ASEAN Roundtable Series: A changing world order: What will President Trump’s Economic and Foreign Policies mean for ASEAN?

Published on 3 April 2017

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Ambassador Michael W. Michalak

Senior Vice President and Regional Managing Director, U.S.-ASEAN Business Council, Inc.

Amb. Michael W. Michalak joined the U.S.-ASEAN Business Council in September 2015 as Senior Vice President and Regional Managing Director. He oversees the Council’s six offices in the Association of Southeast Asian Nations (ASEAN) from the Council’s regional headquarters in Singapore, leads the Council’s regional advocacy efforts and engages regularly with key ASEAN policymakers and thought leaders to offer his unique perspective on the key role U.S. businesses can play in ASEAN. He also manages, coaches and develops the Council’s most critical resource: its staff.

Amb. Michalak most recently worked as an independent business consultant focused on Asia and particularly Vietnam. He also served as Senior Advisor to the private sector host committee of the U.S. APEC Year (2011). His diplomatic career with the U.S. State Department spanned more 30 years and included postings to Tokyo, Japan; Sydney, Australia; Islamabad, Pakistan; Beijing, China; as well as Washington, D.C. He served as U.S. Ambassador to Vietnam from August 2007 to February 2011. Prior to his position in Vietnam, Amb. Michalak was Ambassador and Senior U.S. Official to APEC. He also served as Deputy Chief of Mission of the U.S. Embassy in Tokyo. In addition, he received a group award for valor for his actions in a time of crisis when the U.S. Embassy in Islamabad was burned down. Amb. Michalak began his career as a research physicist at Nasa.

He holds a Bachelor of Science degree in Physics from Oakland University in Rochester, Michigan and a Master of Science degree in Applied Physics from Catholic University of America in Washington, D.C. He received a second Master’s degree in Public Administration from the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts. He speaks Japanese and Chinese.

Dr. Arup Raha

Chief Economist, CIMB ASEAN Research Institute

Dr. Arup Raha is the Chief Economist of CIMB ASEAN Research Institute. While his work and interests are global in nature, Arup’s particular expertise is on Asia where he has close to 20 years of experience working as a professional economist in the financial services industry. He was the Chief Asia Economist for global banks such as HSBC, Citi and UBS and also the Head of India Equity Research for JP Morgan. Prior to working in financial markets, Arup was an economist with The World Bank in Washington D.C.

Arup has a Bachelor of Arts (Honours) degree in Economics from St. Stephen’s College, Delhi, a Masters from the Delhi School of Economics and a Doctor of Philosophy in Economics from Vanderbilt University in the United States.

Dato’ Abdul MajidAhmad Khan

President, Malaysia-China Friendship Association Exco Member, Malaysia-China Business Council

Dato’ Abdul Majid is currently the President of the Malaysia-China Friendship Association (PPMC) and Exco Member of the Malaysia-China Business Council.

He obtained a Bachelors degree in Economics (Honours) from University of Malaya. In his thirty-four years of service with the Government, he served in the Prime Minister’s Department and the Ministry of Foreign Affairs as well as in several missions abroad (Vietnam, Laos, China, USA and Nigeria). He has also held senior positions in the Ministry of Foreign Affairs.

He also acted as the Under Secretary of West Asia and the Organisation of Islamic Cooperation (OIC) and has participated in several Ministerial and Prime Ministerial visits to West Asian Countries and OIC Meetings.

During his tenure as the Director General of ASEAN, he actively participated in the organisation of the 30th ASEAN Ministerial Meeting held in Kuala Lumpur as well as the ASEAN Head of Summit and the 10+3 Summit Meetings in Malaysia.

In 1998, he was appointed as the Ambassador of Malaysia to the People’s Republic of China and concurrently accredited to the Democratic People’s Republic of Korea until his retirement on 2nd January, 2005. Post-retirement, he continues to actively participate in various conferences and seminars dealing with the subject of China’s Economic Development and ASEAN. He sits on the board of directors of several companies, both listed and private.

YAM Tunku Zain Al-‘Abidin ibni Tuanku Muhriz

Senior Fellow, CIMB ASEAN Research Institute Founding President, Institute for Democracy and Economic Affairs

Tunku Zain Al-‘Abidin is a Senior Fellow of CIMB ASEAN Research Institute; Founding President of the Institute for Democracy and Economic Affairs; a Trustee of Yayasan Chow Kit, Yayasan Munarah, the Jeffrey Cheah Foundation and the Genovasi Foundation; an Independent Non-Executive Director of Allianz Malaysia Berhad and Kian Joo Can Factory Berhad; an advisor or patron to numerous educational and cultural organisations; a committee member of several societies; and a columnist in three newspapers.

