PM Lee Hsien Loong's interview with the Wall Street Journal (Mar 2016)

SM Lee Hsien Loong | 29 March 2016

PM Lee Hsien Loong's interview with the Wall Street Journal (WSJ) on 29 March 2016 in New York City. PM Lee was on a working trip to the U.S. from 26 March – 2 April 2016.


Click on any of the links below to jump directly to the respective section, or scroll down for the full interview.
Click here for the Chinese translation of the text.

1. On America’s Role in Asia and the Trans-Pacific Partnership (TPP)

2. On Continuity in Chinese Policy

3. On South China Sea

4. On Thailand

5. On the global economic slowdown and impact on the region

6. On the ISIS threat in Southeast Asia

7. On Malaysia

8. On Taiwan

9. On the US Presidential campaign

10. On identity in China

11. On North Korea

12. On Singapore politics

* * * * *

On America’s Role in Asia and the Trans-Pacific Partnership (TPP)

Wall Street Journal: We would like to get your view to start where you think the American role in Asia is these days and particularly Trans-Pacific Partnership – where that stands and what you think needs to happen there from the point of view of Singapore and the region?

PM Lee Hsien Loong: Obama has made a major thrust of his Asia policy and the rebalancing towards Asia. He personally has put in a lot of commitment into it – personal diplomacy, attending ASEAN meetings, engaging through APEC and particularly pushing the TPP through. It is greatly appreciated in Asia by many countries, your friends especially, but others, too, who are watching. I think it is important for the openness and the stability of Asia, beyond the good it does to your own investments and your own interests there. The TPP is a very important part of this. Because whatever you say about rebalancing, and even if you have security and military resources committed, finally, you have to make the argument that this is in aid of mutual interest for Americans and for the countries in the region. And what is that mutual interest? It is enhanced engagement, cooperation, trade, and the TPP is a visible manifestation of that.

We have a vested interest in the TPP because we planted the seed, which eventually morphed into this big animal, the P4 – Singapore, Brunei, New Zealand and Chile – with the view to its one day growing into a big tree and now, it has. We think it is a strategic move, not just an economic move. It is a demonstration with substance that America wants to deepen its relationship with the important economies in the region. Only two major ones are not yet in. One is South Korea another one is China. The South Koreans are studying this and may come in the next round, the Chinese are looking at it carefully and one day, it could expand to include China, not yet but one day.

We have reached a point now where the agreement has been concluded. It might have been concluded earlier had you obtained Trade Promotion Authority (TPA) earlier, because nobody would sign until you had TPA. Now, you have to get it ratified and you do not have a lot of time before November [when the US Presidential election will be held]. Some people hope that you can settle it before January [when the new Administration and Congress take office]. I hope so too, but I am not very optimistic. But I think it is important you do ratify this and not either let it stand for years unsettled or, worse, at some point, say ‘We are not satisfied, let us come back. I am asking for an even better deal’ because that would considerably undermine American credibility and seriousness of purpose, and confidence in America all over the region.

WSJ: Is it possible if both the leading front candidates in both parties – Donald Trump has opposed, Hillary Clinton said she has opposed and would like to renegotiate – Will renegotiation, in your view, be possible?

PM Lee: I think that is very hard. It has been hard with the President personally pushing every year and every opportunity, it has taken us since about 2010 until now to settle. To renegotiate and reopen, you are giving more or you are asking for more? And if you are asking for more, who is going to volunteer to give? Your candidates have to face election, the Japanese Prime Minister faces re-election, too.

WSJ: How do you think China views the TPP?

PM Lee: At first, very sceptically, now quizzically. But I think that they are keeping an open mind. They believe that you are trying to create rules which will favour you and they will see whether at some point it makes sense for them to be part of this game. Meanwhile, another trade agreement is being discussed, which is the Regional Comprehensive Economic Partnership (RCEP), which includes China, South Korea as well as India and some of the TPP members. It is not as advanced in the negotiations, it is not as ambitious most likely because of the participants, but it is an alternative structure which is developing and another pathway towards free trade in principle.

WSJ: And if TPP is not ratified in the United States Congress, if it fails, or it extends for years out in limbo, what are the consequences in the region and for America?

