Thank you. Thank you, Ambassador. Ladies and gentlemen, good afternoon. The world no longer works the way we thought it did. Tariffs have become instruments of industrial policy. Critical technologies have become arenas of strategic competition. Businesses are redesigning supply chains not just for efficiency, but for resilience. And a conflict in one corner of the world can, within days, send energy prices, food prices, shipping costs, and financial markets into turmoil across continents. These developments are manifestations of a deeper transformation in what is termed geoeconomics, the less well-known cousin of geopolitics. Geopolitics and geoeconomics both describe how nations compete and cooperate, but through very different instruments. Geopolitics pursues power through armies and alliances, territorial control and deterrence. Geoeconomics pursues it through markets, money, and machines. The toolkit includes tariffs, sanctions, export controls, investment screening, payment restrictions, but it also includes cooperative instruments: trade agreements, harmonized standards, supply chains, digital corridors. Geoeconomics is not new, but what is new is its intensity and growing centrality. The concept of geoeconomics was popularized in 1990 by Edward Luttwak, who argued that with the end of the Cold War, commercial competition would increasingly replace military competition as the medium of great power contest. Twenty-five years later, Robert Blackwill and Jennifer Harris called on the United States to deploy its economic instruments of statecraft, like China and Russia, in their view. More recently, Henry Farrell and Abraham Newman explained how control of critical choke points in global financial, communications, and trade networks creates enormous coercive power. Today I want to share with you my thoughts on this new geoeconomics in three parts. Part one: Disorder, the world of geoeconomics as it is. Part two: Discernment, making sense of the disorder. And part three: Design, how might we shape a new globalization. Let's begin with part one, disorder, or the world of geoeconomics as it is.
The historical arc of geoeconomics has turned in recent years. The post-Cold War economic order assumed that efficiency would dominate. Production would move to where costs are lowest. Capital would flow to where returns are highest. Technology would spread through trade and investment. It was of course not always as orderly as we sometimes recall with misplaced nostalgia, but it was a reasonably predictable world where rules mattered and economic efficiency delivered stability as well as prosperity. That predictability has weakened in the last two decades. 2008, the global financial crisis exposed the fragility of financial integration. 2020, the COVID-19 pandemic exposed the vulnerability of global supply chains. 2022, Russia's invasion of Ukraine exposed the risks of energy dependence. And more broadly, the rise of China and other emerging economies on the back of surging international trade and global production networks was seen as imposing huge adjustment costs in the industrial heartlands of the United States and Europe. And so we have entered a new age of geoeconomics. The old assumption was that economic interdependence delivered prosperity, promoted stability, and reduced conflict. Still true. But there is also a new geoeconomic reality that interdependence can also become a channel through which shocks, vulnerabilities, and conflicts are transmitted. The boundaries between economics, technology, finance, and national security are becoming increasingly blurred. Economics is not just about efficiency. It is also about security. Trade is not just about comparative advantage. It is also about strategic positioning. Finance is not just about allocating capital. It is also about power. As Prime Minister Mark Carney of Canada described at Davos earlier this year, and I quote, 'We know the old order is not coming back. We should not mourn it. Nostalgia is not a strategy.' Let's examine the five flashpoints where the new geoeconomics is playing out most actively: trade, investment, supply chains, technology, and finance. First, trade. The most visible flashpoint of geoeconomic conflict. But the story here is more nuanced than the headlines suggest. It comes in three parts. One, the number of trade restrictions has risen dramatically globally. Tariffs, import restrictions, and export controls are being increasingly used as instruments of national coercive power and industrial strategy. Two, international trade remains robust and continues to grow. Global trade in goods and services reached a record level