March 14, 2017 9:40 pm JST

ASEAN businesses want clarity from Trump on trade

Roundtable weighs threat of protectionism to regional economy

CK TAN, Nikkei staff writer

ASEAN Roundtable participants discuss the merits of open trade in Kuala Lumpur on March 14.

KUALA LUMPUR -- Business groups in Southeast Asia are advocating the continuation of open trade policies, just as U.S. President Donald Trump looks to advance his protectionist agenda. 

More than anything, perhaps, companies across the Association of Southeast Asian Nations bloc want to know exactly where Washington stands.

"Business requires certainty to operate and thrive, especially when the ASEAN Economic Community is at a nascent state with teething issues," said Munir Majid, chairman of the CIMB ASEAN Research Institute, or CARI.

Majid was speaking at the ASEAN Roundtable Series on Tuesday, organized by CARI, a think tank of Malaysian lender CIMB Group Holdings, and the ASEAN Business Club, which comprises executives from the private sector. The theme of the session was "Dealing with a changing world order: What will Trump's economic and foreign polices mean for ASEAN?"

ASEAN companies see a danger of supply chain disruptions if Trump follows through on some of his campaign rhetoric, such as imposing 25% to 45% tariffs on imports from China -- a key trade partner for many economies in the region.

Trump made good on his pledge to withdraw from the Trans-Pacific Partnership on day one of his presidency. He blames free trade for causing unemployment in the U.S., but his decision to leave the TPP did not sit well with ASEAN states. The U.S. was the bloc's No. 4 trade partner in 2015, with transactions worth $212 billion.

Trepidation over tariffs

Although ASEAN has been accused of being slow to open its markets, investors regard the bloc as one of the more important destinations, due to its favorable demographics and growth potential.

The region is a key export market for American products and supports about half a million jobs in the U.S., Michael Michalak, regional managing director of the US-ASEAN Business Council, told the forum.

Coca-Cola's announcement on Monday of a 500 million ringgit ($113 million) plan to expand its Malaysian production facilities underscores the region's importance. The U.S. beverage giant's plant in Bandar Enstek, on the outskirts of Kuala Lumpur, serves as a production hub covering Singapore and Brunei, bottling beverages for brands including Fanta, Sprite, A&W, Schweppes, Heaven and Earth and Minute Maid Pulpy.

"What that investment could do for Coca-Cola could not be duplicated in the U.S.," Michalak said.

Coca-Cola's move, however, did not wash away the region's unease about Trump's policies.

Many ASEAN economies are already reeling from the effects of the dollar's rise since November, driven by speculation about interest rate increases in the U.S. These countries are wary of additional, Trump-imposed taxes on imports from Asia. 

"Tariffs would also lead to a further rise in the U.S. dollar and weaken the yuan, both of which would have a negative impact on Asian currencies," said Arup Raha, chief economist at CARI.

Abdul Majid Khan, president of the Malaysia-China Friendship Association, warned the forum that a trade war between the U.S. and China would harm both countries and the broader global economy.

Arup downplayed that possibility, saying, "The chances of a trade war are small and it's in nobody's interest."

Zain Al-Abidin, a senior fellow at CARI, said Trump's inward-looking policies and the U.K.'s impending exit from the European Union should spur ASEAN to reflect upon its founding purposes. "If ASEAN truly wishes to deliver the most optimistic objectives of its proponents," Zaid said, "then it needs to build trustworthy yet flexible institutions at an uncertain time such as this."

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