Singapore’s Lee Hsien Loong on the U.S. Election, Free Trade and Why Government Isn’t a Startup

By virtue of its location—on the mouth of the Strait of Malacca in Southeast Asia, through which one-third of the world’s seaborne traffic passes daily — Singapore has always been a country that punches well above its weight on the geopolitical and economic stage. It’s a country of many cultures and languages, and one that is a staunch ally of the U.S. while maintaining strong trading ties with a rising China.

That makes Lee Hsien Loong, Singpore’s Prime Minister and the son of its founder Lee Kuan Yew, a good person to speak to if you want to understand how Asia works. TIME foreign-affairs columnist Ian Bremmer had a chance recently to sit down with Lee in Singapore. The full transcript of their conversation — which touches on U.S. politics, China’s reforms and how to run a country in the age of automation — is reprinted below:

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Let me ask you a couple of questions about the perception of the U.S. election in Singapore, because I am very interested in that. Let us assume Hillary [Clinton] is going to win, I feel very confident about that. Let us assume that Trump does not do significant damage after the elections are over. How much damage do you think has been done concretely through this 18-month electoral process?

In every American election, crazy things are said. Positions are taken which the winners try very hard to forget afterwards. George Bush Sr. said “read my lips” and regretted it. All American candidates who won have before winning been very harsh on China, and after winning, much more restrained in their approach towards China. On trade too, that has been true for some time. But this time it has been so nasty and harsh that I think Hillary, if she wins, will have a lot of things to unspeak which she will find very difficult to do. I think TPP [the Trans-Pacific Partnership] will be a casualty if it is not settled by January.

And it probably would not be.

Probably will not be.

Her commentary in the debate on TPP was a slightly different formulation, harder. Over the past six months, every single time she has mentioned TPP, she said, “I oppose TPP in its current form.” It is very lawyered. Because I have talked to Jake Sullivan, Clinton’s top foreign policy adviser for the campaign. He basically said, “Look, we do not want to reopen this. We get some additional legislation passed that supports American manufacturing labor. It goes through, we do this lame duck, no problem”. Hillary no longer believes she has Republican support to actually make it happen in the lame duck. Obama privately is concerned about this. Hillary is pressured from the left in order to get them on board to support her through the elections.

Bernie [Sanders] did not help on this one either.

This was one of the top issues for him. Elizabeth Warren, same thing. They have been campaigning actively for it so I would bet you that it would not happen.

That would be a very big setback for America.

What are the consequences of no TPP?

Your standing goes down with many countries around the world. Your opponents as well as your friends will say, “You talked about the strategic rebalance, you talked about developing your relationships. You can move aircraft carriers around. But what are the aircraft carriers in support of”? It has to be deeper economic and broad relationships. You do not do things which the Chinese do. The Chinese go around with lollipops in their pockets. They have aid, they have friendship deals, they build you a Prime Minister’s office or President’s office, or Parliament House or Foreign Ministry. For them, trade is an extension of their foreign policy.

You do not do these retail items. The one big thing which you have done is to settle the TPP, which Obama has done. It shows that you are serious, that you are prepared to deepen the relationship and that you are putting a stake here which you will have an interest in upholding. Now, let’s say you cannot deliver on the TPP. After you have gotten Vietnam to join, after you have gotten Japan to join, after [Japanese Prime Minister Shinzo] Abe has made very difficult arrangements on agriculture, cars, sugar and dairy. Now you say, “I walk away, that I do not believe in this deal.” How can anybody believe in you anymore?

It is not just on trade, even on strategic issues. The key thing in Northeast Asia is North Korea. They are unpredictable, they are developing their nuclear capabilities and their missiles. You do not want the South Koreans to do that, you do not want the Japanese to do that. What is the restraint on them? It is your credibility as an ally and as a deterrent. I do not think failing to ratify the TPP will strengthen that at all, or help Mr. Abe, who has gone out on a limb to support this and is in the process of ratifying it right now.

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I saw Abe during the U.N. General Assembly on the sidelines. We sat down and the first thing he asked me about, of course, was the TPP. He had just met Hillary and she said all the right things but he was not convinced.

He is quite worried. It is a lot of harm. Some Americans say: “We understand all the strategic arguments, but we have had enough of sacrificing for strategic interests of the United States. What about me?”