in 2025, surpassing 35 trillion US dollars. Three, trade is reconfiguring, not exactly retreating. Trade among geopolitical allies has been increasing faster than across geopolitical blocs between 2018 and 2023. But much of the apparent decoupling, the bilateral decoupling, may also be trade rerouting through third countries, not genuine economic separation. It's a mixed picture. The second flashpoint is investment. Here the story is largely one of fragmentation. Governments around the world are tightening investment screening. Inbound investments are scrutinized for security risks. Outbound investments are scrutinized for technology leakage. Industrial policies are reshaping the global geography of investment. The US Chips and Science Act provides huge incentives for semiconductor manufacturing within the United States. This is the largest US industrial policy intervention since the Apollo program of the 1960s. The European Chips Act aims to enhance technological sovereignty and reduce strategic dependencies on foreign chip suppliers. Japan, India, Taiwan, and South Korea all have their own semiconductor subsidy programs. The third flashpoint is supply chains. What used to be designed for efficiency is now being reconfigured for resilience. But it's not a simple story of decoupling or reshoring. Full self-sufficiency is costly and actually impossible. The global economy is too intertwined for any clean separation. What we are seeing instead is more diversification, shorter supply chains, and larger inventory buffers. And this is why global supply chains continued to expand during 2018 to 2023 despite trade frictions and the COVID-19 pandemic. The fourth flashpoint is technology, perhaps the most consequential divide. The semiconductor industry is a critical battleground here. What used to be perhaps the most globalized supply chain in the world is now bifurcating. The US has put in place an extensive export control regime targeting China through restrictions on four choke points: first, on the exports of advanced chips; second, on lithography equipment required for advanced chip manufacturing; third, on access to leading Taiwanese and Korean foundries where the most advanced chips are manufactured; and fourth, on chip design software and intellectual property. On the plus side, technology is deeply embedded in people, products, and platforms, and these continue to work across borders. On balance, though, bifurcation is quite real in advanced technology. The fifth flashpoint is finance, the most damaging if it tips into a genuine fracture. The freezing of Russia's central bank reserves and the ejection of Russian banks from the SWIFT messaging system in 2022 was a watershed moment. It was the first time the coercive power embedded in the global financial system was deployed against a major economy. De-dollarization is happening to some extent, but the US dollar remains dominant. The dollar makes up 58% of global foreign exchange reserves, accounts for more than half of all cross-border payments, and is on one side of 89% of all foreign exchange trades. No other currency offers equivalent depth, liquidity, and convertibility. The big picture is that the world of finance remains highly interconnected. Cross-border banking flows have kept rising through the sanctions and tariff shocks of the past two years, and foreign holdings of US Treasury securities remain near record levels. So looking across the flashpoints of geoeconomics, the five flashpoints, the world looks strange. Everything seems to be connected to everything else and different things seem to be happening at the same time. It reminds us of a movie from a few years ago.
We may need a different lens to better understand the new geoeconomics, which brings us to part two: discernment, or making sense of the disorder. Perhaps the strange world of quantum mechanics offers us a useful frame to make sense of the new geoeconomics. I'm not suggesting that quantum mechanics explains international relations. Nations do not behave like electrons and trade flows are not wave functions. But quantum mechanics is a way of thinking about complex systems, and geoeconomics is a complex system. Quantum mechanics offers us three ideas, or three habits of thought if you will, that could be relevant for navigating the new geoeconomics. It teaches us that apparently contradictory states can coexist. This is what they call superposition. It is both a wave and a particle. It teaches us that distant things can be deeply connected, and this is entanglement, very true in the world of subatomic particles. And it teaches us that uncertainty is an irreducible feature