Southeast Asian Leaders Fear Getting Drafted into China-U.S. Trade War

Malaysian Prime Minister Mahathir Mohamad gestures as he speaks to reporters during a press conference at the Great Hall of the People (GHOP) in Beijing, China, 20 August 2018.(Photo by How Hwee Young - Pool/Getty Images)
How Hwee Young - Getty

Trade tensions between China and the United States are a hot topic of conversation at the Association of Southeast Asian Nations (ASEAN) summit, which kicked off on Tuesday in Singapore.

“The trade tension between the two world powers is bound to create a domino effect that will affect trade reactions and will be a reason for other developed countries to adopt protective measures against developing countries, including the ASEAN countries,” cautioned Prime Minister Mahathir Mohamad of Malaysia, one of the organization’s ten member states.

Mahathir caused a bit of controversy in China over the summer by canceling projects tied to China’s international Belt and Road infrastructure program and voicing concerns that Malaysia incurred too much Chinese debt under his predecessor. He sounded very much like he was on Team China at the ASEAN gathering, as quoted by Reuters:

Mahathir, a veteran strongman of the region who in May returned to the prime minister’s office he had occupied for 22 years, told reporters that the United States is “a colonial power” that uses “economic pressure to cow people.”

In his speech, he said “the rise of trade protectionism, resurgent nationalistic movements and inward-looking policies” seemed to be emerging even among ASEAN nations.

That was echoed by summit host Singaporean Prime Lee Hsien Loong, who told a welcome ceremony for his ASEAN counterparts that “the international order is at a turning point.”

“The existing free, open and rules-based multilateral system which has underpinned ASEAN’s growth and stability has come under stress,” he said, adding that it was unclear if the international order would break up into rival blocs.

Returning to the theme as the leaders sat down to dinner, he said: “Countries are becoming insular, retreating from multilateralism and globalization, which has been the cornerstone of ASEAN peace and stability.”

Chinese Premier Li Keqiang hopes to realign the region by pushing a Chinese trade deal called the Regional Comprehensive Economic Partnership (RCEP) that pointedly excludes the United States. “There are no winners in a trade war,” he said on Tuesday before meeting with ASEAN leaders.

China’s pitch to smaller regional powers is that Beijing has effectively defeated their competing territorial claims by militarizing the South China Sea, a conquest Li hoped to ratify with a new code of conduct. With those territorial claims off the table, ASEAN leaders will be tempted to reach a reasonably beneficial understanding with the new regional hegemon. Li’s task at the forum was to offer just such an understanding.

“It is China’s hope that the [code of conduct] consultation will be finished in three years’ time so that it will contribute to enduring peace and stability in the South China Sea. China and ASEAN countries will benefit in that process, it will also be conducive to free trade and go on to serve the interests of other parties,” said Li.

The editors of the Jakarta Post on Wednesday said it was time for Indonesia to make a deal with China and buy into the Regional Comprehensive Economic Partnership plan, which will “account for 50 percent of the world’s population and 30 percent of the world’s gross domestic product.”

This advice was followed by a bit of frowning about the “serious problems” ASEAN nations still have with China, and some very wishful thinking about the “leverage” Southeast Asian nations can wield against Beijing:

For ASEAN and China, cooperation is the wisest choice despite the unresolved problems.

Once the West and Japan dominated Southeast Asian economies, but it has changed. The region has steadily developed and grown stronger. Outside powers have to adjust themselves to ASEAN’s new leverage.

Does the old proverb lepas mulut buaya, masuk mulut harimau (out of the crocodile’s mouth, into the tiger’s mouth) fit the relationship between ASEAN and China, which has admittedly replaced the power and influence of the US? The answer is definitely no.

For ASEAN, China is no longer life-threatening despite its economic power. ASEAN has leverage to counter its giant neighbor. An Indonesian scholar once joked that ASEAN has equipped itself with the skill of a pawang (animal tamer) in negotiating with outside powers.

Like it or not, for the time being and unforeseeable future, China is a priority for ASEAN. And ASEAN is not alone.

The Chinese are unlikely to pay more than lip service to ASEAN’s cherished concept of “centrality,” which they also see as imperiled by the Trump administration’s regional policy agenda, as explained by Voice of America News:

Katherine Tseng of the National University of Singapore’s East Asian Institute said Trump is causing “great concerns if the aim is to de-emphasize ASEAN centrality.”

The ASEAN centrality concept refers to ASEAN’s role in the regional security architecture, regional order, and the power dynamics among external powers that have interests in the region.

Tseng added that to member countries, ASEAN centrality is a must to defend the region from “undue foreign intervention.”

“With the risk of trade fight escalating with the two largest economies, I suppose there’s more urgency among the ASEAN 10 to work together,” said Song Seng Wun, an economist in the private banking unit of CIMB in Singapore. From the prime minister, he said, “the message is that we have to help ourselves first and look for opportunities wherever they may be.”

ASEAN nations were clearly dismayed by President Donald Trump’s decision to bypass the summit and send Vice President Mike Pence instead. Pence stressed the interest of the United States in forging bilateral trade agreements with individual nations and establishing a more “fair and reciprocal trade arrangement going forward,” as he put it to Vietnamese Prime Minister Nguyen Xuan Phuc.

VOA quoted Angela Mancini of the Control Risks consulting firm criticizing the Trump administration for pulling out of the long-negotiated Trans-Pacific Partnership trade deal and ceding leadership on free trade to China. The Trump administration (and, it should be remembered, quite a few Democrats during the 2016 primary season) believes massive multilateral trade agreements tend to be unfair to the United States and fail to live up to their promises.

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