Lee urges U.S.-ASEAN free trade arrangements

Lee urges U.S.-ASEAN free trade arrangements

SINGAPORE (AFP): Singapore elder statesman Lee Kuan Yew urged the United States yesterday to enter into free trade arrangements with Southeast Asia in order to help the region compete with China's fast-growing economy.

Singling out China as the main long-term economic challenge to the United States, Lee said such trade arrangements would help ensure U.S. engagement in the region and prevent a "major East-West divide across the Pacific Ocean."

In a speech at a forum hosted by U.S. business magazine Fortune in Boston late Thursday and broadcast live to Singapore, he said "one way America can maintain its predominant position is through free trade arrangements (FTAs) between America and the countries of ASEAN."

The Association of Southeast Asian Nations (ASEAN) groups Brunei, Burma, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam, which have a collective market of about 500 million people, less than half China's population.

"ASEAN countries are facing stiff competition from China's lower cost exports to the U.S. and such FTAs will reduce the comparative advantage which China enjoys from its lower labor costs," Lee said.

"More important, an FTA will provide a framework that can ensure that economic links between the U.S. and East Asia remain deep and broad, and so make it worthwhile for the U.S. to stay engaged in the region."

Lee cited the "deep reservoir of goodwill" in Southeast Asia toward the United States since World War II, adding that "stronger ASEAN-U.S. economic ties will provide an anchor for continued U.S. engagement."

The United States maintains about 100,000 troops in the Asia- Pacific region, a presence credited by analysts and officials for underpinning the stability and prosperity of Japan and other Asian countries since World War II.

The U.S. forces are also seen as the only effective counterweight to China, whose military might is rising in tandem with its economic growth.

"The present U.S.-Japan-China triangular balance ensures relative peace and stability," Lee said.

He said there was "some danger of trouble over deeply emotional issues like Taiwan" but "the danger of military conflict between China and the U.S. is low."

"Chinese leaders know that U.S. military superiority is overwhelming, and will remain so the next few decades," said Lee, who has personal links with top leaders in Beijing.

The influential former prime minister expressed confidence that Southeast Asia will overcome its present financial crisis and resume strong growth in two to three years.

Countries in the region, including prosperous Singapore, have been rocked by financial instability since crisis-ridden Thailand freed up its baht in early July, unleashing forces that brought down neighbors' currencies as well.

"The basic conditions for rapid growth still remain. Savings are high, well above the world average. Governments continue to be pro-growth and pro-business and people are willing to study and work hard," Lee said.

Noting that much money had been spent on property markets whose woes spilled over to the regional economies, he said Southeast Asian governments had learned that "savings and borrowings must be channeled into productive investments."

"Once the correct policies are in place, investors will return. Meantime their weaker currencies will boost exports. They can recover within two to three years," he said.