ASEAN's pivotal role in the global trade struggle
The 2025 ASEAN Summit in Kuala Lumpur is a critical juncture for the global economic order. While it may seem odd that a group of Southeast Asian countries could hold the future of this order in their hands, ASEAN, one of the world's most dynamic and integrated economies, has emerged as a champion of regional and global economic openness. The summit's star-studded attendee list, including US President Donald Trump, Chinese Premier Li Qiang, Japan's new Prime Minister Sanae Takaichi, Brazilian President Luiz Inacio Lula da Silva, and South African President Cyril Ramaphosa, underscores the recognition of ASEAN's convening power.
However, the significance of this week's ASEAN Plus meetings extends beyond the summit itself. Two parallel processes are making these meetings particularly consequential.
One is the Regional Comprehensive Economic Partnership (RCEP) Leaders' Meeting, the first since 2020 when leaders signed the agreement virtually. This meeting is a testament to Malaysia's deft diplomacy as the ASEAN Chair. Initially, some major Dialogue Partners in the region were hesitant to sign up due to Washington's scrutiny. The RCEP Leaders' Meeting holds the promise of reaffirming global trade rules and advancing regional economic cooperation, even in challenging circumstances.
The second process involves separate negotiations with the United States on bilateral deals, which have already yielded agreements with Malaysia and Cambodia. These deals may provide temporary relief from exorbitant tariff threats, but they normalize discrimination as the default trade policy logic, contrasting sharply with the RCEP's multilateral approach.
Beyond Kuala Lumpur, the regional summit season continues, with Trump's scheduled visit to Japan and participation in the APEC economic leaders' meeting in Gyeongju, Korea's ancient capital, where he is likely to meet with Chinese President Xi Jinping. The focus on East Asia for the struggle over the future of rules-based trade is understandable.
Amid talk of deglobalization, it's easy to overlook Asia's, and especially ASEAN's, deep integration into global production and the potential for further gains from deeper integration. Most global manufacturing occurs in Asia, and ASEAN collectively ranks among the top-five economies with robust growth. Countries like Malaysia, Vietnam, Thailand, and the Philippines are major exporters of highly traded manufactures, including semiconductors, as part of complex supply chains with significant foreign value-added content.
The RCEP Leaders' Meeting is expected to review progress and push for the implementation of key commitments. Its greater significance lies in providing a much-needed boost of political energy and institutional strength to RCEP, the world's largest regional trade agreement, covering over 30% of global GDP. At its core, RCEP includes an economic cooperation agenda designed to keep the agreement dynamic and responsive to evolving needs. This institutional potential, combined with ASEAN's strategic neutrality and economic dynamism, positions it as a powerful tool for maintaining trust in open trade.
The contrast with the bilateral deals with Washington is stark. These deals may temporarily avert tariff threats but normalize discrimination as the default trade policy logic, diverging from the free trade agreement approach. The accompanying investment pledges further entrench the protectionist trade model embraced by the Trump administration.
Despite their US dealings, ASEAN members have continued to invest in multilateral rules. Vietnam recently joined Malaysia, the Philippines, and Singapore in signing the Multi-Party Interim Appeal Arbitration Arrangement, preserving the WTO's dispute settlement mechanisms while its appellate body remains paralyzed. ASEAN's neighbors, Australia, China, Japan, and New Zealand, have also committed to global trade rules and their protection.
As ASEAN Chair, Malaysian Prime Minister Anwar Ibrahim has carefully prepared the ground. He emphasized that RCEP's success depends on translating commitments into opportunities, urging ASEAN to uphold openness and unity amid uncertainty. ASEAN's growth is not accidental, Anwar noted, but the result of decades of economic cooperation and regional institution-building.
Shiro Armstrong, in a lead article, reflects on this critical moment and Malaysia's role in seizing it. Armstrong highlights the dangers facing the region's economies, particularly Trump's tariffs and threats to tax goods based on Chinese-originating content, which target the connector economies linking global production networks. If such measures become the norm, they would undo decades of integration and lead to a descent into closed trade blocs.
Modelling by the East Asian Bureau of Economic Research and the Centre for Strategic and International Studies in Jakarta quantifies the stakes. Their analysis finds that if RCEP members fully implement their commitments and resist retaliatory tariffs, ASEAN economies could expect GDP to be up to 13% higher than in a scenario of escalating trade wars.
The economic and political cases for maintaining openness are compelling, but the path ahead is challenging. Full implementation of RCEP would boost regional incomes and employment and help ASEAN project and defend its interests through a strong institutional platform. It would complement other initiatives like the CPTPP and engagement with the European Union outside the region.
As the summit and parallel meetings unfold, ASEAN faces the task of anchoring cooperation and preventing fragmentation. The RCEP meeting can signal that the region's economic future will be determined by negotiating and reinforcing rules aligned with multilateral principles, rather than power-based bargaining. For a world weary of trade wars and economic nationalism, ASEAN's message is crucial.