of the system itself, the uncertainty principle. The first quantum-inspired insight is superposition. The world exists simultaneously in multiple possible states. The geoeconomic world may also be said to be in superposition, simultaneously fragmenting and integrating. Trade restrictions have multiplied. Investment screening has tightened. Technology controls have expanded. Yet global trade is at a record high. Cross-border services continue to grow, and companies continue to invest, produce, and sell across borders. A possible insight into this seeming contradiction is to distinguish multilateralism from globalization. Multilateralism is the institutional machinery of international economic cooperation: the WTO, the IMF, the World Bank, the UN system of rules and norms. Globalization is the organic process driven by comparative advantage, specialization, economic incentives, and, of course, a conducive multilateral order. So one is an institutional arrangement, the other is an economic process. So it is possible that institutions can weaken while the underlying process can continue, albeit not as smoothly or robustly as before. So multilateralism has clearly weakened. Tariffs have been imposed unilaterally outside WTO rules. The WTO Appellate Body has been paralyzed since December 2019. Globalization, however, seems to be somewhat more resilient than its institutional scaffolding. The economic logic of comparative advantage cannot be legislated away. When countries specialize in what they produce relatively more efficiently and trade, all countries gain. This is the insight of David Ricardo from 300 years ago. These gains from trade can be so large that even the distortions imposed by tariffs and sanctions do not eliminate them. They reduce them. And this is why trade volumes persist and supply chains reconfigure. So the policy implication of superposition is: if multilateralism is weakening but globalization is more resilient, then we must seek to fill the institutional gap with new forms of cooperation. But we must not give up on multilateralism because it provides the key reference for other forms of cooperation. The second quantum-inspired insight is entanglement. Distant events and domains are deeply interconnected. The geoeconomic world is also entangled. A shock in one node travels quickly across the system through channels that are not visible until the crisis hits. Energy markets are among the clearest illustrations of geoeconomic entanglement. A conflict in the Gulf does not remain in the Gulf. It affects transport costs and food prices, inflation and fiscal sustainability, capital flows and exchange rates in countries far away. Climate change is the deepest form of entanglement because it links all countries through a shared planetary system. Emissions in one country affect the climate everywhere. Deforestation in one region affects carbon sinks for all. A heat wave affects labor productivity, energy demand, and health systems. Policy implication: entanglement changes the question from 'How do we reduce dependence?' to 'How do we manage interdependence?' The third quantum-inspired insight is uncertainty, not as a failure of measurement but as the fundamental nature of a complex adaptive system. The new geoeconomics is inherently uncertain. No government knows how the US-China relationship will evolve. No firm knows how supply chains will reconfigure. No investor knows how tariffs, industrial policy, and technology controls will interact. In the face of this quantum-like uncertainty, three choices present themselves. One: panic and retreat. This sacrifices the gains of openness. Two: wait and see. This is paralysis dressed as caution, leading to irrelevance. Three: scan and shape. And this is the only viable path for a small state like Singapore, which is inherently dependent on the global system. It means understanding the landscape for what it is, not what we wish it to be. It means using our agency to influence outcomes bit by bit. And it is about preparing for multiple possible futures rather than the most likely scenario. Singapore's tradition of national scenario planning takes on added importance in this new geoeconomics. Policy implication: if uncertainty is embedded in the system, we should not wait for clearer signals but prepare for multiple outcomes. So, if superposition teaches us to contemplate multiple states of the world, entanglement to manage interdependence, and uncertainty to act without perfect foresight, then these could become principles to navigate our way forward. And with that, let me turn to part three: design, or how might we shape a new globalization?
