A period of prolonged tension between the U.S. and China will be extremely damaging for the world, says Prime Minister Lee Hsien Loong.

In his opening remarks on Friday, May 31, at the 18th Shangri-La Dialogue, he said should tensions between the two superpowers persist, it will be difficult to address a range of global issues that include the Korean peninsula, nuclear non-proliferation and climate change, given that they all require the full participation of the U.S. and China.

Additionally, Lee said, the damage stemming from the conflict goes beyond geopolitical or environmental.

"In economic terms the loss will be not just a percentage point or two of world GDP, but the huge benefits of globalised markets and production chains, and the sharing of knowledge and breakthroughs that enable all countries to progress faster together."

Lee stressed that it was therefore imperative to avoid going down the path of conflict and causing enmity that will last for generations.

The high-level summit, held annually, sees defence ministers and military leaders from the Asia-Pacific region, including both the U.S. and China, in attendance.

Why U.S.-China is different from U.S.-USSR

China is highly integrated with the rest of the world

Lee said it was a mistake to think that strategic conflict between U.S. and China would play out like the Cold War.

This, he explains, was because China, unlike the Soviet Union, had adopted market principles, despite being communist in political structure, and was integrated into the world order.

In explaining China's integration, Lee stated that China had benefitted from working within existing multilateral institutions and that it also had extensive economic and trade links with the rest of the world.

In particular, Lee noted that all of the U.S.’s allies in Asia, including Japan, South Korea, the Philippines, Thailand and Australia, as well as many of its friends and partners, including Singapore, had China as their largest trading partner.

In contrast, the Soviet Union sought to overturn the world order, export Communism to the rest of the world, and had negligible economic links outside the Soviet bloc.

As such, a new Cold War between the U.S. and China would not result in a clear division of friend or foe, or the creation of NATO or Warsaw Pact equivalents that had a line drawn through Asia, or the Pacific Ocean.

Neither country can take down the other in a Cold War

Lee also said that a Cold War would not end with one side collapsing as neither country have the means of taking down each other.

In the case of China, Lee said that the vigorous Chinese economy would be unlikely to collapse in 40 years under the pressure of enormous defence spending like the planned economies of the Soviet Union and its allies.

While for the U.S., Lee highlighted that it was still by far the strongest country, with the most innovative and powerful economy in the world, and military capabilities and spending that exceeded that of China's.

As such, it will therefore be many years before China can equal the U.S..

Hardening domestic attitudes

Lee acknowledged, however, that a major complication to U.S.-China relations is the hardening of domestic attitudes in both countries, pointing out multiple signs of this in both countries.

In the U.S. this entailed:

• A 2018 Pew survey which found that nearly half of all Americans held an unfavourable opinion of China,
• Growing bipartisan consensus in the U.S. that China has taken advantage of the U.S. for far too long,
• Open discourse of containing China, similar to the Soviet Union, in the U.S. Congress, the military, the media, academics and NGOs, and
• Souring opinion of China among American businesses, which feel that China has not adjusted its policies on trade and investments, and systematically disadvantages foreign businesses operating in China, while Chinese businesses operate uninhibited in the US.

While for China, this involved:

• The sentiment that the U.S. is trying to thwart China’s legitimate ambitions,
• The view that the U.S. is trying to impose its political system and values on China,
• Alarm at the talk of a "clash of civilisations",
• Chinese television rebroadcasting old movies of the Korean War, along with the online circulation of a "trade war song", to drum up nationalist fervour.

The upshot of all this, Lee further explained, is that both sides are sensitive about being perceived as weak.

The U.S. has to show that it comes out ahead in any deal, while China, because of its history with the West, cannot afford to appear to succumb to Western pressure to accept an “unequal” treaty.

As such, such a zero-sum dynamic makes it difficult to construct an agreement that is politically acceptable to both parties, Lee further said.

The U.S. and China need to work together

Both the U.S. and China need to work together, and with other countries, PM Lee said.

To achieve this, both countries must understand the other’s point of view, and reconcile each other’s interests.

As for China, PM Lee said it now has a substantial stake in upholding the international system, having gained much from it.

"China must now convince other countries through its actions that it does not take a transactional and mercantilist approach, but rather an enlightened and inclusive view of its long term interests."

Also, PM Lee said that while it is natural that China would want to develop its armed forces and aspire to be a maritime power, not just a continental power, in order to protect its territories and trade routes, it should wield its strength with restraint and legitimacy.

This will enable it to grow its international influence beyond hard power, he added.

For instance, China should resolve its overlapping maritime claims in the South China Sea in accordance with international law, and through diplomacy rather than the threat of force.

As for the rest of the world, they have to accept that China will continue to grow and strengthen, and that it is neither possible nor worse to prevent this from happening.

PM Lee also acknowledged that the U.S., being the preeminent power, has the most difficult adjustment to make with regards to China’s growing strength and influence.

However, he said despite the difficulty, it is well worth the U.S. forging a new understanding that helps to integrate China’s aspirations within the current system of rules and norms.

Multilateral partnerships benefit all

Why are multilateral institutions crucial?

PM Lee acknowledged that while multilateral institutions today are far from perfect, they are of utmost importance.

Especially so for small states such as Singapore, he adds, because we are naturally disadvantaged in bilateral negotiations; therefore  multilateral institutions can bring about win-win opportunities for all the countries and partners involved.

Examples of regional trade arrangements that Singapore are involved in include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which he hopes China will consider joining in the future, as well as the Regional Comprehensive Economic Partnership (RCEP), which includes more Asia-Pacific players.

Back in January 2017, the U.S. backed out of the Trans-Pacific Partnership (TPP), which was the predecessor of the CPTPP.

The CPTPP is now in force.

As for RCEP, PM Lee urged the participating countries to complete it as soon as possible.

Hope the U.S. will one day rejoin multilateral partnerships

PM Lee also raised his concerns with the U.S.’ unilateral actions, such as imposing tariffs and trade sanctions outside of World Trade Organisation (WTO) rules.

He expressed his hope that one day, a U.S. administration will rethink the U.S.’ position and recognise that it stands to gain, both economically and strategically, from rejoining the multilateral partnership that it played a leading role in designing.

Singapore supports Belt and Road Initiative

PM Lee reiterated Singapore’s stance in supporting China’s Belt and Road Initiative (BRI), saying it is a constructive mechanism for China to engage with the region positively and integrate with the world.

Singapore is also working with the World Bank to promote financial and infrastructure, in addition to supporting professional and legal services to BRI countries.

Nevertheless, he stressed the importance of the way the BRI is implemented, saying the projects must be economically sound and bring long term benefits to its partners.

"Overall, the BRI must be open and inclusive, and must not turn the region into a closed bloc centred on a single major economy. As Asian countries deepen their links with China, they also need to grow their ties with the US, Europe, Japan and others.

In other words, the BRI should help China to integrate with the world. The end result should be to strengthen globalisation, and not to divide the world into rival spheres of influence."

The Shangri-La Dialogue is slated to continue over the weekend, and will see key speeches made from Acting U.S. Secretary of Defense Patrick Shanahan, as well as Chinese Defence Minister Wei Fenghe.

You can watch CNA's live stream of PM Lee's speech in full here:

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Top image: screenshot from live video stream of speech