By EI SUN OH
Nov 14 2018 (Manila Times)
THE annual summit season beckons again. For several days this month, the leaders of the Association of South East Asian Nations (Asean) and their counterparts from near and far, including the United States and China, will gather in Singapore for a series of expanded multilateral and bilateral summits. A few days later, the leaders will join even more of their counterparts in Port Moresby, Papua New Guinea, for the Asia Pacific Economic Cooperation (APEC) high-level meetings.
High on the agenda would of course be the state of the economy not only for the region, but also for the world. The world economy still wallows in the dire aftermath of the global financial crisis a decade ago. Pockets of growth bubble up from time to time, with the US, China and Southeast Asia most conspicuous among them. But already signs of strains surface, with the stock and commodity markets remaining volatile. So there is still plenty to be done by various major economies to stimulate their own and the collective global economy. Southeast Asia and by extension the Asia Pacific region are especially crucial in these endeavors.
Alas, the US under the Trump administration decided to essentially turn its back on the whole idea and practice of free trade which it had first propounded, avidly practiced and assiduously encouraged other countries to adopt. One of Trump’s first official acts after assuming the presidency was the renunciation of American participation in the Trans-Pacific Partnership (TPP) agreement, for which the previous Obama administration had been rounding up members. It would have been the world’s largest free trade bloc, surpassing even the North American Free Trade Area (NAFTA, which itself is under “attack” from the same Trump administration) or the European Single Market. TPP was supposed to be a “free trade plus” agreement, not only opening up the markets of its participating economies, but improving their quality as well by means of rigorous standards.
It is no secret that many TPP member states, especially those with developing country status, signed up to TPP mainly to gain free trade access to the gigantic American market. They did so with the reciprocal condition that they would similarly have to open up their own domestic markets for foreign competition, and for that many of their politicians would have to take domestic political heat as local merchants understandably would like to protect their respective home turfs. Yet many of these politicians pushed for the TPP despite domestic unpopularity, believing that it would be ultimately beneficial to their home countries.
Then came the American withdrawal from TPP, which was as if a rug had been pulled from under them. Some of them would have to face ridicule from their respective electorates. Remedial measures are being undertaken, most prominently by Japan, to try to salvage what is left of the TPP, which has now been renamed the Comprehensive and Progressive TPP. It would still be the world’s third largest free trade bloc, but the enthusiasm for it and its luster have waned. Even if the CP TPP is eventually ratified, it will not have the same forceful effect on the world’s free trade agenda.
Asean does have its own free trade area under the aegis of the Asean Economic Community (AEC), which was supposed to drastically reduce or remove tariffs and non-tariff barriers between Asean countries. But despite AEC having been in force for a few years now, intra-Asean trade has yet to pick up significantly when compared to Asean trade with other major economies in the world.
And then Trump launched another round of trade war, imposing tariffs on manufactured goods mainly from China but also from many other economies. More than a few Southeast Asian countries, though not directly targeted by the American tariffs, will also be indirectly affected. This is because in some cases, they make intermediary products which are shipped to China and other major economies targeted by the American tariffs. So if exports from these economies targeted by the US slow down, so would their demand from these Southeast Asian countries. Electronic products are one such example. How would these countries weather the resulting economic hardships individually and collectively remains to be sorted out.
There has also been much expectation for the Regional Comprehensive Economic Partnership (RCEP) agreement, which would comprise Asean countries and six other neighboring major economies, including China, Japan, Korea, New Zealand, Australia and India. At first it was supposed to sort of collate the various existing bilateral and multilateral free trade agreements among these participating economies, and therefore not difficult to conclude. But the actual RCEP negotiations proved to be much more tedious than initially anticipated, so that in a sense the RCEP negotiations has become even more protracted than the TPP’s. There are increasingly more and more calls for those RCEP participants who are willing and ready to accept the RCEP terms to just go ahead and form it first, with the other potential participants joining later when they are ready. For the world’s free trade momentum must not be lost, and a reaffirmation for it during the upcoming summits would be helpful more or less.
This story was originally published by The Manila Times, Philippines