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.