WAIT­ING IS THE HARD­EST PART

Across Asia, lead­ers and an­a­lysts are be­ing kept guess­ing un­til US pol­icy di­rec­tion un­der Don­ald Trump be­comes clearer

China Daily (USA) - - ANALYSIS - By KARL WIL­SON karl­wil­son@chi­nadai­lya­pac.com

On the ba­sis that dra­matic changes in United States pol­icy are un­likely for at least the next six months, an­a­lysts ad­vise against press­ing the panic but­ton just yet over the Don­ald Trump pres­i­dency.

But there are fears that Asia could be kept in limbo, wait­ing for clear di­rec­tion on the Trump ad­min­is­tra­tion’s poli­cies. This could mean in­creased busi­ness and mar­ket un­cer­tainty, weak­ened in­vest­ment and slower growth in the re­gion.

The US pres­i­dent-elect and his team will not be given the keys to the White House un­til he is sworn in on Jan 20.

Mean­while, it does ap­pear that the Trans-Pa­cific Part­ner­ship is dead in the wa­ter. And an­other trade deal, the tri­lat­eral North Amer­i­can Free Trade Agree­ment which came into ef­fect in Jan­uary 1994 be­tween the US, Canada and Mex­ico, has a huge ques­tion mark over it.

Trump, once in of­fice, might find that slap­ping tar­iffs on goods im­ported into Amer­ica is a harder nut to crack.

Build­ing a wall be­tween Mex­ico and Amer­ica looks doable — if he has the bricks and ce­ment. How­ever, if he throws out all the il­le­gal im­mi­grants, will he still have the peo­ple to build the wall?

While re­build­ing Amer­ica’s crum­bling in­ner cities and bro­ken road and rail trans­port sys­tems is a noble am­bi­tion, where will the money come from? Will the pri­vate sec­tor go along with Trump’s grand vi­sion of the future?

“The big ques­tion is: Will we get Don­ald the cam­paigner or Don­ald the pres­i­dent?” said Simon Tay, chair­man of the Sin­ga­pore In­sti­tute of In­ter­na­tional Af­fairs.

“His win­ning speech gave us a hint that he may be a more con­cil­ia­tory and prag­matic pres­i­dent, rather than the di­vi­sive per­son we saw dur­ing the cam­paign,” Tay told China Daily.

“Dur­ing the cam­paign he said (Hil­lary) Clin­ton should be in jail. In his speech he praised her ser­vice to the coun­try. But there are other things he said which he sim­ply can’t walk away from, such as the Tran­sPa­cific Part­ner­ship … that’s off the ta­ble now,” Tay said.

“We could be get­ting our­selves worked up too much,” said Charles Miller from the School of Pol­i­tics and In­ter­na­tional Re­la­tions at the Aus­tralian National Univer­sity in Can­berra.

“Per­haps Trump will just be like Arnold Sch­warzeneg­ger, a celebrity politi­cian who just wanted to be pop­u­lar and ended up be­ing quite mod­er­ate,” Miller said.

“On the other hand, we could see an em­bold­ened Rus­sia strike out against the Baltics while the US stands by; a trade war with China which would do real dam­age to the global econ­omy; mas­sive fis­cal im­bal­ances which would un­der­mine the sta­bil­ity of the global econ­omy, and worse.”

One of the head­line-grab­bing poli­cies that Trump cam­paigned on was the im­po­si­tion of tar­iffs on im­ports from China and Mex­ico. But this is eas­ier said than done, some an­a­lysts say, be­cause the political sys­tem in the US is not that straight­for­ward.

“For many types of trade re­stric­tions, he would need back­ing from the Repub­li­cans in Congress,” said Louis Kuijs, head of Asia economics at re­search house Ox­ford Economics, in Hong Kong.

He said putting trade curbs in place may not be easy for Trump given the Repub­li­can Party’s tra­di­tional stance in fa­vor of free trade.

“An­other fac­tor is that most types of tar­iff would break World Trade Or­ga­ni­za­tion rules and China is highly likely to re­tal­i­ate,” Kuijs said in a note to China Daily.

He said that given the com­pli­ca­tions in­volved in im­pos­ing tar­iffs, the Repub­li­can lead­er­ship in the House and Sen­ate “will prob­a­bly urge Trump to first fo­cus on is­sues that all Repub­li­cans can agree on, such as tax cuts and dereg­u­la­tion for busi­nesses”.

“The need for Trump to de­liver some­thing anti-Chi­nese in the face of these con­straints makes it pos­si­ble he will — as he promised to do — push the US Trea­sury to name China as a cur­rency ma­nip­u­la­tor.”