Now, when I speak of a new globalization, let me call it for convenience Globalization 2.0, I speak of a possibility, not a forecast or even likely scenario. A forecast asks what will happen given current trajectories. A possibility asks what could happen if determined actors make deliberate choices to bring it into being. Let us picture how a possible Globalization 2.0 might look like. It could comprise two overarching frameworks: plurilateral coalitions, and public-private partnerships. It could play out most prominently in four domains: resilient supply chains, digital economy corridors, interoperable payment systems, and climate and green economy cooperation. And it must have one critical foundation block: a renewed domestic social compact. Let me go through each of these in turn. The first overarching framework is plurilateralism. This is not a new idea. Coalitions of the willing, variable geometries, and flexible groupings have been around for decades. But in a world where multilateral consensus is becoming more difficult, plurilateral cooperation among the willing offers a faster way to deliver stronger outcomes. But to support globalization, plurilateralism must pass two tests. New members should be able to join through transparent rules-based processes, not geopolitical favor. And one coalition's standards must be able to connect with another's, instead of overlapping arrangements creating incompatible systems. The WTO Information Technology Agreement, ITA, is a classic example of the power of plurilateralism at the sectoral level. Signed in 1996 among just 29 economies, the ITA has 84 participants today, accounting for some 97% of world trade in IT products. The ITA did what full multilateral consensus could not. It achieved a zero tariff rate in technology goods among the willing, and the economic gravity of that arrangement pulled in others over time, and it facilitated a boom in global electronics trade, creating millions of jobs. The Regional Comprehensive Economic Partnership, RCEP, demonstrates the same logic at the regional level. It brought together 15 Asian countries to form the world's largest free trade agreement. It targets areas like customs digitalization, logistics connectivity, areas where multilateral consensus remains elusive. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, is an example of a cross-regional plurilateral. It started as simply TPP in 2005 with just four small economies: Singapore, Brunei, Chile, and New Zealand. When I was at the Ministry of Trade and Industry, I went around trying to persuade fellow members of the Asia-Pacific Economic Cooperation, APEC, to join TPP. No one joined while I was at MTI, but today CPTPP includes 12 countries across Asia and Latin America, plus the United Kingdom. As Senior Minister Lee Hsien Loong puts it recently, it shows that small things can grow, and it may not cover the world but it makes a significant contribution. The second overarching framework for new globalization is public-private partnerships, or PPPs. The reality of the new geoeconomics is this. In many areas, government action alone is insufficient. The axis of cooperation is increasingly government-to-business-to-government, or industry-led with government backing, rather than simply government-to-government. Examples: technology protocols are being shaped as much by big tech firms as by national regulators or multilateral bodies. Blended finance is combining concessional public or philanthropic capital with commercial private capital to finance projects which are otherwise not bankable. Multistakeholder bodies like the International Sustainability Standards Board and the World Wide Web Consortium are drawing on businesses, professionals, governments, and civil society to co-design standards and accountability frameworks. Public-private partnerships must pass two tests to serve the course of globalization. They must not become an instrument of private or industry capture, and standards and procurement should remain open and not allow large players to lock others into proprietary systems. At their best, PPPs combine public authority, private execution, commercial discipline, and shared risk to solve problems that neither governments nor businesses can solve alone. So those are the two overarching frameworks: plurilaterals and PPPs.
Let's now turn to the four domains where a new globalization could potentially take shape. The first domain is resilient supply chains. The objective is resilient interdependence. Preserve the efficiency gains across border trade and production while reducing vulnerabilities. A good proof of concept for supply chain cooperation is the recently signed Singapore-New Zealand Agreement on Trade in Essential Supplies, the AOTES. AOTES is the world's first legally binding bilateral supply chain resilience agreement. Both countries have committed themselves to refrain from imposing export restrictions on an agreed list of critical goods during emergencies or crisis. The practical exchange is New Zealand's food for Singapore's refined fuel. But the pact also protects the cross-border movement of healthcare products, medical equipment, chemicals, and construction materials. As Prime Minister Lawrence Wong puts it, we will not shut each other out. Even under strain, trusted partners will keep faith with one another. AOTES can serve as a model to build a plurilateral network of such trusted partners. Supply chain transparency is another emerging area for cooperation. Many companies understand their direct suppliers but have little visibility into their suppliers' suppliers. Public-private partnerships can develop the tools to close that gap: supply chain mapping for a visual blueprint of the entire supply chain ecosystem, and digital product passports that travel with a product detailing where it was made and what materials are inside it. Plurilateral agreements could set common supply chain disclosure standards, enabling governments, companies, and investors to map dependencies in real time. So that's supply chain resilient supply chains. The second domain of Globalization 2.0 is digital economy corridors. Digital trade is the fastest growing component of global commerce. Yet the global digital economy operates within a fragmented governance landscape. The EU's GDPR framework with its stringent privacy protection, the US framework with permissive data flows, and China's framework with security-first provisions and state access. Singapore has been a founding architect of three ambitious plurilateral initiatives to fill the governance gap in the global digital economy. The Digital Economy Partnership Agreement, DEPA, covers cross-border data flows, digital identities, e-payments, fintech, and AI governance, precisely the domains where rules are still being written. DEPA's modular design is truly innovative. It allows economies to join modules where they are ready and defer others. This lowers the barriers to entry while maintaining ambitious standards for those who are ready to go further. Singapore's AI governance framework and Model AI Governance Framework for Generative AI have become the structural anchors for DEPA's AI provisions. Second, the ASEAN Digital Economy Framework Agreement, DEFA. This will cover digital IDs, cross-border data flows, e-commerce facilitation, cybersecurity, and AI governance to support the growing ASEAN digital economy. Third, the WTO Agreement on Electronic Commerce. It provides a potential global baseline for e-signatures, e-contracts, and paperless trade. So, that's the good news.
