ASEAN centrality: Bilateral U.S. tariff deals or unified strategy?

AWANI

ASEAN has long promoted a unified economic front, but when it comes to U.S. tariffs, is it better to negotiate collectively or pursue bilateral deals? Prof Shandre Mugan Thangavelu from the Jeffrey Cheah Institute on Southeast Asia weighs in.

Transcript

00:00ASEAN has long championed a unified economic front.

00:04But when it comes to negotiating tariffs, especially with the US,

00:08critics argue that member states appear to act alone.

00:11With each ASEAN country subject to different tariff regimes,

00:15does it make more sense to negotiate bilaterally on their own

00:19or come together as a bloc with a collective leverage?

00:23Prof. Chandray Mugan Tangavellu,

00:25head of the Jeffrey Chia Institute on Southeast Asia, weighs in.

00:30So the US is not committing to a serious rule-based,

00:35market-based trading dimension itself.

00:37So where does this lead to ASEAN?

00:39ASEAN still needs a coalition.

00:41ASEAN still needs the biggest trading framework itself.

00:45So how much does the US trade to ASEAN actually account for?

00:48Maybe 20% of the total ASEAN trade with US.

00:55But there are 80% that is built on, 90% or 85% is built on this framework

01:02that is very important for us.

01:04So from a long, enduring, sustainable, and inclusive growth that we can create,

01:11it's the 85% that is based on a rule-based, market-based,

01:14and a coalition-based framework.

01:17So ASEAN follows this framework very carefully.

01:20That's the reason why, on April 10th, ASEAN, under Malaysian partnership,

01:26released the statement that fairly they believe that the negotiation from a coalition point

01:33of view, ASEAN point of view, is very important.

01:36And they emphasize the importance of WTO.

01:39They emphasize the importance of rule- and market-based trading area,

01:42which actually underpins how businesses need to do their work.

01:45Chandra added that while some ASEAN countries have been pursuing bilateral tariff deals

01:52with the US, most prefer collective negotiations through ASEAN for better leverage.

01:59So with the current framework, if bilateral FTAs and countries go on themselves

02:05and negotiate with that ASEAN, it doesn't actually help them.

02:10Because the whole framework of ASEAN, as I mentioned, is built on businesses

02:14participating in this framework, from either the flying geese in the 70s and 80s,

02:20currently the global value chain itself.

02:23So bilaterally, if countries negotiate, it is an important thing, I guess,

02:28because countries are trying to mitigate the short-run effect of the trade diversion

02:35that the US has put itself in terms of high tariff, that of 39% on Cambodia

02:44and then 38% on Vietnam and so on and so forth,

02:47on top of whatever the tariff line is.

02:50It's on top add-on component.

02:53So at that tariff rate, there's no trade at all.

02:55There's no margin for businesses to participate.

02:59So only three countries are bilaterally negotiating.

03:01And ASEAN really put up a statement that fairly there are many frameworks

03:05that can negotiate with the US and bring the US back into the negotiation table itself.

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