Asia stands on guard

As the United States under President Donald Trump moves toward restricting its market, the role of Asia in building a new global free trade regime becomes more evident.

Asia claims 33% of the global share in trade, only second to the European Union. The success of free trade is palpable in Asia particularly in countries like Japan and South Korea whose economies immensely grew from their participation in the World Trade Organization (WTO).

At the Economic Freedom Network (EFN) Asia’s session in the Jeju Forum on 1 June 2017, it was pointed out that while Asia has kept the spirit of multilateral or plurilateral free trade regime via the Association of Southeast Asian Nations, ASEAN +3, and even ASEAN +6, it has to be more conscious about a rule-based approach to trade. Among the principles of the trading system is encouraging development and economic reform, which include promotion of good governance and rule of law. This kind of economic leadership in Asia has yet to emerge.

Dr. Razeen Sally, Associate Professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, pointed out that “something unusual” on trade is going on. “Since 2012 until the end of 2016, trade growth barely kept pace with world GDP growth at about 3 percent or less. Is this simply cyclical or more structural?,” Sally asked. “With the new protectionist threats from the West, will we see an upsurge in protectionism? he added.

Sally criticized what American economist Paul Krugman calls “pop internationalism,” and warned that it is dangerous. He acknowledged that American leadership is necessary to maintain a balance of power in Asia.

Dr. Kim Young-Han, Economics Professor at Sungkyunkwan University in South Korea commented that Trump’s protectionist policies are not sustainable, but are nevertheless threatening. “If Trumpian Protectionism spilled over to major trading countries. The current one-sided protective measures of the US are highly likely to provoke retaliatory measures from trading partners. And the next stage would be global trade war, just like the experience before the two world wars,” he cautioned.

Wan Saiful Wan Jan, Chief Executive of the Institute for Democracy and Economic Affairs in Malaysia, offered a more nuanced view. “The presence of US, although important, has not always been helpful to the promotion of open market. When there is a strong American presence, the reaction and resistance is equally strong. For example, in the case of Trans-Pacific Partnership (TPP), one of the key critics is that it allows the US companies to dominate. Now that the US is retreating, China is definitely trying to assert its role. We are still grappling how to deal with the rise of China and with this new normal,” he explained.

“The rule-based system comes as a requirement of investments from the West, and we don’t see this demand from China. The challenge then is for countries to develop a commitment to liberal reforms within themselves with or without pressure from a major economic power,” concluded Wan Saiful.

The session was organized by EFN Asia and the Friedrich Naumann Foundation for Freedom (FNF) Korea, a German non-profit organization that promotes democracy building and market economy.

The discussion was summarized by a quote from German economist, Wilhelm Roepke: “Internationalism like charity begins at home.” Governments should do their best to contain protectionism and keep their market open regardless of what others do.

The Jeju Forum session outline reflects the full documentation of discussion on on Asia’s Contribution to the Global Open Market.

Asia’s Contribution to the Global Open Market. Wan Saiful Wan Jan (IDEAS, Malaysia), Dr. John Delury (Yonsei University, South Korea), Dr. Razeen Sally (National University of Singapore), Dr. Lars-Andre Richer (FNF Korea), and Dr. Kim Young-Han (Sungkyunwan University, South Korea) talk about Asia’s role in a growing protectionist environment.

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