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ASEAN

ASEAN anchor to Asian trade policy strategy

As the global trade regime threatens to unravel, ASEAN would seem the most unlikely bloc to spring effectively to its defence.

This article was originally found on East Asia Forum

As the global trade regime threatens to unravel under the Trump administration’s assault on the WTO dispute settlement disciplines and its tearing up the rules in its trade war with China, ASEAN — the motley Southeast Asian grouping that includes Indonesia, Singapore, Malaysia, Thailand, Myanmar, Vietnam, Cambodia, Laos, Brunei and the Philippines — would seem the most unlikely bloc to spring effectively to its defence.

But that’s exactly what has happened.

Japan’s initiative with Australia and others to double down on the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) — TPP-11 or TPP minus the United States — earlier made a statement that helped to keep regional trade open in the face of the Trump administration’s disavowal of it. But the leaderships of countries like Japan and Australia has been hamstrung in defending of the multilateral trade regime as they deal with aggressive US bilateralism under the constraint of protecting their US alliance relationships.

In November, around the East Asian Summit meetings in Bangkok, ASEAN and its Regional Comprehensive Economic Partnership (RCEP) partners, Australia, China, Japan, South Korea and New Zealand (minus India) declared the agreement all-but-done and their intention to sign off on it in 2020. India’s political nerve broke at the last moment and it demurred.

This was a decisive moment in both regional and global economic and political affairs. The path that ASEAN and its East Asian partners had chosen was a game-changing push-back against the tide of populist-inspired isolationism, protectionism and nationalism and a stand for the multilateral trading order. That’s why it was welcomed so warmly by a trade-war weary world, not just as another regional trading deal. A group of countries that comprise close to a third of global trade and income had taken a stand.

RCEP is a green shoot in the otherwise deserted field. As the world divides, Asia has come together. RCEP is not just a trade agreement, it’s an economic cooperation arrangement. And RCEP brings together a group of countries, a number of which had no free trade agreement that linked them previously. More importantly, RCEP commits what’s still the most vibrant trading region in the world to the common pursuit of global interests and goals.

The RCEP victory was ASEAN-made and ASEAN executed. It has not been ASEAN’s only contribution to the effort to turn around the dangerous tide in international economic diplomacy. Indonesia, at the Osaka G20 summit in June, tabled an important ‘non-paper’ in defence of the WTO and defined a pathway forward on its reform that none of the other major players had the fortitude or strategic space on which to take a stand. That initiative provides a beachhead for more broadly based collective action by middle and smaller powers to protect their interests in the established global trading rules and improve the functioning of the multilateral trading system.

‘ASEAN consistently and quietly delivers peace to one of the most Balkanised regions in the world. Yet, no one notices’, explains Kishore Mahbubani in this week’s lead essay, and….. ‘the understated and quiet leadership of ASEAN managed to pull off one of the biggest coups in recent economic history by announcing the completion of negotiations of RCEP’.

India’s Look East and Act East policies ‘will mean absolutely nothing if it does not join RCEP’, warns Mahbubani. Ironically, the Indian negotiators were ready with the deal on RCEP for Prime Minister Modi to sign off in the lead up to Bangkok. But nationalist and protectionist political forces at the last moment warned the Indian leader off, casting India once more in the role of international trade agreement spoiler.

The cost of the wrong-call to India is large. Its languishing economy sorely needs the boost that RCEP-stimulated reforms would give to long term growth, employment for a bulging workforce and poverty alleviation. Such Indian wrong-calls continue to condemn India (and South Asia that it dominates) to economic welfare indicators just a small fraction of those of East Asia — South Asia has just 2.7 per cent of global trade compared with East Asia’s 30.1 per cent, 2.2 per cent of global foreign investment compared with East Asia’s 48.1 per cent, and 4.0 per cent of global GDP compared with East Asia’s 30.2 per cent, while they account for 23.9 per cent and 30.7 per cent of the global population respectively.

The 15 other RCEP leaders are determined to put every effort into getting India over the line in 2020 but they cannot force it into the deal. Nor can the RCEP 15 let India hold up progress. Japan is reportedly equivocating about RCEP without India. Such equivocation is most unwise. Going back would see Japan retreat from its recent global economic leadership role in saving the TPP and successfully hosting a difficult G20 summit. It would also jeopardise relations with ASEAN. A desire to keep India in RCEP for the Indo Pacific dream cannot be allowed to result in India’s holding the agreement to hostage to low standards knowing the conclusion of a good agreement is strategically imperative.

ASEAN is intent on holding firm and finding a way to structure in continuing engagement even if India can’t find a way to join RCEP immediately.

Another quiet ASEAN contribution to the strategic landscape helps manage great power relations beyond Southeast Asia while solidifying ASEAN’s role as a regional strategic anchor. With Australia and Japan trying to find a way to redefine the Asia Pacific into an Indo-Pacific framework to keep the United States engaged and draw India into the region, ASEAN spent the past year crafting its response to the Indo-Pacific idea to protect its centrality in regional affairs. The ASEAN Outlook on the Indo-Pacific was ASEAN’s response to competing conceptions of the region from the United States, Japan and Australia that ‘could divide the region’, Mahbubani argues.

ASEAN’s Outlook is built on ASEAN principles. Importantly, it is inclusive and adds an economic and development dimension, two key aspects that demonstrate a clear departure from the maritime security conception that looked to China like a containment strategy. For ASEAN, RCEP is an instrument that helps to institutionalise all of that.