Gerard Baker, Editor at Large, The Wall Street Journal: Minister, please. Thank you very much indeed for joining us. There is a lot to consider in terms of regional security in this part of the world. Much of the focus of the discussion today inevitably has been about the tension between the United States and China. Economic tension, to some extent, political tension and maybe even some people fear ultimately, security and ultimately military tension. How does Singapore and other countries in the region, other countries in the Asia Pacific, handle this quite new environment where you have got these two major superpowers really coming toe-to-toe to some extent. How does that affect you and how do you navigate it?

Minister for Defence, Dr Ng Eng Hen: Well, we handle it with bated breath, and anticipation about the circumstances that we are in. And as you rightly pointed out, it is a central preoccupation that all countries will have to consider. And the starting point is if ever any country is supposed to choose sides, then everyone loses. That is the scenario that we want to avoid. But even as we say that, it looks increasingly more difficult, whether it is the choice of technology, whether it is alliances, whether it is the business partnerships and so on and so forth. But to set the context, China’s growth has been good for Asia. I mean we are talking in this part of the world: when we look at the last two decades, ASEAN has grown and I remember in the early, mid-2000s, after 9/11 and the Bali bomb blasts, our economy took a dive, other ASEAN economies also and then we bounced back. Much of that growth was attributed to the Chinese engine as well as India’s economy. China was growing on average ten percent, India six to seven percent but if you look across the Atlantic, for US and Europe, I think they only managed 1-3% especially in this last decade.  So China’s growth has been positive for this region, for ASEAN, for Australasia, but it is also the disparity between the growth rates, between China, as well as US and EU, that I think we are seeing some of the consequences today. The backlash towards globalisation, the feeling that US was upholding a system which all of us remember that it was the chief cheerleader, if not the architect, but felt that it was unfairly done by.

Baker: Where does it, but as you said, you do not want to choose sides but you have a traditionally strong relationship with the traditional superpower, the United States, a political and military and economic relationship with them and then you have got this rising power over the last 30 years, China and you recently signed new memorandums of understanding for economic and financial arrangements with them. China is obviously the big, big, player in this part of the world. But you do not want, obviously, you do not want to alienate the United States, which is a very important country for you. How do you navigate that?

Dr Ng: Well it helps if we sort of, cast our eye back and see, and remember the big events that got us here. And perhaps it is easier to paint it in terms of narratives, we are all very used to this word narratives especially social media, and governments being under stress. But the narrative, one narrative, was that China joins the global system. 1989, the Berlin Wall came down, the Bamboo Curtain went up and it was a cause for celebration. And in that sense, capitalism triumphed as well as western liberal order. But it did not follow the script. Barely a decade after that, 9/11 occurred. The US economy tanked in the mid-2000s, EU as well. That is why in my starting comments, I think we have to put context to it. And both US and EU are seeing the rise of China, economically. As well, in sync with that, pari passu, was its rising military expenditure, its great advances in emerging technologies, in future technologies. China is not the USSR. Its future is written largely on the language of modernity – science and technology.

Baker: You have got very interesting observations on defence spending, including some charts which I do want to show, because they are very interesting. But just very quickly on this issue of China, for example, the US is using all kinds of tools now, I think it is fair to say, to try and "contain" China. Some would argue that this latest action against Huawei for example, is part of, if you like, kind of reducing the dependence of other countries, particularly countries in the west, on China. How do you see something like that, Huawei in particular? Do you see the threat from Huawei in the way the United States does? Is that something, is that an intelligence assessment and a defence assessment that Singapore shares?

