We speak with a trade expert about geopolitical trends resulting in the shifting global trade landscape and the response from Southeast Asian economies - Stephen Olson, Senior Research Fellow at Hinrich Foundation
As the US and China battle for global supremacy, many countries in Southeast Asia are feeling the heat. They’re faced with the need to manage expectations of both global powers, while looking out for their best interests. Can countries in the region remain fence-sitters, and if so for how long? And how will their actions impact their trade policies? We speak with Stephen Olson, senior research fellow at the Hinrich Foundation, to understand how countries in the region are navigating this unusual and unpredictable trade landscape.
Unravel: In this era of trade that is being shaped by trade restrictions and increasing government intervention—particularly by the US and China—what are the implications for other emerging economies?
Stephen Olson: The worst-case scenario for emerging economies would be if the large and wealthier countries became engaged in a race—either to the top or the bottom, depending on your perspective—to pursue industrial policies and provide massive subsidisation to favour domestic production and workers. Emerging economies lack the resources to compete in such a race, and the likely result would be diminished export opportunities and decreased FDI into their home markets. The largely open global trade environment that has existed for decades and has spurred economic development in numerous less developed countries is becoming more closed. The export-led development model is becoming decreasingly viable.
Unravel: How are Southeast Asian economies navigating this changing landscape?
Mr Olson: Southeast Asian economies are playing the cards they’ve been dealt as well as possible. As a practical matter, that means walking a tightrope between the US and China, without tilting too decisively in one direction or the other. That permits them to benefit from both. As trade restrictions and interventionist policies increase, at least some ASEAN members are turning towards trade agreements to hopefully provide insulation. Seven out of the ten ASEAN members are on board for the US-driven Indo-Pacific Economic Framework, four are members of the CPTPP, and of course all of them are a party to the China-centred RCEP agreement. The biggest challenge will be to remain sitting on the fence between the US and China without being pushed off in one direction or the other.
Unravel: Are they doing it successfully, in your view?
Mr Olson: Singapore has elevated its ability to play off the US and China against each other to an art form. As a result, it benefits from robust economic ties with both. Indonesia is also demonstrating an ability to skilfully navigate the terrain between the US and China. Joko Widodo’s deft diplomatic handling of the Bali G-20 meeting including Russia, the US, and China won rave reviews that are deserved. The region has also shown leadership potential on digital trade governance, and could become a key player in the various multilateral and regional efforts that are underway.