PM Lee: You can say that you are rebalancing towards Asia, but is it words or is it deeds? And if in fact, you are rebalancing towards Asia with aircraft carriers and aeroplanes, what is it in aid of? All your partners in Asia-Pacific have China as their biggest trading partner. The Australians, the Japanese, the South Koreans, most ASEAN countries, including Singapore since recently. So, to develop a trans-Pacific relationship, you have to deepen the trans-Pacific trade and investment ties, which have done so much to benefit the people of both sides. If you are not prepared to do that, then what do you mean when you say you are deeply invested and want to do more together?

WSJ: Would it be, do you think, a real inflection point in the perception of America’s commitment to the region?

PM Lee: Inflection points always have a period leading up to them, so people watch America, the mood domestically, your appetite for engagement internationally, the actions and deeds of the Administration and of the President in other parts of the world and draw their conclusions for Asia-Pacific and for our bilateral relationships.

WSJ: And what would be your conclusion?

PM Lee: Our conclusion is that you have an Administration which understands America’s international responsibilities and interests, but you have a population which is anxious, tired and does not want to bear any burden and pay any price, and that is very difficult for whoever becomes President. You are tired of expending blood and treasure, you are uncertain about jobs and competition. To say that you need free trade and you need to be present in far-flung places, it is true, but it is very hard to make the argument and I do not think many of your legislators are doing that.

WSJ: But if it fails, what conclusion – you said that the region, the people draw their own conclusion – would they feel that this represented American retreat from the Pacific region, and what would have be the consequences of that in terms of the arrangements within the region?

PM:All the countries in the region are watching the bigger countries in the region and outside – and that means China, India, America – and all of us want to be friendly with all of the big ones, for good reason, because there are mutual interests, there are opportunities for business who are benefiting together and we do not want to have opponents or hostilities when it is not necessary. So, if you ask the countries to do a secret poll, whether they would like America engaged or not, I think many would say yes. Publicly, they will express it in different voices, but privately, I think everybody will say yes, including the Indochinese countries and including Myanmar. I have no doubt about that. But in order to give substance to that, they must be confident that you are going to be there always and that it is not just the personal interest or history of the President which makes Asia interesting to you, but a deep understanding of a national interest and a consistent policy which is maintained over many administrations.

Look at the way the Chinese do it. When they have friends they make sure that they are a friend for a long time and they make sure you know it. And there is no doubt about their intent and their ability to sustain a policy over many General Secretaries. They consider it an advantage they have over you. Each time a new team takes over, there is continuity, if they need to adjust, they adjust, but they do not start from scratch and have a new learning curve each time. If America is not able to play the same game in the same league, then your friends will say, I want to be friends with the US but to what extent can I depend on the US?

And it is not just the small countries. The Japanese have gone out on a limb, Prime Minister Shinzo Abe, to commit, to participate in the TPP. His predecessor, several of them, looked at it, funked it and did not do it. But Abe did and he has had to pay a political price even though you have had difficult discussions with him on beef and rice and things like that. And if at the end of it all, you let him down, which next Japanese Prime Minister is going to count on you, not just on trade, but security? If you are not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements? It is a very serious consequence and these thoughts are already not absent.[/section]

WSJ: I recall the last time you visited with us, talking about the Chinese and meetings in Asia, you just said they come to these meetings extremely well prepared, better prepared than anyone they have a strategy, they have goals they want to execute them, and I assume that is continued since we last talked. So, if they are continuing to do that and the US is sort of half-committed or half-prepared, if we get to the point Paul has been describing, do the Chinese seem to have a game plan relative to these relationships they have been developing with the other countries over there if the countries start to conclude the US is not going to be their worth, what is next?

PM Lee: It is a process of adjustment for all of the countries to have a new rising power in the region. If you examine it rationally and dispassionately, you must conclude it is better to have a strong China rather than a disorganised and a weak one, stable rather than fractious and exporting revolution, but it is still a process of adjustment. Suddenly, our neighbour has become a much bigger than he used to be and there are opportunities which arise, but at the same time, you have to make adjustments and pay more attention to his likes and dislikes. It is so between people, it is so between countries. And all of the countries want to be friends with China, even those which have issues with China like over the South China Sea. They can adjust. I think they would be more comfortable doing that if it is an open region and there are other participants and they can maintain an omnidirectional policy. If you only have one relationship, well, then between being a friend and being a client, the line is grey.

On Continuity in Chinese Policy

WSJ: Can I ask you, you mentioned the continuity in Chinese policy, but President Xi seems to represent something of a departure from his two predecessors and that is showing up in some resistance to his reform efforts, but also a more, not just confident but aggressive policy on the part of his leadership team. Do you see that, and if so, how?