Dr Ng: I will not comment specifically on Huawei but if we address the first question that there is a reaction from US in terms of technology. My first comment is that it was predictable, because US felt that it was asked to do its unfair share, post-Cold War. Remember at the time when it was asked, they had the pressures in the Middle East, in Asia, in Europe, and that they felt that the European countries were not doing enough militarily. And there was a backlash. And I think the red flags, were waving high for people who would notice. So for instance, one data point coming out from the US was the life expectancy of non-college whites, which was in the fifties. Similar to what Russia was experiencing post break-up of the USSR, and I think that explains in part political outcomes in the Rust Belt. So it was predictable that US itself felt there was an unfair system and I suppose that China was taking advantage of the system that it had helped set up. Now I think there was a second limb too about technology. In the extreme scenario, the fear that any technological company that has market share would put into its supply chain, instruments, or chips, or components that allow a backdoor. I mean that is a specific threat. And if you ask experts, they would say not so likely. Not so likely.

Baker: In principle. But then again, in Huawei’s case?

Dr Ng: I was going to add on. The difficulty is in detecting such components and we are in a security business. If you want to analyse one motherboard for such a component, it will take you quite a long time. So it is a theoretical threat made more difficult because it is actually very hard to disprove.

Baker: Let us talk about, let us talk about the macro picture.

Dr Ng: But let me make a point that the security lapses that we have today, in terms of either fake news or internet intrusions or hacking, is occurring not on a 5G network. It is already occurring on a 3G and on a 4G network. And one other view of companies that are competitive, like Huawei, which is very competitive, it is not so much that they have these components, but to be competitive, companies like that may pay less attention to security requirements, which you can fix as an industrial standard. Not necessarily ban it.

Baker: Let us look at this macro picture, could we call up the first slide that the Minister has. This is interesting, now I want to put this into historical context here which gives us a sense of how the world, and another of this extraordinary data points to what gave us a sense of how much the world has changed in the last 20 years or so. Now this chart tracks Asia, EU, and ASEAN defence spending. Look at the way in which Asian defence, including ASEAN, has increased in the last twenty years. Now that is predominantly China, but also India, maybe the Koreas too. So give us a sense of that, of the historical importance of that, and what that means in terms of the region’s strategic importance.

Dr Ng: I wanted to show this chart because I do not think many people would realise that Asia’s defence spending has outstripped the EU’s since 2008.

Baker: Now, President Trump would say that is because the Europeans are not spending enough on their own.

Dr Ng: That may be so. But this is both a consequence of the economies that have been growing. For instance, ASEAN now has the combined GDP about that of the UK’s. This is the consequence of them (ASEAN economies) modernising their militaries because they have the economic means. You are right, I mean China has the largest spending in the region but Japan is also spending significantly. I think Japan’s military spending is close to what the UK and France spend now, and India spends more than the United Kingdom. Now, that is not necessarily bad in and of itself because  militaries are spending more and there are business opportunities provided by this, but let me just finish off this slide with this - unlike the EU, Asia does not have institutions that came about after wars and episodes, and there is not that collective "never again" moment among Asian countries. And to me that spells risk.

Baker: There is no NATO, as it was. So let us move on to the next chart, since this puts this into a broader, global context too. What is happening to defence spending; there is a lot of detail in here but the one I want to pick up on – the bottom particularly – the scale of US defence spending, compared with the other P5 countries. I mean even including China, US defence spending is still about 50% more than the other P5 countries put together. And in the bottom right, China’s defence spending is more than the combined defence spending of India, Japan, South Korea and Australia. Again, it just paints this picture of this two enormous economic, and increasingly military superpowers, really dwarfing everybody else’s military capability.

Dr Ng: That is one takeaway but if you start on Table 3, the slide on the bottom right, that the spending of India, Japan, (South) Korea are significant, even in global terms. That is the first point. China, yes, military spending has increased significantly. But if I could make one observation, the US’ response to China – I think there is usefulness in contrasting it with the US’ response to the EU, for instance. So if you take EU on this first chart, Table 1 on the top, EU spends more than China. But the US does not respond to EU as it does to China.

Baker: Well, that is because the EU is mostly full of US allies. To be fair.

Dr Ng: That is a good point. The point to ask is, if we use the Thucydides’ trap. Under what circumstances, we started with US-China, under what circumstances would US respond to China?

