Globalization to be reshaped by US-China power tussle

In an increasingly polarized world, the need for multilateral frameworks that enable countries to do business with each other, even if they do not always see eye to eye, is stronger than ever, said Singaporean Deputy Prime Minister Lawrence Wong.

“If we can forge stronger partnerships between the major powers and all countries in the region, we can help foster a more stable and prosperous Asia,” he stressed in a keynote speech at the 55th Wharton Global Forum on Saturday, calling for new working arrangements and international collaboration to tackle issues that affect everyone, such as climate change and future pandemics.

“We must all work together to fortify multilateralism, and the global rules of the game.” 

What happens over the next few decades will be defined by how the rivalry between China and the US unfolds, said Wong, describing Taiwan as a dangerous flashpoint, with the Ukraine war adding to tensions.

Speaking to 800 alumni of Wharton School of the University of Pennsylvania, business leaders and government officials at the Shangri-La Singapore, he noted that on the economic side, the era of untrammeled globalization we enjoyed over the last 30 years is over.

More and more multinationals are looking to move production back home or relocate to markets that have a bigger consumer base, where they are less likely to get caught in geostrategic crossfires.

“Governments are also embracing more muscular industrial policies. The US, China and European Union are stumping out more aggressive support, in the form of tax breaks and subsidies, to develop domestic strengths in what they assess to be critical industries like semiconductors and green energy. We are seeing the emergence of an industrial policy arms race, and a huge contest for leadership in key technologies, which is likely to escalate with time,” said Wong, who is also Singapore’s Finance Minister.

“Left unchecked, if this trend continues, we will see a more fragmented and dangerous global order.”

While the leaders of both the US and China have affirmed their intent to engage one another and said they do not want a new Cold War, more needs to be done, said Mr Wong, highlighting Singapore’s support for multilateral pacts such as the Regional Comprehensive Economic Partnership, the world’s largest free trade agreement, covering countries such as China, Japan, Australia and the 10 Asean nations.

“Meanwhile, the US has signaled its continued commitment to deepen its economic engagement of the region through the Indo-Pacific Economic Framework. Singapore has welcomed this too and hopes to work with partners to develop a framework which is open, inclusive, and flexible.”

Wong highlighted how an open, rules-based international order helped keep the world relatively stable.

While such an order was never perfect he said, “This stability fostered international cooperation and gave birth to an era of unparalleled economic transformation – many countries prospered, and millions were lifted out of poverty”.

“Today the world is more divided than ever before. But amidst these differences, we must find enough common ground to solve our collective problems.”

He added that multilateral institutions, like the World Bank, World Trade Organization and World Health Organization, which have helped define the rules-based international order over the decades, remain strong and relevant.

Wong said Singapore would do its part to advance these goals, while being realistic. “After all, we are really one of the smallest countries in Asia. We know that we have to adapt to the world as it is, not what we would like it to be.”

If not, he cautioned, Singapore might go the way of another Singapore – an American village founded in the 1830s in Michigan. Once a thriving lumber port town hoping to emulate the Asian city it was named after, it is now a ghost town after the lumber trade went into decline.

Wong, who is an alumnus of the University of Michigan, said Singapore is determined not to meet the same fate. “Singapore today may be in a stronger position than when we started out... but we will always be that little red dot in the world. And in this era of change, really, one can never take things for granted.”

To thrive and prosper, Singapore will do its best to stay relevant and add value in the global network as a key node for trade, finance, talent and ideas.

“We will continue to build a vast network of friends to promote peace and stability in our region, and, most of all, to preserve our sovereignty and right to determine our own future.”