Asean to-do list in 2017
28 January 2017
As appeared in The Star Online
IT is not business as usual. As Asean’s array of official and private sector meetings roll out for the year, urgent thought must be given to dramatically new challenges beyond the stubborn issues that continue to arrest the region’s meaningful integration.
The advent of Donald Trump as President of the United States has overturned many regional assumptions and threatens to cause economic as well as political turmoil. These developments should make Asean think crisis management – even if, in the end, the worst does not happen.
There are a number of “what ifs” which should be addressed.
What if Trump causes a trade war to break out between America and China by imposing the punitive import duties on Chinese goods that he has threatened?
It will then not be a simple outcome of relocation of manufacturing centres from China to low-cost Vietnam, for instance, as some have rather sanguinely suggested. The supply chains to which many Asean exports are linked for the finished Chinese product would be broken. There will be export disruption – not just for China.
There are countries in Asean, apart from Vietnam (90%), like Singapore (176%), Thailand (69%) and Malaysia (71%) whose exports amount to a substantial proportion of their GDP.
On top of exports through China, their own direct exports to the US will also be affected, as will any relocated exports from Vietnam.
There will be no winners in a trade war, no benefits to be derived from China’s apparently singular predicament. The knock-on effect will be widespread. In time, as excess capacity looks for export sales, dumping will become a problem, as will protection against it.
Motor cars that cannot get into America will have to go somewhere. Steel turned away from the US as Trump seeks to protect mills and jobs in the mid-west will have to be shipped somewhere else. Even the textile industry will be spinning in different directions as Trump has promised to revive it in America.
The whole global free trade ecosystem will go topsy-turvy. How will free trade within the Asean Economic Community, such as it is, be maintained? Can Asean plus six move on to the Regional Comprehensive Economic Partnership (RCEP) as the fallout from Trump’s America First trade policy hits the world?
Asia – and Asean – will have to stick together and carry on with the open, albeit reduced, global free trade and investment system. Will that happen?
Some Asean states with larger domestic economies are less dependent on international trade than others. Already, now, they take a different position on opening up their market. Will it get worse in the situation of stress, should it come about?
Asean must talk about these possibilities now, before they happen. Someone must take the lead. Too often this does not happen in Asean. Can the officials, or the secretariat, or the private sector do this scenario-setting for the ministers, for the leaders? Or is Asean going to carry on as if everything is not changing around it?
I am reminded of what George Orwell has been said to have remarked: In a time of universal deceit, telling the truth is a revolutionary act. The tendency to take to the Asean level what routinely happens in many Asean domestic systems should be snapped. Some functionary in Asean must warn the regional grouping of the dire threat facing it.
The other challenge facing Asia and Asean is the risk Trump poses to regional peace and stability.
This comes from the challenge again thrown at China, this time in respect of its claim to the South China Sea. As China’s predominance in the disputed expanse of territory is by no means ideal, its exposure to a more counter-assertive and belligerent American stance under Trump – no Chinese access to islands artificial or militarised that do not belong to China “under international law” – may encourage claimant Asean states to be less compliant with the China-set path of dispute management.
Since the law of the sea tribunal decision last July, there has been a lowering of temperature in the South China Sea dispute, even if at the cost of not highlighting the baselessness of China’s claims under international law. The return has been a commitment by China in the diplomatic channeling with Asean to having a code of conduct (COC) finally in place this year – although only in framework form.
It has been a long-term Asean objective to have this COC for peaceful conduct in the South China Sea. China has hitherto been dragging its feet on this. With a more assertive American policy against China, would there be among Asean states a disposition to push with the US to get a better deal on the South China Sea?
This kind of geopolitical arbitrage may be attractive, but it would come at a longer-term cost to regional cooperation, which has become critical because of Trump’s foreign economic and trade policies. This is a dilemma Asean states would do well to address together.
Already, beyond Asean, India appears attracted to taking advantage of the predicament China might be in with Trump. India, of course, has long-standing border disputes with China, which Beijing has been happy to keep unresolved. At the same time, there is strategic competition between the two over their regional place in Asia.
Another could be Japan which, again, has many unresolved disputes and issues with China.
India, in particular, appears to want to flirt with Trump even at the cost of frustrating conclusion of the RCEP. The cost to India, however, could be isolation from the Asia-Pacific region for an uncertain alliance with Trump’s America.
You cannot do strategy with a counter-party whose leitmotif is transactional. With Trump it is not going to be win-win. It is going to be win-win-win for America.
Asean states should want to address these profound issues. Even dissuade member and partner countries from wanting to sup with the devil, as it were.
China, of course, has not been the ideal big country partner beyond platitudinous statements and suffocation of Asean by money. Its actions in the South China Sea are not indicative of a great power that will not grind your face in the dirt if you did not do its bidding.
Will China become the good big brother it claims it wants to be, even as America becomes the bad and ugly one?
It looks like Asean might be caught between a rock and a hard place. Individual member states no doubt will be doing their calculation with the hope to position themselves in a better than survival mode.
However they will all be better off if they also worked together among themselves and partnered Asia-Pacific countries to achieve better economic integration, whose benefit will discourage them from playing dangerous geopolitical games.
So, as Asean under Philippines leadership looks at themes such as inclusive growth, an excellent focus, and addresses the many stubborn issues that are barriers to better integration, it must prepare also for the very difficult economic and political environment which will be fashioned by the Trump administration.
Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.