ASEAN Must Remain Neutral In Trade War Between Economic Superpowers - Andrew Sheng

By Mikhail Raj Abdullah and Durratul Ain Ahmad Fuad

KUALA LUMPUR, April 10 (Bernama) -- ASEAN must remain neutral in the escalating global trade war over tariffs between superpowers the United States and China, former Bank Negara Assistant Governor Tan Sri Andrew Sheng said.

“It is not going to be healthy for anyone to be seen taking sides, more so with ASEAN economies inextricably linked in both trade and investment to Washington and Beijing,” Sheng told Bernama at the ASEAN Finance Ministers’ and Central Bank Governor’s Meeting (AFMGM) here, Wednesday.

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He said Malaysia, as the ASEAN chair this year, has the influence to help shape the grouping’s views toward neutrality as regional leaders converge for their 47th annual summit here on May 26-27.

“ASEAN’s neutrality is critical right now,” said Sheng, who is also chairman of the George Town Institute of Open and Advanced Studies and distinguished fellow at the Institute for Capital Market Research.

Since US President Donald Trump announced sweeping tariffs against 168 countries on April 2, both countries have been engaged in a tit-for-tat tariff retaliation.

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This has culminated in the US announcing a staggering 104 per cent tariff on Chinese imports while the latter has hit back with a 84 per cent import levy on American goods entering its own market.

The global backlash has escalated with Canada hot on the heels of China, imposing a 25 per cent tariff on selected American vehicle imports.

The 27-member European Union (EU), meanwhile, is also planning retaliatory tariffs on America although it has expressed willingness to negotiate first.

(In the latest development taking place just hours ago, Trump paused the higher reciprocal tariffs for 90 days, authorising a universal lowered 10 per cent tariff, but he increased the tariffs on Chinese goods to 125 per cent.)

Besides roiling global markets and bringing chaos to the world trading system, the trade war has stoked fears of rising inflation and an impending global recession.

Asked whether it could be time for ASEAN+3 (China, South Korea, and Japan) to unite against the US, Sheng said, “That is clearly a ‘No’ as America’s biggest power is being the largest importer of all you produce.”

He likened the US-China trade tension to a “war of the elephants, the ‘Sang Kancil’ or mousedeer in reference to small countries, “must be very clear about how to stay nimble, fast and flexible.”

Southeast Asian economies should reaffirm their diversities and economic strengths.

In doing business, they must hold onto an open trading approach, allowing for flexibility and discretion in choosing partners without necessarily revealing their identities.

To suggestions that Indo-Chinese countries Cambodia and Laos were the hardest hit because of their dependence on China, Sheng said this was not true as both were heavily reliant on the US market.

That's why the US wants to remind Cambodia, “You're ultimately selling to me.”

Sheng emphasised that trade and investment cooperation “is not something you can achieve overnight as every country is different (and) as long as everybody is nimble and fast on your feet, you will survive.”

“This entails ASEAN countries being open to the idea that non-tariff barriers (NTBs) are not necessarily sacred cows that you cannot remove,” he said. 

Malaysia, as ASEAN chairman, has the opportunity to introduce fresh ideas such as the ASEAN Business Entity (ABE), proposed by the ASEAN Business Advisory Council (ABAC), which accords trade privileges to companies operating regionally.

He pointed out that Trump’s shocking tariffs have inevitably started an economic revolution for which economies must upgrade and achieve competitiveness or risk losing out to the vagaries of the international marketplace. 

“Tariffs have changed the competitive game,” he said, adding that this is not a crisis but rather a massive shock for which the good news is that “you do something you don’t want to do” such as reducing NTBs.

-- BERNAMA