But the physical infrastructure of the digital economy is becoming the terrain of great power competition. The explosive growth in data centers globally threatens to set off geoeconomic competition for access to energy. US-China tensions are creating geopolitical detours for undersea cables, which carry over 99% of internet traffic today, and access to advanced AI computing infrastructure is increasingly being regarded as a strategic resource. So there's still work ahead. The third domain of a new globalization is interoperable payment systems. The ASEAN Regional Payment Connectivity, RPC, is directly linking the region's national instant payment systems. A first of its kind in the world for retail payments. It bypasses correspondent banking networks, international credit card schemes, and the US dollar. The building block was laid in 2017 with the PayNow PromptPay corridor between Singapore and Thailand, enabling cross-border transfers using only a mobile phone number. This created the blueprint for a series of bilateral ASEAN retail payment linkages. Today, a tourist from Indonesia shopping in Malaysia can open his domestic banking app, scan the Malaysian merchant's QR code, and pay. The tourist is debited in Indonesian rupiah, the merchant receives Malaysian ringgit, and the settlement happens in seconds. Cross-border payment volumes in tourism, remittances, and SME transactions have grown across ASEAN, boosting commerce and trade. The long-term goal is multilateral scaling. ASEAN central banks have partnered the Bank for International Settlements to build a hub-and-spoke model where each national payment scheme connects once, just once, to a central gateway, and through this gateway gains access to all the others. There is scope to extend this model beyond ASEAN, potentially connecting the European Union and even Latin America. Achieving the same seamless connectivity in wholesale payments is much harder. Wholesale payments are high-value transactions involving the settlement of financial assets cross-border. They rely on correspondent banking networks and sequential messaging, compliance, screening, reconciliation, and settlement. Multiple efforts are underway to streamline this process using distributed ledgers, tokenized assets, and smart contracts, but the proliferation of different tokenized payment networks may reduce the benefits of global interoperability if this is not well managed. So this is still further out.
The fourth and final dimension is climate and green economy cooperation. The projections by the Intergovernmental Panel on Climate Change, the IPCC, are unequivocal. Without drastic emissions reductions, global warming will exceed 2°C by mid-century, with devastating consequences for lives and livelihoods. The logic of climate change is like that of COVID-19. No country is safe until every country is safe. Four areas offer some scope for climate cooperation. First, green economy agreements. The Singapore-Australia Green Economy Agreement is the world's first bilateral green economy agreement. It is a potential template for plurilateral climate cooperation, including low-emissions trade and investment, renewable energy, carbon markets, green skills, and critical minerals, all bundled into a single framework. Second, cross-border trade in renewable energy. An interconnected power grid across ASEAN will help enhance electricity trade across borders, with benefits for all. Regions without renewable capacity can have access to clean energy. Clean energy providers can achieve scale by expanding their markets beyond domestic buyers. Singapore's import of renewable energy from Lao PDR through Thailand and Malaysia is a working proof of concept for how this can be done. Third, carbon markets to bridge the climate financing gap in many developing countries. Carbon credits are a market-driven solution to enable decarbonization that would otherwise not have occurred, especially in the Global South. The evolution of carbon markets is a study in plurilateral engagements and enablement, with public-private partnerships building much of the market infrastructure. The Coalition to Grow Carbon Markets, co-chaired by Singapore, Kenya, and the United Kingdom, has provided companies a common framework for the credible use of carbon credits. The Transition Credits Coalition convened by Singapore is a multistakeholder public-private partnership which designed a novel category of carbon credits to incentivize the early retirement of coal-fired power plants. It is currently being piloted in the Philippines. Fourth, blended finance: public and private capital working in combination. Blended finance uses catalytic capital, grants, or guarantees to absorb first-loss risk and attract commercial capital for green and transition projects. Singapore's Financing Asia's Transition Partnership, or FAST-P, applies this logic at platform scale. A $500 million government pledge matched dollar for dollar by other sources of catalytic capital, together aiming to crowd in four times as much commercial capital, for a target fund size of $5 billion. FAST-P is not the only game in town. Many blended finance platforms are taking shape to help bring much-needed financing to the Global South. So those are the four domains.