PM Lee: I think there is an evolution. The earlier tag phrase was what Deng Xiaoping said, which is韬光养晦, hide your light under a bushel and go quietly in the world. And they observed that for a long time, but there is a second half to that phrase, which is有所作为, but do great deeds in the world. I think the balance between the two is gradually shifting and it is a recognition on their own part that their influence is growing, their resources are growing, their ability to shape events and shape the international set of rules which apply to them and to others. They would like to do that, and not accept the rules which have been settled at the time when China was weak and, in some respects, they would consider to be to their disadvantage. So, it is to be expected and if you watch their rhetoric, they continue to say the right things about peaceful emergence and playing by international rules, but, of course, their perception of what is fair and what they are entitled to, may or may not be the same as the perception of countries which have disputes with them.

It is one of the difficulties of being a big country that it is very hard to internalise how other people see you. It is so for Americans overseas, it is so for the Japanese, it is even more so for the Chinese. Because you think it is entirely reasonable and everybody should see the world your way, while others see the world in different ways, and unless you can appreciate that, you can be at cross-purposes. For example, right now, if you compare where we are today with where we were a decade or two ago, there is no doubt that China is a more influential participant, to put it at the minimum. But from the Chinese point of view, I think they are very conscious of the issues which they have with other countries, they are very conscious that America remains a great power and the superpower, and they are not. I am not sure that they are feeling triumphant. I think they are feeling anxious that there are so many relationships in the region which are yet to be fully consolidated. They like people to be their friends, but they know that that takes time.

On South China Sea

WSJ: How do you read what China has been doing in the South China Sea and particularly building up the islands and the fortifications on the islands that have been protested by many governments in the region?

PM Lee: We have a Declaration of Conduct on the South China Sea. We signed this quite a long time ago between ASEAN and China and everybody agreed not to raise the temperature and to resolve matters peacefully. But, of course, what is in dispute is itself in dispute. My piece is indisputably mine; your piece is in contention. Everybody takes such a view and the Chinese perspective is that other participants have been taking actions and liberties and why should they be bound by stricter rules? Which, in a strictly logical argument, the syllogism follows. But when you are the biggest participant in the game, and you do the same as other countries, the consequences are on a different scale. So they have decided to harden their position. I think the first steps were taken a long time ago. In the early 1990s, they went into Mischief Reef and built what they called ‘fishermen's shelters’. They were very well-sheltered fishermen over there. But now, there is far more than fishermen's shelters and I think they want to create facts on the ground.

WSJ: What should the US and regional response be to those facts on the ground

PM Lee: First, I think you must have an overall substantive relationship and that commitment to deepen that relationship, which is why I say the TPP is very important. Without that, without the interest in a broad range of mutual cooperation, America is just another country which has some claim or makes some assertion. So, you must have that. I think there must be no doubt in anybody’s mind that America is a Pacific power, that you have an interest in the region, that you would like a peaceful region, but at the same time, you would like international norms and laws to be observed, in particular, the Law of the Sea, and that you have a role to play in security issues. One thing which you should do which would be very helpful, but I do not think is going to happen for a long time, is to ratify the UN Convention on the Law of the Sea (UNCLOS). Your administrations all say so, even former Defence Secretaries say so, but your Congress does not do that and you put yourself in the wrong. If you want international rules to apply, you should lead by example.

First, you must have an overall relationship; secondly, you must be quite clear what the principles are, including international law, and thirdly, in the case of the South China Sea particularly, freedom of navigation is something which concerns many countries, whether you are a claimant state or not. Then, having done that, you are in a position to say ‘I am here, I have an overall relationship with China, we have issues, we have cooperation, but we also have things which we need to discuss.’ And within that broad relationship, you can handle individual issues such as the South China Sea. If you look at it just as one thing and it is a zero sum, then the argument is either I let it happen and I do not want to get engaged, or I harden and I take a risk of raising tensions. But it is not one-dimensional. You have a very complex and comprehensive relationship with China and this is one item which has to be put on the table, together with the rest and discussed.

WSJ: But this would mean US should acquiesce in China’s ability, willingness or just facts on the ground that it wants to establish to say, ‘Alright, they are establishing those facts, fine, we do nothing about it. We can have a few ships sail by and that is about it’.

