Is the Association of Southeast Asian Nations (Asean) ready for a new era of trade coercion? The answer will depend on each nation, but Asean members want to look unified and pragmatic.

Last week in Melbourne, at the ministerial meeting of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the 12-member free trade pact made it clear that the global trading system is being turned upside down due to growing malpractice and a lack of cohesion.

The CPTPP members did not name the culprit. They did not have to, as they all know the US is responsible for enforcing new trade rules, much to the chagrin of traders worldwide.

Lest we forget, a decade ago, Washington initiated the high-end free trade arrangement known as the Trans-Pacific Partnership with gusto.

The pact was doing well until the first Trump administration pulled the US out in 2017, leaving the nascent trade bloc shaky. Fortunately, the remaining members carried on the goodwill under the current revitalised CPTPP pact, which has now expanded to include 12 members. From the region, two additional Asean members -- Indonesia and the Philippines -- have applied. Singapore, Malaysia, Vietnam, and Brunei are CPTPP members.

In Melbourne, the CPTPP representatives also held talks for the first time with representatives of the EU and Asean to explore avenues of cooperation and forge common strategies to address new forms of trade cohesion and distortion. The meetings were timely, as Asean is seeking meaningful ways to diversify its markets and supply chains.

According to the Asean Geoeconomics Report (AGR), released at the 47th Asean summit, Washington's weaponisation of tariffs is pushing even its friends and allies into a defensive position. Simply deciphering President Donald Trump's comments on Thailand-Cambodia ties, one can understand how the White House is threatening its trading partners by linking trade and security.

To broker "peace" in the Thai-Cambodian conflict, Mr Trump recently warned that discussions of reciprocal tariffs would be suspended if the joint declaration is not implemented. After a landmine incident on Nov 10, Prime Minister Anutin Charnvirakul suspended the joint declaration to protest Cambodia's breach of Thailand's sovereignty.

The AGR also urges Asean to act collectively, deepen integration, and reinforce multilateralism. To be blunt, these recommendations are not new. Asean members have heard those pledges before. While it sounds like a wonderful vision, it falls by the wayside in practice.

This time around, however, Asean leaders realise that the Trump administration's reciprocal approach is dangerous. Furthermore, it has the potential to negatively impact Asean economic growth and ties with other major trading partners. Washington knows the Asean creed very well. To counter the rise of China, the White House is taking aim at the regional bloc, which has boasted China as its No.1 trading partner for the past 14 years.

The report lays out four pillars of action -- managing short-term risks, advancing integration, reinforcing multilateralism, and pursuing ambitious reforms. It calls on Asean to coordinate responses to US tariffs and to accelerate the implementation of agreements such as the Regional Comprehensive Economic Partnership (RCEP). After all, RCEP, concluded in 2020, keeps Asean at the centre of the world's largest free-trade region with strong regional supply chains.

In addition, it calls for upgrades to the Asean Trade in Goods Agreement (ATIGA) and the Digital Economy Framework Agreement (DEFA). The latter would be concluded by next year under the Philippines' chairmanship. It would become the world's first digital economic framework.

Beyond the diplomatic pleasantries, the core issue is the transhipment of goods through third countries. The US has said it would impose a 40% tariff on goods transhipped through these territories. To prevent Asean from being punished by the US, the bloc needs to diversify its trading partners and existing supply chains. It will be one of the biggest challenges confronting Asean since its establishment nearly six decades ago.

Today, geoeconomic matters the most. Washington has introduced new measures and weaponised its trade with the world. It has sidelined the Geneva-based World Trade Organization (WTO) and undermined global norms.

At this juncture, it is notable that the region's manufacturing ecosystem, such as electronics, machinery, and automotive components, depends on deeply integrated China–Asean production networks built over the past 25 years. The recent upgrade of the Asean-China Free Trade Agreement 3.0, including the digital and green economy, will further augment their trade volume.

But Asean would be in a quandary as Washington is blinded by its unilateral tariffs and security-driven trade controls. The problem is that the US does not distinguish between allies, friends, or competitors. America comes first in all instances. These countries are targeted simply because their supply chains are linked with China's trade.

As tariffs expand, Asean economies could face a double blow. On the one hand, whenever goods pass through Asean supply chains linked to China, they are punished. On the other hand, should Asean countries try to decouple their longstanding ties with China to please Washington, the bloc could be indirectly reprimanded by China.

Asean's economic future does not depend on picking between Beijing and Washington. In truth, it depends on the region's longstanding supply-chain ecosystem with China. Of course, from now on, expanding market access elsewhere, such as with the EU and within the RCEP members, is essential.

To avoid being targeted by Washington, Asean members must strengthen compliance with rules of origin and improve customs transparency. Most importantly, the bloc must also work with trading partners to prevent accidental or deliberate transhipment.

With Mr Trump trying to distract domestic attention, the weaponisation of trade will intensify. Asean must act now. The AGR's recommendations must be implemented promptly and with seriousness.

Source: Bangkok Post

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