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Singapore's timely peace plea to avenging superpowers

Reticent Asian leaders must speak out and press Trump and Xi to ease tensions

| Singapore

Amid so much drama, the American and Chinese masses can agree on at least one thing these days: "Avengers" mania.

The latest Marvel comics flick is breaking box-office records in the two biggest economies. And that is as apt a metaphor for our times as you will find. What better image for viewing 2019 than the clashing of superpowers laying waste to entire cities?

The off-screen clash, though, is more dangerous than entertaining. It pits two strongman leaders backed by a combined $36 trillion in economic firepower against not just each other, but a post-World War Two order that served both their nations exceedingly well. While the U.S. is the biggest beneficiary of our decades-old rules-based system, China (at least in the last 40 years) is a close second.

A subplot to this blockbuster deserves more attention: the plight of Asian neighbors cast as unwitting bystanders, praying they don't get trampled. Praying because, frankly, there is not much little economies can do but hope the collateral damage does not prove fatal.

Now, one of those bit players is speaking out -- and what Singapore has to say is worthy of our consideration.

In a speech in Washington on May 15, Singaporean Foreign Minister Vivian Balakrishnan detailed how smaller but still very significant economies are getting caught in the trade-war crossfire.

"We are still in the early stages -- increased volatility, next step decreased growth, and after that, far deeper existential anxieties," Balakrishnan said, uttering words rarely spoken by diplomats. Yet, something existential indeed feels afoot as Donald Trump's America replaces the win-win ethos of the last 70 years with a zero-sum battle for supremacy.

Singapore's nimble, trade-driven economy often previews global inflection points. An 11.7% plunge in non-oil exports year-on-year in March was, in retrospect, the "spoiler alert" for more recent poor data from Japan to Indonesia. The same goes for the 26.7% slide in Singapore's electronics exports in March, the worst performance since the 2013 monetary "taper tantrum."

The U.S.-China battle is rapidly altering the corporate calculus. China's Huawei is directly on the front lines as this commercial cold war unfolds. Last week, President Donald Trump effectively banned the electronic equipment maker from operating in the U.S.

The impact is spreading. From Japan's Toyota Motor to South Korea's Samsung to Singapore Telecommunications, executives are hunkering down for a rough second half of 2019.

Taiwanese companies, too. As the trade clash dents confidence and demand, margins for leading tech suppliers are rapidly being squeezed. Look no further than Nikkei Asian Review's monthly snapshot of Taiwan's nine major Apple suppliers -- assemblers of iPhones, iPads and MacBooks, chipmakers and component suppliers.

As Nikkei finds, the combined profit of the island's top nine Apple contractors plunged a combined 26.23% in the first three months of 2019. This augurs poorly for investors in Foxconn, Pegatron, Catcher Technology and others. It also paints a gloomy picture of the global growth trajectory.

This tech downshift predates the latest escalation between avenging superpowers. On May 10, Trump raised tariffs on $200 billion of Chinese goods to 25% from 10%. On May 13, China previewed taxes of between 5% and 25% on $60 billion of U.S. goods. On May 15, Trump dropped the hammer on Huawei's 5G ambitions. On May 16, we learned China scrapped orders for 3,247 metric tons of U.S. pork.

What is the endgame? That is anyone's guess. In the meantime, smaller players like Singapore face a dilemma: protecting hard-won economic progress without having to side with either Trump's America or Xi Jinping's China.

"For us in the middle, especially for small countries, we do not wish to be forced into making invidious choices," Balakrishnan said. "So we hope that both sides will work out a strategic response and take into account China's increasing influence and weight in the international arena, and that both sides will find a way to accommodate each other's legitimate interests."

It is futile to attempt to contain a $14 trillion economy and the home of humankind's biggest population. Only "constructive competition," between the U.S. and China as Balakrishnan calls it, can rid Asian peers of the need to choose between rivals.

Such a divide jeopardizes the U.S.-led order from which Washington benefits. It also reduces Asia's options in pushing back against China's territorial ambitions and mercantilist policies. China's rapid gross domestic product growth is a boon for export-reliant neighbors. But its overwhelming pricing power is hollowing out industries in Japan, Korea, Taiwan and Singapore. Hence the importance of America's role as counterweight.

Asia must do a better job making its voice heard. This message comes from another Singaporean -- former Prime Minister Goh Chok Tong. Speaking in Seoul last week, Goh urged nations caught in the middle of Trump versus Xi to step forward to safeguard stability.

"If we want to be independent and neutral in the U.S.-China rivalry, we must exercise our collective influence as the 'moderate voice', and as friends of both the U.S. and China. We all have a stake in building a cohesive and peaceful world."

Next month's Group of 20 summit in Osaka is an opportunity to do just that. Singapore will not have a formal seat at the table, but South Korea's president Moon Jae-in will. So will Indonesia's Joko Widodo, India's Narendra Modi and host Shinzo Abe. Japan's prime minister would score big points in Asia if he took Balakrishnan's advice, using the G-20 to amplify calls for "more quiet discussions, less headlines, less rhetoric in public" between Washington and Beijing.

Already, that conflict is doing great damage. Economists including Iris Pang at ING warn Chinese GDP growth is on the verge of falling below 6% in 2019. Less demand from Asia's biggest economy complicates economic reform efforts in Indonesia, Malaysia and the Philippines. It could deepen Japan's coming recession and hit Singapore hard.

The trouble is, nobody can say where how plot will develop. Possible twists include Trump targeting all Chinese goods entering America (more than $500 billion annually); Beijing dumping some of its $1.12 trillion of U.S. Treasury debt holdings; or both sides going on a banning tirade. Imagine the market sellout on hints that Xi might ban imports from Boeing, General Motors, Apple or U.S. farmers? Or fresh moves by Trump to disrupt supply chains?

It is high time the avenging superpowers tore up the script and hammered out a happier ending. Count officials in Singapore among those willing to pitch in with some rewrites.

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades." He was given the 2018 prize for excellence in opinion writing by the Society of Publishers in Asia for his Nikkei Asian Review work.

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