But the problem is that if Obama had argued TPP from Day One, not as a trade deal, not as a jobs deal, but as a standards deal, that, “Look you guys have to understand that if we do not do this, the Chinese are. That is your alternative in the region.” He did not. He had people like Paul Krugman that were actively undermining him from Day One, only focusing on the jobs issue in the U.S.

Paul Krugman has a very fixed position on this. But Obama did not push this very hard domestically, and expend the political capital until quite late. He may have left it too late.

So when you see our friend [Philippines President Rodrigo] Duterte, now going to Beijing, probably en route right now.

He is there.

Certainty the announcements he made in advance were about as negative as one could have expected towards the U.S. You also saw demonstrations towards the U.S. embassy. How far do you think that is likely to go?

I do not know, because these are early days. Mr. Duterte’s own position I think is deeply felt. I do not think he is posturing. How far he will go, and what his civil service’s and his armed forces’ positions will be, and whether they can influence him or he will work with them, only time will tell. I would not like to speculate.

As you say, the American fleet can only get you so far. Looking at the South China Sea from an outsider’s perspective, it seems to me that the Chinese have handled it pretty well over the course of the last few years. They have made incremental gains consistently but they backed them up with continued lollipops and with continued economic policies.

It is an issue where on the South China Sea itself, you are in a zero-sum situation. But each of the other claimant states has a broader relationship with China, and none of them want to push it to the brink. So there is this game which will be played. How do you move, what are the trade-offs, and what are the alliances or partnerships which try to get formed and try to get broken? The Chinese are quite clear what their interests are and very consistent on pushing their interests.

Read More: Exclusive: Singapore Prime Minister Lee Hsien Loong Speaks Candidly With TIME

What do the geopolitics of this region look like? How different are they in five to 10 years’ time? Hillary, as President, is certainty very competent. She knows all the players, she will appoint people in Cabinet who know Asia reasonably well. We did not have many in the second term for Obama. But the external constraints and the domestic constraints are only getting higher. Given that, how do you think Asia is changing?

I am very reluctant to say that America is on a downhill slope. You currently have difficulties, both with the economy and the politics, which is very fractious. But it is not to say that the Chinese do not have their own problems or that America does not have a lot of resilience, creative energy and entrepreneurship. You have the science, you have the technology in Silicon Valley and you have the ability to attract brains from all over the world. You can bounce back. On a 15, 20 year view, I do not see any reason to believe that you will continue to go downhill.

My argument is that I would not say America is in decline at all. But I do believe America’s foreign policy influence is decreasing. That is structural and in part that is because of America’s changing interests.

It is the perception of their interest. Because Americans are preoccupied with jobs, upset about globalization, so they say, “How about turning inwards? Forty per cent support building a wall. It does not mean it is in the interest of those 40% to build a wall, but that is the sentiment and it is not helpful. If that continues to be the sentiment, I think it is negative for America and it is negative for the world. Because in fact, you have got a lot of friends, you have got a lot of partners, you have got a lot of interests. Your investments in Asia are considerable and there is goodwill towards America all over the region. If you look at the ASEAN countries, practically all are very happy to see you present in the region. It means prosperity, it gives options and it fosters stability. So for you to say it is not an important interest and it does not matter to the U.S. anymore for the next ten years, I think that is not accurate. Hillary knows that. Hillary as Secretary of State worked very hard for Southeast Asia.

I agree completely. The people around her definitely would reflect that.

If she can keep those instincts, it would be very helpful. It does not mean that you want America to go there on a warship but you want America to be here friendly, benign and supportive.

My question is if it turns out that the United States’ pivot to Asia is seen to have failed in the next five to ten years. Do you think that the only real alternative is that China becomes the dominant player in the region or do you think that we are evolving towards a much more multilateral situation?

It depends on what the Indians do, what the Japanese do. India’s scale is not as massive as China, in terms of their gross domestic product (GDP) or their trade. The Chinese are three times their GDP, but India is growing. Mr. Modi is trying to set the country in the right direction and they will have interests beyond the South Asian subcontinent. They have a complicated relationship with China. There is a border problem and there is rivalry. It depends how they participate in the region. I think their interests will push them to be more active, but we will have to see how that goes. The Japanese, if the Americans begin to look less reliable as a partner, you do not know what they will do. Their Cabinet Secretary has already said in February this year that nuclear weapons are not against their Constitution.

