An ASEAN out to the US-China pressure?

As the clash of the superpowers continues, New Zealand is coming under pressure to choose between the US and China - but could regional groupings like ASEAN offer a safety valve? Sam Sachdeva reports.

“I am a Tariff Man.”

US President Donald Trump’s declaration, made in his latest tweetstorm regarding a trade dispute with China, has done little to soothe fears of a global tariff war.

The sabre-rattling between the two superpowers has been going on for some time, and has led to fears for the rules-based system and regional architecture like the Association of Southeast Asian Nations - better known as ASEAN.

But Dr Pavida Pananond, an associate professor of international business at Bangkok’s Thammasat Business School, says the grouping of 10 nations is well practised when it comes to managing its relationships with competing superpowers.

Pananond, in New Zealand as part of a fellowship set up in 2017 to mark the 50th anniversary of ASEAN’s creation, says the organisation grew up in an era when the US was the traditional power in Southeast Asia, both politically in the wake of the Vietnam War and later as an economic force.

But China’s growth in political and economic power, as well as Japan’s strong presence through history, means ASEAN is used to balancing its interests in the region, Pananond says.

ASEAN to benefit from trade war?

That’s not to say the region can avoid the fallout from a full-blown trade war.

She says the most direct impact will be trade-specific, with ASEAN consumers and companies not immune from tit-for-tat tariffs.

However, there could actually be a positive outcome, with companies trying to avoid a financial hit deciding to “reconfigure” their operations and look for other destinations to host their facilities - such as within Southeast Asia.

“After a while, multinationals start to realise it’s important not to put all their eggs in one basket,” Pananond says.

That feeling may be heightened by technological advances such as automation which have reduced the need for low-cost and labour-intensive operations, meaning companies do not need to be based far away from their home market or have protracted supply chains.

"It’s [ASEAN] perhaps the only regional bloc that has actually existed for a while to move regional schemes further forward."

In fact, Pananond is somewhat bullish about ASEAN’s role in the region, saying it is “very much at the centre of everything” on trade and economic issues.

“Not all countries belong to the CPTPP...it’s [ASEAN] perhaps the only regional bloc that has actually existed for a while to move regional schemes further forward.

“These are 10 countries that already have some kind institution and infrastructure going in that direction.”

The more than 600 million people in the 10-nation bloc, while smaller than China, offers more market diversity - one of the reasons why she thinks New Zealand should look to ASEAN as a counterweight to economic overreliance on the Asian superpower.

Dr Pavida Pananond says New Zealand's relationship with ASEAN must be more than "one-way and one-dimensional". Photo: Sam Sachdeva

“New Zealand is a country that relies a lot on export of their agricultural and primary products. ASEAN has a growing middle class, and as economies develop they will consume more of the products that New Zealand exports.”

However, Pananond warns against New Zealand’s relationship with ASEAN becoming “one-way and one-dimensional”, only led by trade.

The region’s complex supply chains offer opportunities for Kiwi companies, she says, contrasting New Zealand’s service-driven domestic economy with its “very much commodities-driven” exports.

The country’s agricultural technology could also entice ASEAN firms to invest here, she says.

'Thorny' rise of authoritarianism

But the diversity of countries that makes ASEAN appealing on an economic level is cause for concern on the political front, with a rise in authoritarianism throughout Southeast Asia alarming some observers.

Pananond says the trend, in part exacerbated by the diversity of populations, religious beliefs and political systems within the region, is “certainly a thorny issue” for countries like New Zealand and Australia.

There is also the risk that countries within ASEAN may not see eye to eye on which superpower they should back.

"[ASEAN] find ways to have the minimum threshold of some kind diplomatic words to say.”

She points to China’s Belt and Road Initiative as one project which has inspired a range of views, from support to wariness.

But Pananond dispels any thought of the grouping’s disintegration, saying ASEAN is “experienced enough to be very light and superficial in the way they approach certain issues” relating to each other's domestic politics which could create division.

“ASEAN has always been a region that has a very light integration touch: I think what would happen is they find ways to have the minimum threshold of some kind diplomatic words to say.”

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