He was educated at the Kuala Lumpur Alice Smith School, Marlborough College and the London School of Economics and Political Science, where he obtained his MSc in Comparative Politics. He then worked in the UK Houses of Parliament before moving to Washington DC to join the World Bank as a Public Sector Consultant. Upon returning to Malaysia, Tunku Zain worked at the United Nations Development Programme and the KRA Group before becoming a Research Fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore.

In 2006 he co-founded the Malaysia Think Tank which evolved into the Institute for Democracy and Economic Affairs (IDEAS) in 2010. Since 2008 he has maintained a newspaper column: firstly Abiding Times in theSun, then Roaming Beyond the Fence in the Star and Sin Chew, and now Conservatively Speaking Freely in the Malay Mail, Borneo Post and Oriental Daily. From these articles three books have been compiled, the latest being nominated for the Popular Readers’ Choice Awards. Tunku Zain also authored a coffee table book for the Installation of the Eleventh Yang di-Pertuan Besar of Negeri Sembilan and led a major project to revitalise the State Anthem.

An Eisenhower Fellow, he has been selected for various leadership programmes by the governments of Australia, France and the European Union and has received awards for integrity and impact among young leaders.

Tan Sri Dr. Munir Majid

Chairman, CIMB ASEAN Research Institute President, ASEAN Business Club

Tan Sri Dr. Munir is the Chairman of CIMB ASEAN Research Institute (CARI) and the president of ASEAN Business Club (ABC). He is also the Chairman of Bank Muamalat Malaysia Bhd, and has been on its board since 2008. He obtained his B.Sc (Econ) from the London School of Economics and Political Science in 1971, and his PhD in International Relations in 1978. He taught at the Department of International Relations in LSE from1972-1975, and was an analyst for Daiwa Europe NV in London from 1975-1978.

On his return to Malaysia at the end of 1978, Tan Sri Dr. Munir joined The New Straits Times Press (NSTP) as a lead writer and progressed to become its Group Editor. He left The NST in 1986 to become the CEO of a small merchant bank, Pertanian Baring Sanwa (PBS), which then became Commerce International Merchant Bankers, the genesis of today’s CIMB Group. He left CIMB in 1993 at the invitation of the Government of Malaysia to set up the Securities Commission and became its first Executive Chairman until 1999. He continued with his illustrious career, serving in various capacities, including as Chairman of both Celcom and Malaysia Airlines System at different times. He was the founder and President of the Kuala Lumpur Business Club (2003-2008), and was the chairman of its Advisory Council. Dr. Munir, an Honorary Fellow, is Visiting Senior Fellow at LSE IDEAS (Centre for international affairs, diplomacy and strategy).

The roundtable discussed the potential impacts of President Trump’s economic and foreign policies on ASEAN. In his opening remarks, Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI) said that, “It is important to note there is a shaking up of the current world order and it is a threat to global trade which is the biggest perceived business risk.” He added that, “America’s might and power require a look at President Trump and his policies.” Each panellist agreed that any action the United States may take will have an indirect or direct impact on ASEAN. However, they also reiterated the unpredictability of President Trump’s economic and foreign policies makes it difficult to say for sure what policies will and will not enacted. A recent United States Trade Representative (USTR) trade policy report outlined the possible direction of current Administration’s trade policies, which signals a rise in bilateral trade agreements putting an end to the era of the US pursuing multilateralism.

1. A trade war is unlikely

There was a consensus among the panellists that the U.S. is unlikely to start a global trade war. Ambassador Michalak said that while there is a lack of clarity within the Trump Administration on who is leading trade policies and what these policies should be, it is unlikely that the country will be the epicentre of a trade war. However, what is clear is that, first on the trade agenda seems to be a renegotiation of North American Free Trade Agreement (NAFTA). Again, how long these negotiations will take and what clauses will be added or removed are highly unpredictable as this will rest on who leads the negotiations. One thing that Ambassador Michalak was certain about is the fact that thus far the Administration has not engendered trust in trade policies particularly because, in his opinion, President Trump believes in a zero sum game.

CARI Chief Economist, Dr. Arup Raha began by saying that protectionist measures are not new to the United States. The country has been protecting many of its industries including the automobile, airline and banking sectors. In his opinion, as a significant proportion of American trade is intra-firm – foreign entities of US firms trading with their domestic arms – implementing tariffs will adversely affect American firms.

2. China-U.S. relations: Antogonistic or Amicable?

Dato’ Majid Khan, former Malaysian Ambassador to China noted that President Trump’s anti-China rhetoric has lessened of late. In fact, according to a survey President Trump’s popularity in China was rising, second only to that in Russia. According to Dr. Raha it seems that President Trump’s campaign proposals to raise tariffs for Chinese products by 40 percent are unlikely because that would also result in the strengthening of the US dollar and hurt U.S. exports. With the chances of extreme trade measures toward China being unlikely the panel discussed the response China has taken towards America.

