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Moderator:  Calla Wiemer (calla.wiemer@acaes.us)

Geopolitical Fragmentation, Regional Cooperation, and Prospects for ASEAN Trade and Value Chains

ASEAN countries are characterized by considerable diversity but share an outward-oriented development strategy. While intra-regional economic cooperation over the past two decades has been important, global, not regional, interaction has been the key to ASEAN’s success story. Hence, the strong policy headwinds facing globalization in the post-Covid period threaten continued growth and prosperity in the region. Proposals in major markets to protect domestic industries by raising obstacles to trade vary from sectoral protection to more comprehensive “geopolitical” or “geoeconomic” approaches, such as: (1) re-shoring to encourage local production; (2) near-shoring to encourage trade with regional partners; and (3) friend-shoring to support trade with political and diplomatic allies at the expense of others. The result could be “geoeconomic fragmentation” (Aiyar, et. al., 2023).

These fragmentation scenarios would leave ASEAN economies particularly exposed. Re-shoring negatively affects small, open economies the most. The large share of extra-regional markets for its exports makes ASEAN vulnerable to near-shoring, and as a basically non-aligned region, its members could well be excluded as “friends” from key markets. One goal of the paper on which this post is based, Petri and Plummer (2023), is to estimate what effects these global scenarios would have on ASEAN incomes, trade, and participation in global value chains (GVCs).

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ASEAN and Megaregionalism: Challenges Ahead

Co-Authors: Peter A. Petri; Fan Zhai    

In December 2015 the ASEAN Economic Community (AEC) went into effect. It was the culmination of a process that began with the Bangkok Declaration in 1967 and represents the most significant economic integration initiative among developing economies in the world. A notable milestone to be sure, but the region has a long way to go before it will be able to attain its original goal of creating a 21st century single market and production base. Meanwhile, ASEAN needs to nest the next stage of its cooperation program in the context of emerging megaregional trade arrangements, namely, the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), and the future expansions of both. In addition, it has to do this at a challenging time for the global trading system upon which it depends; the US-China trade war continues with no clear resolution on the horizon, the World Trade Organisation is at an impasse, and the Covid-19 pandemic has decimated global trade in the short run and may have long-term implications (UNCTAD 2020).

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