What Direction are Asia’s Trade Winds Blowing?
Updated: Jun 23
It seems to be “Every Man for Himself”
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Asian nations that have grown and depend on trade have long looked to the US to provide leadership on global trade issues. From freedom of navigation enforcement to leadership on multilateral trade agreements to harmonized rules, the US has provided this leadership for over 70 years. Enter the Trump administration and it looks like those days are over.
From the campaign into the first half of the Trump administration signals have been strong that global leadership on trade would not be a priority and actually would be resisted. Trump seems convinced that the rest of the world has freeloaded on American leadership over the years and that America has gotten a bad deal. The Trans Pacific Partnership (TPP) was quickly jettisoned, bi-lateral trade agreements have been called into question and tariffs have been put on Chinese imports into the US.
While we can debate the costs of building and sustaining the global trade network and who has born the bulk of those costs, it is true that the global trade system has provided economic growth and has lifted millions out of poverty. It is also not debatable that the system has created winners and losers across and between economies. But turning our backs on over 70 years of relative peace and prosperity is confusing to a region of traders.
So what are Asian leaders to do? Some have looked to China to provide leadership. China is now the 2nd largest economy in the world and has been a huge beneficiary of the US lead system. But in the past China has been wary of pushing global norms that at times interfere with other countries internal policies. Most outward economic moves by China have been exclusively in the interest of Chinese investment and growth.
Some are looking to institutions as the substitute for American leadership. The 11 remaining members of TPP have indicated a willingness to continue on without the US. China has recently launched the “One Belt and One Road Initiative” (OBOR) that looks to bind much of Asia and Central Asia into a transportation and trading partnership with strong Chinese led infrastructure investment.
But none these approaches will bring the level of global coordination that the US led system provided. Expect most of Asia’s trading nations to take a multi-prong approach to trading relationships as it is now “every man for himself.”
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