PM Lee: Well, whether an atoll is one hectare or 50 hectares does not change the strategic situation. What changes the strategic situation is the intent and the capabilities of the major powers and where does America stand? Where do the Japanese stand? The Indians one day will be more than a sub-continental power and will have an interest in the broader areas in Asia. What do their countries believe, what do their countries do, what are they prepared to commit and how do they engage, maintaining their interests and yet at the same time able to avoid collisions? It is always a game we have to play between powers.

WSJ: A senior defence official suggested to me that there should be real consequences, they build an island, we sell some sort of missile defence system to the Philippines, or to Taiwan. Would you support that kind of approach to the level of pain that China feels?

PM Lee: If you are the senior defence official, you have to take such a perspective. If you are looking at it from the point of view of the President, you have to look at the overall relationship and decide what pressures you want to bring to bear and how seriously you want to take this. You do have serious interests at stake. And you have to speak with one coherent voice. One of the things which confuses people is when you do a Freedom of Navigation (FON) operation – you have done that from time to time – the question is, how do you interpret this, what does this mean? If you are asserting your rights, it is one thing. Let it be known that you are doing an innocent passage through somebody's territorial waters, and it is a completely different interpretation. You must decide which interpretation prevails in your own mind and make sure there is no misunderstanding elsewhere.

WSJ: Are you saying the United States has not been clear about its purposes on its FON operations?

PM Lee: I read the newspapers and the newspapers give a range of interpretations based on, I presume, well-founded sources.

WSJ: I think the Defence Department would say that they are sailing through what the United States considers to be international waters and not the Chinese territorial waters?

PM Lee: I think there have been other reports which are sourced back to the National Security Council (NSC).

On Thailand

WSJ: May I ask you about one country in the region which really does seem to be backsliding, and that is Thailand? Can you give us a sense of where you think Thai politics are going domestically…?

PM Lee: I think they are in the transition, they are anxiously watching the succession to a new Monarch in due course, and wondering how the system will work with a new Monarch in place, having gotten used to a very dominant and revered figure over the last 60-something years. Thailand has a very difficult problem to solve because if you go purely on parliamentary democracy rules, like you would in Britain, it probably is not governable because the elite will not feel themselves part of this. And if you just work on the basis of the elite being in charge and chuck the parliamentary rules out of the window, you also, in this day and age, will find it very difficult to run a modern economy and society. So, how to find the right balance which is going to be workable in such a society? So you may call it ‘backsliding’, you can say it is not according to the norms which internationally prevail, but they have to find a solution which works for Thailand and that is very hard.

On the global economic slowdown and impact on the region

WSJ: Well, if you can talk a little bit about the effects across the region of the global economy slowing down and as China is certainly persisting now for a number of years, finally caught up with China, and I think it is just having political consequences for individual states in terms of, I mean, those countries depend heavily, especially China, on continuous job creation, economic opportunity for people. If we are heading into a period with that not happening, that has consequences.

PM Lee: First of all, China, they are slowing down. I am not sure it is because of the global economy slowing down, in fact, the global economy blames its slowdown on China. I think there are structural reasons within China why the growth is slowing down. The first one is demographics because their working age population has already peaked several years ago and is now declining every year, which is a dramatic change. So, if you want to grow, you have got to grow by higher productivity and that is a much tougher proposition. You can do that in principle, because half the population is still in the rural areas, it is still agricultural largely, and if you can improve performance in the agricultural sector – which I think is entirely possible – and free up the resources you can put them to many other productive purposes, not building empty houses, but there are so many social needs which need to be met – hospitals, schools, services in the urban areas. But to do that, you need structural reforms and the structural reforms have not been easy to do. The Government has a roadmap. They said they have done a few, they have said what they need to do, but I think there is a lot of resistance and so, as a result, their growth has slowed down. It has had some impact on their partners, including in the region. Certainly resource suppliers like Australia have been hurt. Singapore’s trade with them has also somewhat slowed down. Within the broader region, energy prices have come down, which is bad for our neighbours but not bad for us.

We in Singapore have to get used to a slowdown, for a different reason. It is because our own economy is at an inflection point. We have to grow by transformation and by productivity and that is a slog because the obvious things have already been done. We do not have farmers to convert them to factory workers.

There will be political consequences if the Chinese are unable to make this transition over the next five, ten years. It is a transition which they did not do to the extent they had hoped in the previous Chinese Administration. With Xi Jinping and Li Keqiang, he has started off his term, first, focusing on corruption and reforms in the military and legal system, but as a result, the economic reforms have slowed down. And as a result, their officials have frozen and are very reluctant to make any dramatic moves because they never know when they may be accused of “serious violations of discipline”, even out of retirement.