Let me now touch on one foundation block that is key to holding up the entire architecture of Globalization 2.0. A renewed domestic social compact. There can be no global integration that is politically sustainable without domestic integration. Take the United States. Wage stagnation and rising inequality over the last 30 years. Real wages for the bottom half of the income distribution are barely above 1980 levels. This has led to the dismantling of what George Packer calls middle-class democracy. The unwritten social compact among labor, business, and government that ensured that the gains of economic growth were broadly distributed. And today we see the political consequences of the fracture of this social compact in the form of protectionism and multilateral withdrawal. The populist backlash against globalization you see in many countries is not at its root a verdict on globalization itself. It is a verdict on domestic policy failure: the failure to ensure that the gains from an open world economy were widely shared, that those displaced by trade and technology were supported, and that the promise of a better life through hard work remained credible. As President Tharman Shanmugaratnam puts it, 'Until we tackle the issues besetting countries themselves, the growing social and political polarization, the hollowing out of the middle of workforces, it is going to be very hard for us to achieve a renewed sense of solidarity internationally. We have to do both things together.' A renewed domestic social compact for Globalization 2.0 must be about investing upstream and a stronger jobs and wages agenda in each country. This means equalizing opportunities early in life and building ladders for upward social mobility throughout life. Five years ago, I spoke about a job and wage architecture for building social inclusion. It means a labor market that provides more equal outcomes, more diverse pathways, supports continuous upgrading, and springboards for those who fall to bounce back. Redistribution through taxes and transfers still has an important role in fostering inclusion. But the labor market can do more of the heavy lifting.
Let me conclude. The new geoeconomics is not the end of global connection. The world is still trading. Capital is still moving. Technology is still spreading. Supply chains are still linking economies across continents. But the terms of the connection have changed. Efficiency must now contend with resilience, openness with security, interdependence with power, and global integration must contend with domestic legitimacy. The old order assumed that economic interdependence would largely govern itself. The new order will have to govern interdependence quite deliberately. We can and we must build a more resilient, more trusted, and more legitimate form of globalization. The habits of thought offered by quantum mechanics can help us navigate this task. Superposition reminds us that the world is both fragmentation and integration, and that the task is to manage the risks and harness the benefits of both. Entanglement reminds us that in a deeply interconnected world, position matters, and that a trusted and connected state can carry weight beyond its GDP. Uncertainty reminds us that we will never know enough before we act, and that it is better to act early than late to be able to influence the outcome. A new globalization will not arise from a single grand bargain. It must be built standard by standard, platform by platform, corridor by corridor. Plurilateral coalitions can move where multilateral consensus cannot. Public-private partnerships can mobilize capabilities that governments or markets cannot supply on their own. And a renewed domestic social compact can give globalization the legitimacy it needs to endure. None of this is predetermined or even very likely. The future is neither assured nor foreclosed. It is open to agency, and that matters for Singapore. As a trusted and connected node, Singapore has agency, and we have seen this agency at work in the trade architecture that we helped to build. Thank you.
build in the payment rails that we helped to design in the digital corridors that we helped to pave and in the climate finance that we helped to structure. And that is Singapore's opportunity and responsibility in the new geoeconomics. Thank you very much.