But even that may be dif­fi­cult, said Kuijs, as the Peo­ple’s Bank of China, China’s cen­tral bank, re­cently spent a “siz­able amount of re­serves pre­vent­ing the cur­rency from de­pre­ci­at­ing more”.

He said Trump could also move on Chi­nese for­eign di­rect in­vest­ments in the US and the on­go­ing ne­go­ti­a­tions be­tween the two coun­tries on a bi­lat­eral in­vest­ment treaty.

Trump gave warn­ing to Ja­pan and South Korea that they should start shoul­der­ing some more of the cost of sta­tion­ing US troops in their coun­tries.

South Korea could also face a prob­lem with its ex­ports of cars to the US should Trump move to im­pose tar­iffs on im­ports.

In a note on Nov 9, No­mura said 40 per­cent of all Hyundai and 50 per­cent of Kia sales in the US are im­ported from South Korea. But it ob­served that Kia had ramped up pro­duc­tion at its Mex­ico plant in May.

In the Philip­pines, a for­mer colony of the United States where re­la­tions have been strained in re­cent months, there is grow­ing un­ease about future US in­vest­ment in busi­ness process out­sourc­ing, or BPO, firms.

The BPO sec­tor is the big­gest con­trib­u­tor to Philip­pine GDP, with the coun­try re­ported last year to have over­taken In­dia as the call cen­ter leader of the world.

Philip­pine Pres­i­dent Ro­drigo Duterte, who is of­ten likened to Trump for his out­spo­ken and crude re­marks, re­cently sig­naled an align­ment with China.

“We have a safety net which was fore­seen by the pres­i­dent,” said so­cioe­co­nomic plan­ning sec­re­tary Ernesto Per­nia on Nov 9.

“He fore­saw that there’s this like­li­hood that Trump will be­come (US) pres­i­dent, so he de­cided to pivot to China,” the Philip­pine Star news­pa­per quoted Per­nia as say­ing.

“He’s a clair­voy­ant ... We are now di­ver­si­fy­ing our friends so we don’t crash when the coun­try you de­pend on is in trou­ble,” he told a brief­ing af­ter ad­dress­ing the Philip­pines De­vel­op­ment Fo­rum in Davao City in Min­danao.

Per­nia said there is a strong pos­si­bil­ity there could be lower in­vest­ment com­ing from the US. And he sin­gled out the BPO sec­tor, which could be hit hard­est as 75 per­cent of its in­come comes from US com­pa­nies.

In In­done­sia, Pres­i­dent Joko Wi­dodo said his coun­try would con­tinue its “mu­tu­ally ben­e­fi­cial co­op­er­a­tion” with the US.

“Our re­la­tion­ship will still be good, par­tic­u­larly in trade. Amer­ica is a ma­jor in­vestor in In­done­sia and I be­lieve that will not change,” Joko told jour­nal­ists.

The same is ex­pected for Malaysia, where Prime Min­is­ter Na­jib Razak and Trump are said to be on good terms de­spite the lat­ter’s anti-Mus­lim rhetoric dur­ing the cam­paign.

Thai­land’s Fis­cal Pol­icy Of­fice Deputy Di­rec­tor-Gen­eral Waro­tai Kosolpisitkul told the Bangkok Post the Trump vic­tory is a ma­jor “risk fac­tor” not only for Thai­land but for the global econ­omy, as in­vest­ments will be put on hold due to un­cer­tainty over his economic poli­cies.

An­to­nio Fatas, pro­fes­sor of economics at the busi­ness school INSEAD, said it is hard to pre­dict what the con­se­quences of a Trump ad­min­is­tra­tion will be, given “how lit­tle he has talked about poli­cies”.

“And when­ever he did, he kept pre­sent­ing con­tra­dic­tory pro­pos­als,” Fatas told China Daily.

“There is no doubt there will be a se­ri­ous set­back to any pro­pos­als to sign new trade agree­ments. It is likely that some of what we have so far will be scaled back.” Fatas said this might force Asia to look for more trade in­te­gra­tion in­ter­nally, and less with the US.

As for re­gional growth, he said: “The risk to growth does not come from lack of new trade agree­ments. The risk comes from the pos­si­bil­ity of a US re­ces­sion which will likely have an ef­fect on the global econ­omy in­clud­ing Asia.”

In Fatas’ view, the rep­e­ti­tion of a cri­sis like 2008 is pos­si­ble, and “China has less room to do what it did in 2008-09 to iso­late it­self from the cri­sis”.

“But it is hard to pre­dict what the con­se­quences will be.”

Asia is wait­ing for clear di­rec­tion on the poli­cies of US pres­i­dent-elect Don­ald Trump’s ad­min­is­tra­tion.

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