On the ISIS threat in Southeast Asia

WSJ: You have two very large nations in your neighbourhood with some large Muslim populations. What have you seen in those countries in the degree of the recruits that may be going to Middle East to join ISIS, if any, from Malaysia and Indonesia and how do you view the security threat?

PM Lee: We take it very seriously. I think our neighbours are taking it very seriously, too. The Malaysians have had more than 100 go to the Middle East.

WSJ: More than 100?

PM Lee: More than 100. They have had a few suicide bombers actually blow themselves up in the Middle East. Many more have wanted to go and have been arrested, including commandos from the army, a naval officer, and a police officer. So, it is a serious matter and they are taking it seriously, but I do not think you can assume that they will be able to police up every last shred of the threat.

The Indonesians also have a very serious problem. They have maybe 500, maybe more, who are in the Middle East. They go up on ‘hijrah’, that means they actually migrate there and bring their women and children along with them to participate in this. Some come back, some more want to go, sometimes, they are stopped. Nothing can be done about those who want to go in Indonesia because their laws do not cover this. We have stopped several who have come through Singapore to whitewash their travel records, in order to make it to the Middle East undetected. We have picked them up, verified their intentions, sent them back to Indonesia, told the Indonesians. The Indonesians picked them up, verified it, sent them back to the village and let them go! There is nothing more they can do. So, they will try again and some will get through.

There is a battalion in ISIS called ‘Katibah Nusantara’ which is formed of volunteers from Southeast Asia. ‘Nusantara’ means ‘the archipelago’ and it must be 500-600 people, maybe more. They have a propaganda video in Bahasa targeted at recruiting more people from Southeast Asia to go to the Middle East to fight with them. The militants from Indonesia who are in the Middle East have given orders back to their network in the home country to do something there. What they want to do is to set up a ‘Wilayat’ in Southeast Asia, a province of ISIS, just as they have in Yemen or Libya. And you can imagine places in Southeast Asia where the government's writ does not run strong.

WSJ: Aceh?

PM Lee: Maybe Aceh, but there other places which are just faraway from the government. Poso in Indonesia; Mindanao, for example, in the southern Philippines where Abu Sayyaf has links to these groups, or southern Thailand, where there are no links yet, but there is an insurgency.

WSJ: Bangladesh?

PM Lee: Bangladesh has groups, too. We discovered a group in Singapore of Bangladeshi workers who got radicalised in Singapore and started discussing mounting operations in Bangladesh and elsewhere. We sent them back to Bangladesh which I think will deal with them. This is a cancer, which we take very, very seriously.

WSJ: Is it because there is a jihadist threat larger now because of ISIS than it was with just Al-Qaeda?

PM Lee: Yes, with Al-Qaeda we did not have hundreds from Southeast Asia going to join them in Afghanistan after 9/11. A few people went and we had at least one from Singapore. In fact, that is how we discovered the Al-Qaeda-linked Jemaah Islamiyah group in Singapore in 2001, after 9/11. Somebody told us: ‘Watch this man, he is going to Afghanistan’, and lo and behold, the man disappeared. We traced it and found the network but before we were quite ready to act, strange rumours came back from Afghanistan that a Singaporean was in jail there. That forced our hand. We had to clean up the network, but we were not quite ready and so, a few got away.

Now, you have hundreds from the region. We have had several from Singapore who have gone to the Middle East and maybe a dozen, including young people, whom we have picked up who wanted to go, self-radicalised.

WSJ: What do you do with them?

PM Lee: It depends. We assess them. If they are not a severe threat, we release them with a Restriction Order, so we keep track of them and also keep in touch with them and try to gradually turn them around over time. If they are a more serious threat, we detain them without trial and we try to turn them around. We have a Religious Rehabilitation Group of a well-respected ulamas, religious scholars who work with these people and their families and try and persuade them that this is not the correct interpretation of Islam. Their track record is not bad. Since 9/11, we have picked up 72 people altogether. We have released almost all of them, we have only about a dozen in detention now. The recidivism rate has been quite low. But some are very hard core. They have been there since 2001/2002 and I do not know when we will be able to let them go. You have the same problem with some people in Guantanamo.