Dato’ Majid, observed that China has been making the first moves since President Trump’s inauguration to placate the potentially reactionary measures of his Administration. For example, China has approved 38 of President Trump’s business patents in the country. Dato’ Majid believes China is creating a “positive atmosphere in preparation for the leaders of the two countries to meet”. However, he also warned that the U.S. should be careful of its actions with respect to China as he believes if during the upcoming National Party Congress elections military leaders are voted in, they along with the conservatives in the Party, may be encouraged to adopt an anti-U.S. position.

Having spent many years as a diplomat in China, he said that through his discussion with various Chinese leaders he gets the impression that “that China is not rejoicing at the U.S. retreating from the global stage”. This is because while China can take over the role of a global powerhouse it is not yet ready to shoulder such global responsibility. What China really wants is an equal role on the world stage through institutions such as the International Monetary Fund and World Bank. At least for now, according to Dato’ Majid, China is adopting “a wait and see attitude” before they make any moves as President Trump’s policies could either be an opportunity or challenge for the world’s second largest economy.

3. The U.S. economy: A rise in economic nationalism

The panel agreed on the fact that the move towards economic nationalism is a worrying trend globally which has brought about the rise of leaders such as Donald Trump and made ideas such as Brexit a reality. In the United States specifically, Dr. Raha said that the “Make America Great Again” rhetoric is appealing because real incomes in the country have not gone up since the 1960s and that the median income has actually fallen thus causing the rise of populism. However, he added that most of the decline in manufacturing jobs had taken place due to improvements in technology, though some of it was due to trade and a lack of regional growth.

In President Trump’s attempts to make “America Great Again” he is likely to undertake reflationary policies, which has seen the stock market react positively. However, Dr. Raha believes that as the U.S. economy is close to full employment the reflationary fiscal policy is likely to be countered by the Federal Reserve, diluting its impact.

According to Dato’ Majid, there is also a possibility that remittances from Vietnamese and Filipinos working in the U.S. may decrease especially if immigration policies mean that many of them are unable to enter the country again.

4. Implications for ASEAN

Each panellist had their different perspective on how Trump’s economic and foreign policies would impact ASEAN.

Ambassador Michalak believes that companies will continue to set-up in ASEAN as the region offers many advantages that the U.S. is unable to offer anymore.

Dr. Raha was of the opinion that ASEAN countries will have to be prepared with monetary policy measures in response to the Federal Reserve’s policies. The easing cycle in ASEAN is over and countries, such as the Philippines may have to raise rates this year. He believes that what really drives trade is business investment abroad. Trade still remains the driver of ASEAN growth and the region should continue to pursue free trade agreements such as the Trans Pacific Partnership with or without the participation of America.

Dato’ Majid believes that ASEAN leaders and the secretariat “need to proactively cultivate a relationship” with the new Administration and President Trump. They should do this now in the early stages of the presidency to impress upon the American policymakers the importance of ASEAN. However, Dato’ Majid raised the question of whether there is strong enough leadership within the region to execute this.

Additionally, Dato’ Majid cautioned that the potential reorientation away from Asia could cause some countries in the region to move towards China which in turn may create some antagonism within the region further weakening ASEAN centrality.

Tunku ‘Abidin, Senior Fellow at CARI, emphasised that ASEAN has to be weary of the phenomenon that led to President Trump’s election in the first place – the trends towards populist nationalism, xenophobia and protectionism. He believes that if this populist nationalism grips ASEAN then it could stall the integration of the region and the ASEAN Economic Community. However, he said that ASEAN could learn from Mr. Trump’s rise. “Currently, ASEAN is seen as an elitist bureaucratic institution by the younger generation,” he said. “If we don’t want to see little “Trumps” in ASEAN then it is important that the institution be successful, significant and propel the region forward.” he concluded.

A question was raised on the role of ASEAN in the U.S.- China relationship. The panel responded by saying that ASEAN must prevent antagonistic interactions between the two countries and that ASEAN must continue to build trust and confidence in itself as a regional body.

The panel agreed on many pertinent points during the discussion. The first was that a trade war is unlikely to materialise as President Trump will not raise tariffs on Chinese goods to the levels he previously promised. What did emerge from the conversation was the importance of the relationship between U.S. and China and how ASEAN should play a role in ensuring that the relationship between the two countries remains amicable. It was also noted that unless President Trump is able to perform economic miracles and reverse the technological advances which has caused wages to stagnate in the U.S., businesses will continue to set up in the ASEAN region for the competitive advantage the region provides.

Written by Tamanna Patel, Resident Research Fellow at CARI.