Baker: The other question I have though, is given again, the scale of the way in which these two countries have become these two military as well as economic superpowers. And your point about Thucydides’ trap, as it is known - when a rising power challenges another power, it often ends in conflict - all these numbers, do they make you feel more insecure, and more fearful of conflict? Or do you actually think, because there is another argument - that maybe there is a deterrent effect at work here, and the more these countries spend, as we saw in the Cold War by the way, Russia (USSR) at one point was spending 20% of its GDP.

Dr Ng: That is a central argument.

Baker: And we have managed to avoid conflict.

Dr Ng: That is a central argument, the deterrent effect. I made an earlier point that unlike the EU, there are not these institutions and collective never-again moment. And that is what we have been busily working at. We started the ADMM-Plus in 2010, which is ten ASEAN countries plus eight countries, and we have militaries exercising. We are trying to catch up, trying to prevent miscalculations, prevent mishaps. I think we have a lot of catch-up to do in terms of confidence-building. So for instance, yes, US and Russia (USSR) were in the Cold War, but even US officials who remember back then, the amount of interactions between US and Russia (USSR), compared to  US’ and China’s interactions, I’m talking about the military, even within Asia. The militaries between US and China and Korea talk much less than the antagonist and the protagonist in the EU. And that to me, that spells risk.

Baker: Let me ask you. Who do you think is the bigger threat to global stability? Or to regional stability? The United States or China, right now?

Dr Ng: It would be intemperate action.

Baker: Okay, who is more likely to take intemperate action?

Dr Ng: It depends on the mood of the day.

Baker: So we saw what happened in the South China Sea? China has established its dominion, essentially, over the South China Sea now, has it not?

Dr Ng: Not quite. I would not agree with that. Some have pointed out that China is trying to establish its own Monroe Doctrine in the South China Sea. I think the parallels are very far, in which America established the Monroe Doctrine towards the European colonial powers in the late 1800s. And that any action on colony, both North America and South America, would be a threat of war. China is very far from that. And that is why you have the freedom of navigation, flight, passages in which China dutifully asserts its alleged claims, and which the US and others who conduct these passages respond. Now that is hardly a hard threat. You may not know it, but what is even more worrying, for instance, is between China and Japan, because both of them have declared ADIZs (Air-Defence Identification Zone) in the air. And every year, Japan responds to more than 1,000 planes, in part in response to Chinese intrusions. But that is not on the newspapers, that does not show up, so our preoccupations sometimes are shaped by perception. But I worry far more about other events than I do in the South China Sea. 

Baker: Do you think China is aiming to get to a strategic situation in Asia, or East Asia at least, where the United States is essentially rendered, essentially incapable of projecting its strategic power. Is that China’s ambition?

Dr Ng: I do not know whether it is China’s ambition but even if it is, that is unrealistic. As long as the Indo-Pacific Command is here, I mean that is just not a thinkable scenario anytime in the next two, three, even four or five decades. But China’s response has been to a doctrine that has been around since the early 1900s in terms of containing China. The first island chains, the second island chains, the third island chains, which by the way is not a Chinese construct. It is a construct which the US put out in the early 1900s and it is tied up with its century of humiliation, it was invaded by powers, it never wanted a similar situation – that was China’s "never again" aspiration and I think China wanted to be assertive, at least the PLA wanted to be. They have the resolve, they are positioned in the South China Sea with their own position under UNCLOS and I think there is a code of conduct that is a practical way forward for ASEAN and China. I do not think that at any point of time, in foreseeable future anyway, where you see the US pulling out of the Pacific.

Baker: So Sir, do you think China has handled the South China Sea territorial issues responsibly?

Dr Ng: I think it could have done better. I think that they too think that perhaps tactically and strategically they could have, they could have in retrospect handled certain aspects better but I am glad they are making progress on the COC and it is a practical way forward.