WSJ: You mentioned them being self-radicalised. Is that to say that is your experience they are being radicalised on the Internet, rather than among people and not necessarily…

PM Lee: Yes. It is not in the mosque, not a network, it is an individual usually. Sometimes, somebody notices and tells us. Sometimes, we pick it up and from some other source. They go on the Internet, they read, they watch Anwar Al-Awlaki, now dead, but the videos are still there. They get in touch on the Internet and they actually make practical arrangements to go. There was one young man who wanted to go. He made plans, and his fall-back plan was if you could not go there, well, he would try and do something back home: he would try to assassinate the Prime Minister or the President.

So, it is very serious problem. The community, our Muslims, are on our side. The religious leaders understand and are quite unambiguous in their stance. But you will have people who have had something gone wrong with their world or they may be teenage, or have had some life crisis and they get radicalised. Their families may be in denial and may not tell us. Sometimes, the families do tell us, and we act on the problem quickly.

WSJ: The Belgians turned out to be having criminals.

PM Lee: That is not our pattern. One of the persons was a lawyer, went to law school in Singapore. He was in a very well-known school before that. The others are not down-and-outs who turn to this out of desperation.

On Malaysia

WSJ: I want to ask you about your neighbour, the Prime Minister of Malaysia has had some interesting political experiences in the past few months, how do you assess his political position and the future of Malaysian politics?

PM Lee: There are investigations which are going on, including in Singapore. We have frozen some accounts and we are pursuing the investigations. Reading the newspapers, other jurisdictions are also pursuing investigations – Americans, Swiss and others. We will have to see where the investigations lead. It is premature to say anything about them. Najib is somebody whom we have worked with, known a long time and worked well with and been able to do business with. We have a very constructive relationship with him and his government, and we hope that that will continue.

WSJ: Do you at all worry about finally, UMNO, after all of these decades, losing power to the opposition?

PM Lee: When you have an election, you never know how things will turn out until the ballot boxes are opened. The basis of politics in Malaysia has always been race, and religion – Islam – has become a much bigger factor over the years, and I think that will continue. I do not know how the next election will turn out. In the last several elections, there have been surprises, but if you do not have a basis for governing Malaysia which will maintain social stability and racial harmony under Malaysian rules, that will mean a lot of uncertainty for them and undoubtedly impact on us.

On Taiwan

WSJ: Taiwan will have new leadership shortly – how do you foresee that government’s goals might impact you in the region?

PM Lee: With the Kuomintang (KMT) Government over two terms, Ma Ying-jeou has been able to make progress with Mainland China on cross-strait relations. We hope that what has been gained will be maintained and if possible, they make further headway beyond that. But, of course, it is now going to be a Democratic Progressive Party (DPP) government. The basis on which the progress has been made has been this ‘constructive ambiguity’ in the 1992 Consensus, but there is now ambiguity about that ambiguity. So, that puts the whole edifice in question. But if you look at it in terms of the attitudes and the polls which have been done in Taiwan over time, the consciousness of a Taiwanese identity has strengthened considerably. It is very perceptible even over a period of four, five years. The same has happened in Hong Kong. That constrains what any Taiwanese leader will be able to do. But at the same time, I think the Taiwanese fully understand that if they collide with Mainland China, they will be on their own.

WSJ: You mean that there is a perception that the US would not help?

PM Lee: No, I think Americans have made your position quite clear, that if Taiwan goes for independence, you are not standing with Taiwan. At least the previous administrations made their position very clear.

On the US Presidential campaign

WSJ: How do you look at the American campaign season, the political season here, the presidential race? What do you make of some of the rhetoric about America’s…?

PM Lee: We have a stake, but we have no say. We have to live with the outcome. We see what is happening, it is quite a departure from the way politics has traditionally been conducted even in America…

WSJ: Do you see a difference?

PM Lee: I see some difference and we have to live with the outcome, whoever it is. But it is not just the person because he represents presumably angst and disquiet on the ground, which is projected onto him and, well, they hope that he will fight for them. In the same way as anxieties and hopes were projected onto Obama and people voted for Obama and said, change that we believe in. What exactly the change is, well, that is yet to be defined and we do not want to define that now, but here is a change and vote for me. And fortunately, you have a President who comes in and assembles a team of experienced people and the ship of state sails on. If you have a change into something which is chaotic and disordered, how do the rest of the world make their calculations? What do I depend upon?

WSJ: But you worry about an America in retreat from its obligations that it has undertaken since World War II?

