Trade war may propel Asia to restructure industrial chain

With trade tensions between China and the US heating up further, the spillover has begun to hit Asian economies. To prevent itself from being badly hurt, Vietnam has come up with the idea of combining trade deals and domestic reforms, said the country’s prime minister Nguyen Xuan Phuc in an interview with Bloomberg recently.

It is not only Vietnam that strives to survive. Other export-dependent economies in Asia, such as South Korea and Southeast Asian countries like Singapore and Malaysia, are also vulnerable when global trade is under threat.

It is true that Asian economies are still reliant on the US, the world’s largest consumer market. While US President Donald Trump fired the first shot with 25 percent tariffs on Chinese goods, his unilateral moves have broken the balance in the region. This offers an opportunity for the whole of Asia to think about restructuring regional trade patterns.

Munir Nanji, Citi Global Subsidiaries Group’s head for Asia-Pacific, was quoted by CNBC as saying that when a trade war occurs, the countries involved would have to go somewhere else. For instance, China has signed contracts with India’s cotton exporters who will ship 85,000 tons of the new season harvest to China after Beijing decided to impose import taxes on American farm commodities including cotton in response to tariffs enacted by the Trump administration.

In other words, when both demand and supply come from Asia, Asians can buy more from and rely more on themselves. To avoid any trade shock affecting the region, Asian economies need to join hands and step up cooperation within the framework of regional mechanisms.

China, as the largest economy in Asia, has been shouldering its due proportion of the responsibilities to promote trade flows in the region. In the latest round of negotiations of the Regional Comprehensive Economic Partnership in late August, consultations on two key issues – trade facilitation and government procurement – were completed. The mega-trade bloc involves the Association of Southeast Asian Nations (ASEAN) and its six partner countries and is rigorously advocated by China.

Meanwhile, China and ASEAN are working to upgrade a bilateral free trade agreement and will adopt a Strategic Partnership Vision 2030 Statement in the 21st ASEAN-China summit in November, crafting a new path for cooperation. China also urges accelerating the China-South Korea-Japan free trade agreement talks in an effort to promote regional cooperation and act against trade protectionism and unilateralism.

Regional cooperative mechanisms are in full swing and China’s indispensable role comes as a result of its growing consumption capabilities, a mighty economy, industrial clusters as well as advantages in both its upperand lower-end industrial chains.

Regional cooperation may put the China-US trade war on the back seat. What’s more, such cooperation will give impetus to the integration of more sectors in Asia – a unified currency, for example – and lead to new security patterns.