On a slightly different topic here, were you surprised to see the Americans put sanctions against the Chinese companies doing business in North Korea two weeks ago?

Yes, I saw that.

That is kind of new. I am hearing a lot from the Defense Department now, both Democratic and Republican-leaning folks, that in the next year or so, the Americans will have to make a big strategic decision on whether they really want to squeeze the Chinese on their support for North Korea – that North Korea is getting to breakout capabilities and red lines for the Americans on what they can do vis-à-vis the US. The Americans do not think they have many other options other than the China card.

I do not know what the texture of their discussions with China on this are. I know that Obama has spent quite a lot of time talking to Xi Jinping. He did so in Hangzhou at the G20; he did so at the Sunnylands retreat in 2013, and they have spent a lot of time talking. Biden has spent time talking to Xi Jinping too. I am not sure what the relationship is or how directly they are able to discuss these issues. The one saving grace this time round is the substantial economic relationship: Chinese have lent America trillions of dollars so they do not want America to crash, and America has a lot of business with China which you do not want to lose. That is different than the relationship between you and the Soviet Union in the Cold War.

That is different than us and the Russians right now.

And with the Russians right now. Or for that matter, between the Chinese and the Russians right now. There is a lot of trade as well as economic interest between the U.S. and China. Whether that is enough to counteract the tensions which will arise, it is difficult to say. I hope so; at least it will restrain both sides. If you have a very hot issue, like over Taiwan, then of course that is a different proposition. But short of that, economics is one of the important items in the overall bilateral relationship, and the linkages have to be exercised.

I look at the U.S. and China and I see a relationship that despite all the problems that U.S, has had with foreign policy, it feels reasonably well-managed right now. Do you agree with that?

Yes, though I do not think there is a lot of strategic trust. I did not use to believe that you could do much about building up strategic trust, because fundamentally you have taken a position, and it is not a matter of having a drink after dinner and then resolving your elementary misunderstandings. You are fundamentally in different positions which are not easily reconciled. But there is an absence of strategic trust in the sense that the Chinese are convinced that you are trying to slow their growth and you are convinced that the Chinese may do something unpredictable. It does not mean that they want to fight you but they may push in a direction which is not in your interest, including in the South China Sea. How do you establish enough dialogue in order to overcome that? It has to happen at the top. With the Soviets, you used to have backchannels. You used to have Kissinger with Dobrynin and Kissinger with Gromyko, and then Nixon would talk to Brezhnev. They were opponents, but they made some progress. Now you have the mechanisms with China. You have the Strategic Dialogue where your Secretaries of State, Defense and Treasury meet their Chinese counterparts. But I am not sure the degree to which you are able to engage and come down to brass tacks.

China is responsible for 37 per cent of global growth right now. And certainly, everyone I talk to in the White House understands that if it were not for China after the 2008 financial crisis, we would be in a very different position than we are right now. So I certainly think that on the defense side, zero-sum, everyone in the Pentagon is preparing for war against China in the next 10, 20, 30 years and that is not really changing. But on the economic side, at least I think it feels better if you are sitting in the U.S.. Would you say that the Chinese are not getting any of that yet?

What do you mean not getting any of that? They are selling to you, their exports.

I was a little surprised that you said the Chinese believed that America does not want them to grow, that we are trying to constrain them.

I think they deeply believe that.

You think they still believe that – has not changed at all?

Yes.

That is interesting. And you think they are reasonably well-disposed to Hillary? Because a year ago, they were not.

I do not know whether they are well-disposed to Hilary. They have said that they are fine with an America that is focused on the region, but I think they will be quite comfortable if the U.S. is focused elsewhere.

Off the record, if you were grading Xi Jinping over the last four years on everything he has been able to accomplish internally, you would give him what?

No, I do not think I want to grade people.

That is why I said off the record.

No, not even off the record. But what he has done on anti-corruption I think is progress. He has worked very hard at reforms in the armed forces, in the PLA, which are not easy to do. He has restructured the chain of command and made himself Commander-in-Chief to assert himself. He must have had a lot of resistance to that but he went ahead and did it. On the economic side, I think they face difficult policy choices. Some people think they have collected all the low-hanging fruit and whatever they do, growth will henceforth be slow. But I believe there are still some more things which they can do. They have been very cautious about acting when there could be social or political fallout—like cleaning up the state-owned enterprises (SOE) or the massive expansion of debt which is happening. They must know that these problems need to be tackled, but they have not acted yet. I am not sure whether they are as impatient to rationalize the economic system like a World Bank economist would, but I am sure somewhere in their system, their officials know that these things need to be done. How urgently they feel that and do that over the next five years, will have a significant influence on whether China can continue to grow five, six per cent or whether it runs into a middle income trap. I think the potential is there. The biggest potential is half the population is still rural and agricultural, and you do not need half the population to feed China. If they can free up that, and not just move people into the cities but employ them productively, to build up their services sector or social services, then there is growth and prosperity to be had.

