The White House announcement throws the international trade rulebook out the window. If the Trump administration’s imposition of these tariffs on a flimsy national security pretext does not outright flout the rules of the WTO, then it at least flouts its widely shared norms.
The response from the European Commission was to ‘do the same stupid things to respond to stupid things’ — promising retaliatory tariffs on a range of US exports into Europe, from Harley-Davidson motor bikes to bourbon whiskey. The tariff imposts also launched a process in which trading partners like Australia successfully begged exemption on various grounds both sound and spurious, all of which are nonetheless in clear violation of the understanding that trade will be conducted under internationally agreed rules, not ad hoc bilateral deals.
That’s the beginning of the rot; it may be a short-term tactical victory for countries like Australia, but it is certainly not effective strategic play.
What happens now?
US commentators reckon that a challenge of the Trump tariffs before a WTO dispute panel is a no-win game. If the European Union takes the United States to the WTO (as it has promised to do) and loses under Article XXI, which allows trade restrictions on national security grounds, the ruling will open countries to restrict imports however they choose on ‘national security grounds’. If the United States loses, it will surely reject the ruling, rendering the WTO dispute process effectively dead.
The strategic objective is to keep the WTO system alive in the face of this potentially mortal threat. The United States is playing itself out of the system. Learning to live without the United States as a rules- and norms-enforcer won’t be easy, but it is the only response that will protect the system and avoid the large-scale economic cost and dangerous political consequences of an escalating trade war.
The strategic response to the Trump trade threat is more important to Asia than to any other major centre of international trade. Asia’s prosperity and political stability depends critically on its integration into the global economy through the rules-based trading system. The global trading system has underpinned the growth of Asian interdependence, Asia’s economic prosperity and its political security.
China, in particular, is in Trump’s cross hairs as ‘the cause of US trade deficits because of its violation of trade rules’. But China is also a crucial stakeholder in the rules-based system through its largely faithful observance of the protocols of its accession to the WTO in 2001 and the huge trade in Asia and around the world that has been built on that.
Locking in China’s entrenchment to the WTO system — and resisting the temptation to take retaliatory actions in the face of Mr Trump’s trade antics — is thus a major element in the system’s defence.
As China and the United States stare each other down with a potentially devastating trade war on the horizon, it may seem strange to turn to ASEAN, but it has a central role in the collective response to Asia’s present predicament.
ASEAN centrality has been an organising platform for Asian economic policy cooperation over the past half century, as explained in the issue of East Asia Forum Quarterly ‘ASEAN Matters‘ released today.
The retreat of the United States from leading the global order and the reversal of its pivot to Asia; the rise of China with its aggressive stance on the South China Sea and its infrastructure development ‘carrot’ in the Belt and Road Initiative; a putative ‘Quad’ configuration of Indo-Pacific power around the US, India, Japan and Australia; and the hot spot in North Korea all present challenges to ASEAN’s central role in the region.
ASEAN leadership in the negotiation of the Regional Comprehensive Economic Partnership (RCEP) in East Asia renews its centrality in Asia’s response to the present uncertainties.
RCEP includes not only the ten ASEAN economies but also Japan, South Korea, China, India, Australia and New Zealand. It is a coalition of countries with the economic weight to deliver a powerful message to the world. Without movement in ASEAN, RCEP is unable to go anywhere. The signing of the Trans-Pacific Partnership agreement without the United States (TPP-11) in Chile last week was a start in defence of the global trading system. But the TPP-11 is not systemically important enough to make the difference. RCEP is.
The threat to security in our region is now much more about the dangers to the multilateral trading system than anything else, despite the still unfinished business on the Korean peninsula.
The Australia–ASEAN summit next weekend is a singularly important opportunity for setting out joint interests on the economic dimensions of regional security and ASEAN’s role in achieving them. ASEAN, with Indonesia at its core, is a regional enterprise with a distinctly global outlook and objectives. A declaration from the Sydney summit that commits to elevating the momentum in RCEP will help cement a broader coalition of Asian economies, including China, Japan, South Korea and India, to holding firm on the international trading system. It will also ensure ASEAN’s continuing centrality in economic cooperation across the region.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.
The latest edition of East Asia Forum Quarterly, ‘ASEAN matters’, is available to read here.
A global world order that divides the world into allies and enemies is not healthy. Rules and institutions should provide security and freedoms to all people’s equally, regardless of which nation they come from.
In an increasingly more complex world, ASEAN’s role in the region and possibly the world should not be underestimated.
Given the to reach a conclusion for RCEP to demonstrate that the countries involved are serious to keep and strengthen free trade and the fundamental intent of the current international trade regime and rules and to move ahead despite the current threats and challenges. Perhaps a new approach to RCEP negotiations should be adopted so to reflect constructive attitudes of the absolute majority of the involved countries and to avoid the situation where the whole negotiation processes can be held up one or two countries. It can, at the same time, provide an easier mechanism for the remaining one or two countries to join in should they agree and adopt the majority views.
Members can adopt a core content approach where all members agree to form the agreement and leave some more difficult issues for a late stage. Alternatively, the agreement can be formed by a absolute majority of countries that all agree and leave one or two members out temporally and leaving the door open for them to join in a late stage pending on further negotiations.
The difficulties in WTO negotiations also indicate more practical, efficient, innovative and fair approaches need to be considered and adopted in negations.
I can accept a great deal of the argumentation in here, but I cannot agree that this leads to a conclusion of ASEAN “Centrality”. The facts suggest the opposite, I would contend.
ASEAN is a demonstrable failure politically and economically, and it has never accounted for anything strategically. Accidents of geographical proximity and a capacity for endless meetings shrouded in empty protocol and gaudy, inappropriate clothing and gestures are no substitute for real, collaborative effort.
Nobody would rate ASEAN’s “Economic Community” of 2015 as counting for anything. Nobody could think of an instance where concerted ASEAN action had made any difference to the hard interests of the region. Most effective international cooperation in the Southeast Asian region has happened outside ASEAN: the Shangri La Dialogue sponsored by the International Institute of Strategic Studies; the regional policy efforts of the Asian Development Bank; the scholarly endeavours by academic groups such as ISEAS and NUS in Singapore.
It’s not clear what has produced this sudden rewriting of recent history. What is evident is that not everyone accepts it (Malcolm Cook of the Lowy Institute being one.)
It might be problematic if it leads to unrealistic expectations of the Australian ASEAN Summit in Sydney.
Mr Wilson’s assessment of ASEAN, we’d suggest, sits at odds with what the circumstances of the group are and therefore what its strategic interests are. It also makes the incorrect assertion that the grouping has not been successful economically. This is plainly wrong. The ASEAN economies have collectively performed well above the global developing economy average – Asian financial crisis and all notwithstanding. The ASEAN economies are also deeply internationally integrated. They have done so well because ASEAN has helped them form a successful regional strategy with global objectives. And that is exactly what their circumstances in the regional and global economy demands. They have forged a policy approach that that eschews non-inclusive and rigid regional institutions in favour of open regionalism. That too is what their circumstance demands. And ASEAN’s consensus-based, consulative diplomacy has been a helpful model in similar settings (APEC, East Asian arrangemets the G20 among them). It is important not to choose the wrong metric whereby to judge how well ASEAN has performed (see Jayant Menon, EAFQ 10.1).