soon get through the European Parliament. We will learn how to navigate this carefully and shepherd the process of the European Parliament but we hope that we will never lose sight of the fact that these free trade agreements, investment protection agreements, are not just about lowering barriers to trade but about the EU’s statement to the rest of the world, on how it wants to integrate and connect with the rest of the world and to leverage each other’s relative and comparative advantage to bring our respective economies to a higher plane.
14. Likewise, Brexit or not, the UK has to answer those same questions. How will the UK relate to the rest of the world, especially in Asia where the UK, where together collectively with the European countries, they have a significant presence in the region. It will be a shame for either the UK or the European community to walk away from this leadership position.
15. Let me touch on the third set of issues that we will have to confront today, that is Asia’s relevance in the new emerging global market.
16. I can safely and confidently say that no one in Asia wants to choose sides. Although some may feel that they have no choice but to choose sides. No one wants to see the world being balkanised into different trading blocs where you are either with me or not with me. Everyone in Asia wants to see a more integrated global community. And the question is, how can Asia do this against the backdrop between what is happening between US and China and the posture that the EU wants to take.
17. Asia will need to strengthen our efforts to create relevance. To create relevance regardless of what is happening between the US and China. Asia cannot be looking for the spoils of war as they say, but it has to create relevance by once again, re-doubling our efforts to integrate our economies. Once again, to leverage each other’s relative comparative advantage to bring out the best in each other. And this is why the CPTPP, the on-going RCEP negotiations, the ASEAN Economic Community and all these efforts are important.
18. All these efforts speak to the same urgent need for us to integrate our economies rather than to choose sides or to fragment our regional and global production and value chains.
19. For example, the growing digital economy is a tremendous opportunity for economies in Asia and the rest of the world to come together. It is an opportunity for greater integration, but if we don’t seize that opportunity then we also risk balkanisation into digital islands - isolated digital islands, which contradicts the very essence of data and digital flows to bring about a more integrated world. And this is where Asia, and with like-minded partners in Europe, America and elsewhere, must come together to evolve the WTO system. Beyond taking care of the conventional goods and services sector, to look at the new rules that we require for the digital economy to enable the digital economy to grow, flourish and integrate.
20. So these are the three sets of challenges that we have to confront today. How the US and China relate to each other and thereby exercising their leadership for the global system, how the EU and the UK decide on its priority for the day after Brexit, with or without Brexit, and how Asia comes together to create relevance for itself.
21. On that note, I will be happy to hear your views and share thoughts and perhaps we can all, in our respective spheres of influence, help to bring about a more integrated world that will bring out the best in each of us, for the good of our people.
22. Thank you.