Is he accumulating so much power individually that the ability to continue to reform and transform beyond Xi Jinping becomes a significant risk?

I think one of the issues now is that there may be different views as to which way to go, policy wise, and so the officials are cautious, and decisionmaking has slowed down. It is a balance when you are in the leadership team — it depends somewhat on the personality, somewhat on the phase. After a period with a strong leader, you tend to go for a collective leadership. Then you find that collective leadership is difficult to operate, and you try to centralize the leadership in a more dominant figure. We will have to see what team Xi comes up with next year in the 19th Congress and how he balances or divides up the responsibilities in that team.

One of the things that I found most interesting and startling since I’ve seen you last, is that almost every CEO I talked to tells me about how much faster they are moving away from a big labor force that they expected. I see it in pharmaceuticals; I see it in retail; I see it in fast food; I see it in shipping, in trucking, in transit, you name it. Labor in the developed world is becoming much more efficient, much faster, the whole fourth industrial revolution.

On one hand, Singapore is incredibly more well positioned to take advantage of all these forces of efficiency, incredibly digital-savvy than the rest. On the other hand, we may see a creeping protectionism in the United States and Europe and maybe other places too if we do not deal with it. How do you think about the social contract in Singapore? How do you think about Singapore’s position in the world given how fast that transformation comes?

It is a challenge for us, just as it is for other developed countries. It is a challenge preparing young people to cope with the future world which we are not quite able to define yet. They have to have the skills to learn and learn again. It is also a challenge helping people who are already in the work force. They have a career, they have a family, they have obligations. And now they are not sure whether they can continue in the same job until they retire. And if they can’t, how can we help them? You cannot solve it by saying “keep out the problem, stop the change, and therefore I carry on doing what I used to do”. Even General Motors could not survive that way.

There are things you can do to help: training, transition assistance, social support if people are out of a job. But you cannot stop the change from happening. It is going to put the social contract under pressure. People have to feel that the Government is on their side and is helping them to cope. In Singapore, unemployment is very low by international standards – currently 2.1%. But it can go up and it is going to go up even for the professionals. Because blue-collars, in a way are an easier problem to solve. The numbers are bigger but we can train them on courses for three months or six months while they learn new skills.

But lawyers, the accountants, the financial advisers…

Yes indeed. Bank managers – that is harder. And that is coming. You can see it beginning already.

Do you think about universal basic income? Do you think about flexible corporate environments? Is it all about retooling and skilling? Where do you lean?

We have not gone towards universal basic income. We do not have a minimum wage. We have what we call Workfare, basically a negative income tax. It provides support to those up to the 30th income percentile, around 440,000 people. We think it is a more flexible way of doing it. I do not think we can afford a universal basic income. Nobody has done it. Even the Swiss voted against it. Silicon Valley thinks it will solve the problem, but it is a vast expense and we do not know what the social consequences will be of doing that.

I think we progress step by step. We will build up our social-safety nets, but we also have to make sure they are sustainable and affordable. It will mean more spending. More revenues will have to be raised, and people will have to understand and accept that. It is not just spending on the low income, it is also for the retirees, and on medical care which is related to ageing. All of which will cost more, and somewhat more of the burden will have to be carried by the State. We have tried our best to make each individual self-sustaining. That is how we structured our Central Provident Fund—when you work, you contribute; when you retire, you have provided for yourself. Now with Workfare for the lower end—you work, but you are not quite earning enough, so we help you to top up; then when you grow old, you will also have a nest egg, which the government has helped you to build up.

So everyone looks at Singapore as being a great model for so many things, and particularly in this area. When you as Prime Minister look around the world, who else do you think has a good model for addressing what is coming in terms of the social contract?

