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Retaliatory trade measures can ‘severely undermine’ multilateral trading system, PM Lee warns

BEIJING — The multilateral trading system behind decades of global prosperity could be severely damaged if retaliatory measures between major economies escalate into trade wars, Prime Minister Lee Hsien Loong has warned.

A worker is seen at the Yangshan Deep Water Port, part of the Shanghai Free Trade Zone, in Shanghai, China.

A worker is seen at the Yangshan Deep Water Port, part of the Shanghai Free Trade Zone, in Shanghai, China.

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BEIJING — The multilateral trading system behind decades of global prosperity could be severely damaged if retaliatory measures between major economies escalate into trade wars, Prime Minister Lee Hsien Loong has warned.

“There will be no winners in a trade war,” Mr Lee told the People’s Daily, the Chinese Communist Party’s official newspaper, in a wide-ranging interview covering bilateral relations and global concerns, such as the mounting trade tension between China and the United States.

Over the past week, both countries have threatened to impose more tariffs on each other’s exports. The Trump administration, for instance, has announced plans to slap a sweeping 25 per cent tariff on over 1,300 Chinese imports, like flat-screen televisions, medical devices, aircraft parts and batteries. China has hit back with proposed tariffs on US$50 billion (S$66 billion) worth of American soybeans, cars, chemicals and other goods.

“Globalisation and international trade have underpinned the growth and prosperity of many countries, including Singapore and China,” said Mr Lee, who will be in China for a five-day visit from Sunday (April 8).

“If unilateral and tit-for-tat actions escalate into trade wars, the multilateral trading system that has brought countries prosperity for decades will be severely undermined.”

He noted that the political mood against global trade has shifted in some countries, particularly in the US. Though Washington has historically been a strong advocate of free trade and economic multilateralism, President Donald Trump has taken a protectionist approach of late in his bid to protect some domestic US industries.

Mr Lee expressed hopes that recent progress on two pan-Asia Pacific trade pacts would send a “clear signal to the world” that many countries remain committed to multilateral trade and an open, inclusive international system.

Last month, 11 countries, including Singapore, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), some 14 months after the United States formally withdrew from the trade pact.

Without the US, the agreement’s share of world gross domestic product drops from 40 per cent to about 13.5 per cent. Nevertheless, trade experts have said the CPTPP will still create a free trade area with a high-standard of market liberalisation.

Singapore has also pledged to “redouble” efforts to conclude the Regional Comprehensive Economic Partnership (RCEP), an ambitious free-trade agreement among 16 Asia-Pacific countries.

Mr Lee said: “If we can sign the RCEP this year, it will, together with the CPTPP, send a clear signal to the world about our commitment to multilateral trade, and our resolve to keep the regional architecture open and inclusive.”

China is part of the RCEP negotiations, but is not involved with the CPTPP. Member countries of CPTPP would welcome China, and other countries, to join “when they are ready”, he added.

And as China’s share of the global economy and international trade continues to grow, Mr Lee noted that there is increasing expectations for Beijing to contribute more to the system by further opening market access for trade in goods and services, and liberalising rules for foreign investments into China.

“These steps would better match China’s present stage of development. China can do so on a multilateral basis, or through free trade agreements with regional partners,” he added.

Turning to China’s ties with the Association of South-east Asian Nations (Asean), Mr Lee said that Singapore, as this year’s chair of the regional grouping and the coordinator of Asean-China dialogue relations, will “continue to expand and deepen cooperation between the two sides”.

He added: “China is the top trading partner for most Asean Member States. Asean is a significant grouping whose cohesion and effectiveness fosters a conducive regional environment for China.

“It is therefore in the interest of both sides that relations remain strong, stable and mutually beneficial.”

On China’s Belt and Road initiative, which will be a key area of discussion at the annual Bo’ao Forum for Asia which Mr Lee will attend on Tuesday (April 10), the Prime Minister said that Singapore is an “early and strong supporter” of the infrastructure project.

In particular, the Chongqing Connectivity Initiative, a government-level collaboration between Singapore and China, will enhance connectivity from western China to South-east Asia, and the rest of the world.

As one of the world’s largest offshore centres for the yuan, Singapore banks are also actively helping Chinese companies expand into South-east Asia via the Belt and Road initiative, said Mr Lee. Its financial centre will play a useful role in structuring and providing specialised insurance coverage for Belt and Road infrastructure projects, he added.

With many Chinese firms using Singapore as a base for their regional operations, both countries can also develop commercially feasible projects in third countries along the Belt and Road, and offer training to officials from these countries, he said.

“(The Belt and Road) will benefit many countries that need more and better infrastructure. It is also compatible with keeping the regional architecture and international system open and inclusive. Thus, Singapore and China have agreed to make the (initiative) a focal point in our bilateral relations,” added Mr Lee.

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