Singapore isn’t expecting the trade tensions between the U.S. and China to be resolved anytime soon.
That’s based on conversations with both U.S. and Chinese officials, Singapore’s Minister for Trade and Industry, Chan Chun Sing, said Tuesday at the ASEAN Conference 2019 in Singapore.
In marriage-counselor-like terms, Chan said the two trading partners would both need to resolve a “lack of strategic trust,” while also working on their underlying, internal issues.
Chan said the U.S. and China had each “hardened their views” on the other, and it wasn’t a pretty picture.
“The U.S. feels very frustrated with the current situation. The U.S. thinks the Chinese have done many injustices to them,” Chan said, adding, “I’m making no judgments as to whether the perspectives are valid or not. That’s just how they see each other.”
At the same time, factions on the Chinese side see the U.S. as trying to thwart the mainland’s rising star and its growth, Chan said.
But for the two economic superpowers to deal confidently with each other, they must resolve their internal issues, he added.
“The U.S. will need to focus on how it can maintain its long-term competitiveness. And the long-term competitiveness of the U.S. will be very much defined by its enterprise, its innovation, the skills of its people, the investment in its infrastructure and so forth,” Chan said.
In addition, China faces challenges from the unequal pace of development between its coastal provinces and its inner regions, as well as balancing resource allocation between its privately owned and its state-owned enterprises, without risking a loss of control, Chan said.
Meanwhile, while China and the U.S. work out their feelings, the Trump administration’s many trade war fronts have taken a bite out of global economic growth.
The World Bank’s Global Economic Prospects report, released Tuesday, downgrading its global economic growth forecast by 0.3 percentage point to 2.6 percent for 2019 on weaker-than-expected international trade and investment. It also lowered its global trade growth forecast for this year by a full percentage point to 2.6 percent, the weakest since the Global Financial Crisis.
“Heightened policy uncertainty, including a recent re-escalation of trade tensions between major economies, has been accompanied by a
deceleration in global investment and a decline in confidence,” the World Bank report said.
At end-May, China imposed retaliatory tariffs of 20 percent to 25 percent on US$60 billion of U.S. imports after the Trump administration announced higher tariffs on around US$200 billion of imports from China and moved toward duties on all Chinese imports, according to a Reuters report. No further trade talks have been scheduled since a 10 May meeting ended without any deal.
The tensions between the U.S. and China are also spreading to non-trade areas, with China warning its people that traveling in the U.S. carries risks from harassment by law enforcement and of being shot. At the same time, Chinese students attempting to study at U.S. universities are having more trouble getting visas.
In his presentation Tuesday, Chan expressed concerns over how a trade tensions can spread.
“Almost exactly 100 years ago, in the 1920s, the world faced the same question. The debate was whether we will further integrate our economies or will our respective countries adopt isolationist , protectionism, beggar-thy-neighbor policies,” Chan said. “One hundred years ago, the world made the wrong choice and we ended up with the Great Depression in the 1930s and subsequently, World War II.”
He pointed to risks that failing to help businesses and workers adapt to a new environment of competition and technological disruption would spur the rise of more populist politicians promising an “easy way out,” instead of making tough economic reforms.
“It becomes easy to externalize the problems to someone else rather than take a hard look at how we need to muster the resources to help our people to succeed,” Chan said.
“The correct approach to this, in our view, is to make sure that we protect the workers and not the jobs. The jobs will change and the jobs will evolve. But it is the skills of the workers that will make our workers relevant in the new era,” he said. “If workers are left behind, if salaries and wages of our workers are not progressive, but regressive, then we can all expect a local backlash against trade, globalisation and technology with negative global consequences.”
The ASEAN Conference 2019 is jointly organised by the Singapore Business Federation and United Overseas Bank, Rajah & Tan LLP and RSM Chio Lim LLP.
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