I think for countries, it is very difficult to find a model because most countries are different from us. They have hinterlands which gives them ballast. So you have the option of considering the degree to which you want to be engaged with the world — whether you want to pull back or you say in America, they feel, “I do not need the rest of the world so much anymore. I wish it would go away.”

We do not have that option. If you look at cities, there are a lot of interesting things which other cities are doing — London or Sydney or New York — in terms of smart cities, in terms of competitiveness, in terms of investment in infrastructure, so that you can be networked not just with your own domestic, rural areas, but linked up with other cities in the world. And we have to pick up ideas from each one of them and put it into our context.

So if small is increasingly beautiful in terms of being forced to globalize, do you worry that China is going to have to decentralize much more? I am not talking about Xi Jinping. I am talking about the structure of the system — I mean 1.4 billion people but Beijing still calls so many of the shots. Can they really transform without having some form of significant self-accounting?

It is a very difficult problem for them. Between them and India, India has gone the way that you have described — competitive and cooperative federalism. It is Modi’s mantra and he seems to be making some progress with it. It means that some provinces are getting ahead and other provinces will progress more slowly. In China, it is a different model. They have actively discouraged local power bases. They post party secretaries into provinces they do not belong to, and it has worked for them. There is still quite a lot of competition between the provinces and between the cities, a tremendous amount of rivalry

One Belt, One Road makes it stronger…

One Belt, One Road is a broad strategy, an approach as to how they want to link up with their neighbors. I do not know if it will lead to a lot of concrete results very quickly.

It is also a lot of competition between the cities.

They all use the slogan. Every project is called a “One Belt, One Road” project, but they would have done the project anyway. I think there is a lot of competition within China, but I do not know how they work the devolution. I suspect they will go carefully. I believe they have to move because both the economic and social imperatives are strong. They have proceeded very cautiously over the last 15, 20 years. Their society is changing, they need mechanisms that will work with the new generation. Otherwise, if young people become disillusioned, and opt out or become fractious, it is very troublesome. It is a big country, you may think they have full control but actually it is very hard for them to maintain control. Things happen which they do not know about, and they are extremely nervous about it.

When you think about technology and the fact that on the one hand, technology empowers masses, information, the ability to express themselves. It also empowers corporations and states to engage in more effective surveillance and take control of the market place. How do you think that has been playing out? Do you see technology as more decentralizing or more centralizing now? Especially with the way politics works.

It is a tool which you have to use. When the Internet came, people thought it was marvelous. Now, everybody can speak. But the actual result is to the extent that everybody can speak, you get a lot of strange stuff on the Internet. Yet, on the other hand, to a great extent, people go on the Internet to access half a dozen major services. Google, Facebook, news sites, I suppose entertainment, porn. That is about it. It is not as if there a million different masterpieces in a library and you explore a new treasure every day. It did not turn out like that. Human societies are not like that.

What we can do in Singapore is to try and make the best of the technology. Individually, Singaporeans are probably as facile as anybody in the world using IT, except maybe for the Koreans. In terms of getting our organizations to develop and deploy IT solutions, we have made progress, but there is still much work to do. As for being swift-footed, like a Silicon Valley company would be, I think we have a long way to go, and I do not know how far we can, how closely we can approximate a Silicon Valley firm. In the end, we are a country and we have to carry everybody along. In Silicon Valley, if you are a firm, I choose my partners, I choose my team and I need not be typical of the country.

And you can make a widget and it does not matter if someone cannot afford it, but the government cannot do that.

Obama just went to visit them. He said something quite sensible. He overstated the case a little bit, but he had a very valid point.

I pulled that out and sent it out to some of my folks. I thought it was worthwhile. The libertarians in Silicon Valley need to remember it a little bit more. I was a Stanford guy, so you hear a lot of that right now and you recognize that these are people who all believe that they are billionaires because they did it themselves. They never think about the infrastructure that is underlying that civil society that makes that happen. They are completely transactional, which is a problem.

They live in a bubble. It is marvelous, you create your own environment, you have your couches, ice creams, massages, celebrity chefs on the lunch canteen menu. But the world is not like that. When you are in a country, you have to take advantage of that efficiency, creativity and verve. But at the same time, you have to make the whole country work, everyone must feel that they belong and that this is theirs. Those are not strange guys from the outer space or worse, somebody who intruded in our lives and discombobulated our community. In San Francisco, the pushback against even the little white vans that go around collecting people to go to Silicon Valley is quite high.