PM Lee: Yes, we worry that your ground mood, because of the way globalisation has impacted your workers, because of the way people see Wall Street and the wealthy, you have a strong groundswell of people who understand free trade, who will understand rational policies but in the end say, I am unhappy with the situation, I want some change. ‘Occupy Wall Street’ was neither here nor there in terms of scale or in terms of logic, but in the psychological impact, crystallizing this sense amongst a significant chunk of the population that the system is not legitimate, I think that it significantly diminished the credibility of your status quo. Which is a pity, because actually, you have benefited from globalisation. There are downsides, there are adjustment problems, you will have Michigan and Detroit and difficult places like that, but overall, America has benefited, and you are wealthy enough and resilient enough to be able to help those who are buffeted and to take advantage of the opportunities, which are out there other, rather than to say, ‘I do not want the competition, I do not want cars which are made overseas and I want to pull back and forget about the rest of the world’.

WSJ: Since World War II, the world's system, globalisation, and not only trade but also security, has rested on America that is willing to spend a larger share of GDP on defence, that is willing to be the market of last resort, if you will, for trade goods around the world. Do you see that role of the United States fundamentally changing now that the ISIS is shifting the mood here such that that dominant role is going to – ‘dominant’ is the wrong word – that leadership role is going to stop?

PM Lee: You will still be the leader and if you do not cooperate, nothing can be done. If you do not do climate change, there is no climate change solution for the world. Because unless you are committed, we cannot get the Chinese along, much less the Indians and everybody else. So, your role remains indispensable. Whether you are prepared to step up to that, or whether you decide to chuck it and just ignore the consequences because they only come after the current presidential term, well, that, we cannot say how your political process will turn out. In practical politics, it is always a trade-off between grasping the nettle and kicking the can down the road. Every politician does sometimes one and sometimes the other.

WSJ: And I assume, if you were advising the American public, you would advise us not to chuck it?

PM Lee: No, I think you cannot solve all problems within one term, but you do have to continue to carry the responsibility, which in the end secures your own security, your own prosperity and your own self-image that you are a country which is different from other countries.

WSJ: What is the going on here? Some say it is basically a raw populist movement, based on raw populist anger? Do you recall any historic precedents of that sort around the Asian region in which the leaders stepped up and simply tapped into emotional surge and when it led to how it was dealt with because we may end up, we do not know how this is going to end?

PM Lee: You believe in your system, with checks and balances, you can have somebody who is far from ideal become the President and the system will prevent him from doing harm. And so far, it has worked in the sense that you have had Presidents who have not measured up, but after some time, well, the world comes back. But I do not think you have ever had such an extreme menu of choices as you have in this election, choices which are likely to end up on the ballot paper. If you do, there are precedents. In Asia, you can write those off as unstable, immature democracies, but in Europe, before the War, such stress led to very extreme outcomes in Germany, in Italy and in the end, you had a very unhappy result.

Your mood nationally is not like that. Even if the Republicans win, I doubt, they are not going to get a landslide. There will be at some point a pushback because you can say things but can you make them happen? From the assertion to the reality is a rocky journey.

WSJ: You know Xi Jinping?

PM Lee: I have met him, yes.

WSJ: And the Chinese leadership, how they think and act. How do you think they would react to an American President who said, ‘We want to redo our trading relationships and we are going to impose a 40 per cent tariff on you if you do not renegotiate terms of that relationship?’ What would be the response?

PM Lee: It is hypothetical, but if you put that to any other country, those who have no choice would be forced to lie back and enjoy it. Those who have a choice will say, ‘Chuck it, I cannot work on this basis’. It is not possible, because if that is how we work, seriously-entered-into undertakings can be just torn up, and because the Americans are not happy, we can do it over again, then how do we conclude a new agreement? How do I know where the bottom line is?

WSJ: Do you have any sympathy for the argument that the Asian countries, some Asian countries – Japan and China, in particular – are depreciating their currencies in a way that damages trade with the United States?

PM Lee: It is an empirical question. In principle, it could happen. With the Chinese, I do not think it has happened because if you look at the Chinese real terms of trade, in fact, their wage costs have been going up. So, the real exchange rate wages, rather than just the nominal exchange rate of just the currencies, have been going up. Even if you look just at the currencies, the variations have not been very huge and the International Monetary Fund is not convinced that there is a problem. So, you can argue over whether you want to manoeuvre your currency a bit higher or a bit lower, but overall, I do not think you had a hot issue when this was hot five years ago and I do not think the issue is hot anymore now.

