As ASEAN continues to make progress toward the goals of the Blueprint 2025, the dream of creating a highly integrated and cohesive economy with enhanced connectivity and sectoral cooperation is potentially at risk. One important source of risk comes from ASEAN’s difficulties in effectively tackling the proliferation of non-tariff barriers to trade. As tariffs have fallen, member states have responded by placing an increasing number of new obstacles in place. Not all trade actions taken by ASEAN member states are an automatic trade barrier. States have legitimate policy objectives to achieve in protecting public health and safety, for example. But it is possible for such actions to cross over and become barriers to trade or for governments to design measures from the beginning to obstruct foreign firms from participating fully in domestic marketplaces. In spite of repeated commitments to eliminate such barriers to trade, ASEAN has struggled to identify non-tariff measures (NTMs) and non-tariff barriers (NTBs), much less assess the impact of these challenges, nor to stop the continued rise in obstacles of all sorts across the region. Failure to effectively address the increase of unjustified, difficult and costly trade issues undermines the progress towards the ASEAN Economic Community’s Blueprint goals and objectives. This report is designed to assist ASEAN members in achieving deeper integration in the region. It examines barriers to trade in three sectors: automotive, agri-food (alcoholic drinks, biscuits and seafood) and healthcare (pharmaceuticals and medical devices). The study complements existing NTM and NTB literature by identifying and assessing specific barriers to trade faced by businesses trading today across the ASEAN region. The results give policymakers a better understanding of the range of company concerns and helps officials devise and implement appropriate strategies to assess and reduce NTBs.
First is what might be called the “X Factor”—the multi-dimensional challenge posed by China under Xi Jinping to the U.S.-led international order, especially in the Asia-Pacific. There is an emerging consensus that the U.S. and China have entered a period defined by confrontation and competition that will be won or lost in the grey area short of kinetic action. At its core, this is a contest over divergent values and interests. It’s a contest between opposed political and economic systems, and between different visions for the future of Asia and the world writ large. On the political front, it’s a contest between authoritarian rule and democratic rule. On the economic front, it’s a contest between a state-led model and a market-based model. It’s a contest in which the U.S. must prevail. To compete effectively with China, it’s imperative for the United States to strengthen economic engagement in the Asia-Pacific through increased trade and investment, and not to succumb to protectionist impulses. I would note that every U.S. multinational enterprise worth its salt understands that they cannot be a successful global company unless they have a meaningful presence in Asia or a strategy to attain one. But American firms are working against considerable headwinds emanating out of Washington.
The net result, for Trump, is that he did what he wanted and it worked. Flush with this victory, it is highly likely that Trump will double down on his strategy in the future. After all, he will reason, his advisors argued against his Mexico gamble and yet it paid out so well for him. Why, then, should he listen to them if they advise against similar trade and tariff policies again? Trade is now a tool to be used for non-trade objectives, as we have noted previously. While clearly illegal, such a distinction does not matter. Trump was willing to impose tariffs on Mexico in direct contravention of existing World Trade Organization prohibitions, NAFTA rules and the upcoming NAFTA 2.0 rules. He used a dubious interpretation of the American emergency powers act to justify his decision domestically. The gloves, so to speak, are clearly off. And, having won a big match in this way, there is every reason to believe such tactics will be tried again. Future opponents should be forewarned.
From PM Lee’s speech: First, there is no irreconcilable ideological divide between the US and China. China may be communist in political structure, but it has adopted market principles in many areas. The Soviets sought to overturn the world order. But China has benefited from, and by and large worked within, the framework of existing multilateral institutions. During the Cold War, the Communist bloc sought to export Communism to the world. But China today is not attempting to turn other countries Communist. Indeed, it is often criticised for being too willing to do business with countries and leaders regardless of their reputation or standing, citing non-interference in the internal affairs of other countries. Second, China has extensive economic and trade links with the rest of the world. It is a major node in the world economy, unlike the USSR, whose economic links outside the Soviet bloc were negligible. In fact, all of the US’ allies in Asia, including Japan, South Korea, the Philippines, Thailand and Australia, as well as many of its friends and partners, including Singapore, have China as their largest trading partner. They all hope that the US and China will resolve their differences. They want to be friends with both: to nurture security and economic ties with the US, as they grow their business links with China. In a new Cold War, there can be no clear division between friend and foe. Nor is it possible to create NATO or Warsaw Pact equivalents with a hard line drawn through Asia, or down the middle of the Pacific Ocean. On the other hand, if there is indeed a conflict between the US and China, where will it end? The Cold War ended with the total collapse of the sclerotic planned economies of the Soviet Union and its allies, under the pressure of enormous defence spending. Even then, it took 40 years. It is highly improbable that the vigorous Chinese economy will collapse in the same way.
From PM Lee’s speech: Thus, short of universal trade agreements, we should at least strive for regional or pluri-lateral arrangements. This may be a second best solution, but it is a practical way to incrementally build support for lower trade barriers and higher standards, which can then be adopted by other countries. This was the rationale behind the Trans-Pacific Partnership (TPP). The US originally came on board the TPP because it saw the strategic benefits, although it ultimately withdrew. Fortunately, the remaining 11 members were able to preserve nearly all that had been negotiated, and so the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is now in force. I am glad that more countries have expressed interest to join the CPTPP, including South Korea, Thailand and the UK. China is also watching the CPTPP carefully. They are not ready to join now, but I hope that they will seriously consider doing so sometime in the future. Similarly, I hope one day it will become politically possible for a US administration to rethink the US’ position, and recognise that it stands to gain, economically and strategically, from becoming a member of the partnership that it played such a leading role in designing. Meanwhile, countries in the Asia Pacific are working on the Regional Comprehensive Economic Partnership (RCEP). The RCEP has a different footprint from the CPTPP. It covers all the key countries on the western side of the Pacific, including Northeast Asia and Southeast Asia, and also importantly India, Australia and New Zealand. This inclusive configuration minimises the risk of the RCEP being misperceived as a bloc that excludes the US and its friends. With such a wide range of participants, RCEP standards are naturally less ambitious than the CPTPP’s, and the deal is also much harder to negotiate. Nonetheless, I hope the participants can take the final step to complete the RCEP by this year, or if not, as soon as the domestic politics of the key players allow.