With the Japanese, you have not raised it to the same temperature, but actually, when you implement quantitative easing (QE) and your exchange rate moves, you say that that is a helpless side-effect and then you decide not to make an issue out of it. That is what you have done with the Europeans and with the Japanese.

WSJ: So, the Japanese and the Europeans are more aggressively and transparently depreciating than China?

PM Lee: Well, the Japanese and the Europeans have done QE, the Chinese have not and they will tell you that their objective is not to depreciate their currencies either.

WSJ: Even though we know they are.

On identity in China

WSJ: I was going to ask you, you mentioned Taiwanese self-identity. No Hong Kong Chinese ever identified themselves as a Hong Konger, they would say Cantonese. Since 1997, I think many would say, as you would say, use a new identity. Obviously, Singapore, you have a new generation growing up with wealth without the problems their parents had. What about China? What do you think a new generation growing up with wealth and opportunities is going to mean for China? Do they have a different identity?

PM Lee: You mean, in China, or rather than…?

WSJ: In China, yes.

PM Lee: They are travelling more, but if you believe that now that they are more affluent, they are less nationalist, you may be ahead of the curve. I do not think they are anywhere near that. The young Chinese are probably as nationalistic as the older generations and sometimes more so. When it comes to issues like Japan, the young ones are the most assertive. It is because of the national education they have been given, the history which they have been taught, the chronicled version, the popular films which they watch and the TV serials. The Sino-Japanese war is one of the bigger staples of the popular media. The difference between the Chinese and the Japanese is that the Japanese cannot remember the war and the Chinese cannot forget it.

WSJ: Do you think the Xi regime is stable?

PM Lee: I think so. I do not think he has a challenger, and he has a lot of personal popularity. David Shambaugh has just written a book to say the regime is coming to an end, but I do not really think so. They have problems, but they are working at them. They understand the problems even though they may not be able to overcome them quickly.

WSJ: Do you think he is setting up some kind of cult of personality with all this ‘Uncle Xi’ business?

PM Lee: That is a normative, a pejorative statement. But I think he is putting himself front and centre because he thinks it will help him to get what he needs done, done. And he does have a personality and he is projecting it. You find it strange because several of his predecessors did not have any personalities publicly projected.

WSJ: There is a reason for that. China has been trying to get away with…?

PM Lee: Yes, I know, Deng Xiaoping went for a collective leadership and they did not want this. So, between Xi and his team, the dynamics have worked out such. I do not know whether after his first term when he has to renew a significant part of the Standing Committee, who else will come in and how the new dynamics will work out.

On North Korea

WSJ: Speaking of unpredictable regimes, we have not even asked about North Korea. Does the situation there concern you? Do you have any insights behind?

PM Lee: We have no insights, we just know what everybody else knows, but we are concerned because you cannot tell what they will do. They are not mad but they are doing brinksmanship and they can miscalculate or there can be an accident. Even if there is no precipitated disaster, over time, it will change the attitudes in South Korea and Japan. It is taboo to talk about nuclear options, but I am sure the thoughts are not absent to think about developing nuclear capabilities.

On Singapore politics

WSJ: We are close to out of time, but I wanted like to ask you about Singapore politics. You had a major election after some opposition had made some gains…?

PM Lee: Oh, we had a general election, yes.

WSJ: What did you do differently that made a difference?

PM Lee: First, for ten years, maybe even longer, we have been shifting policies to adjust to a new phase of our development, shifting to strengthen social safety nets, shifting to grow in a different way, shifting to a balance which is more in tune with the aspirations and expectations of a new generation of Singaporeans who grew up well after independence. We had a setback in 2011, but we continued on this path after that and by last year, 2015, when we went to the polls, I think people could see that what we were doing was yielding results and that our heart was in the right place. That it was a 50th anniversary and a moment for reflection and introspection was helpful. I have no doubt that founding PM Lee Kuan Yew's passing earlier that year had an impact on voters as well. But mainly, they had faith that this is a team which will do the right thing. People had to make a serious choice: which team do you want to lead the country? Do you want to vote for the opposition? They may become the government. It is not just a protest vote. If you want the PAP, you need to show the PAP support so that they can work for you. The opposition went on a message that ‘Vote for us, the PAP will work harder’. I countered that the opposition was not up to scratch, vote for the PAP, make the opposition work harder. And fortunately, the voters believed me.


Foreign affairs