East Asia, Globalisation and World Trade
The world trade system has for centuries represented wider economic, political and technological developments shaping human society, as well as pointing to its future development. East Asia has always been important to this system, and in recent decades has become an ever stronger player in it. This does not just relate to the rise of China but also to other roles played by Japan, South Korea, Taiwan and Southeast Asia in shaping our trade and economic futures.
Globalisation and the underlying technologies that have created it have made trade in most industries increasingly complex. It is technically companies that trade, not countries. Transnational enterprises from both inside and outside the region have created the ‘Factory Asia’ phenomenon, where international trade and production work closely together to help make East Asia core to the global economy. Globalisation has also forged deep economic interdependence in the region, and thereby de facto imperatives for East Asian states to co-operate with one another. However, China’s rise, and its more assertive foreign policy and globalising of its trade relationships, has presented significant challenges on this front. Furthermore, geopolitical developments outside the region – in particular the disruptive impacts of U.S. President Donald Trump’s ‘America First’ foreign economic policy and the Brexit referendum outcome in Europe – have brought further complexities to the international trade environment in which East Asia finds itself.
Both the ‘Trump’ and ‘Brexit’ factors are causing many to predict a number of possible volatile outcomes. Both have become emblematic of a new phase of defensive economic nationalism and push back against globalisation. In this paper, I will discuss the ways in which the Trump and Brexit effects could impact on East Asia’s trade and world trade futures overall.
East Asia’s Evolving Trade Agenda
East Asian governments have become increasingly active in trying to manage and govern their trade relationships at multiple levels. Trade continues to be a prime driver of economic development in the region. Various forms of industrial policies are still employed to enhance the trade capacity of exporting firms, especially in new emerging strategic sectors such as digital technology and clean energy. Sub-regional ventures such as the ‘Greater Mekong Subregion (GMS) project’ have included infrastructural trade capacity-building measures (e.g. economic corridor and multi-model transport hub projects) designed to promote cross-border trading activity. The ASEAN Connectivity Initiative and China’s Belt and Road Initiative (BRI) seek to achieve the same outcomes by infrastructure-oriented methods.
The last two decades have also seen a proliferation of mainly bilateral free trade agreements (FTAs) among East Asian nations plus a spate of regional FTAs. In 1990, there were just 16 FTAs in force worldwide and no such agreements implemented in East Asia. Now there are around 400 FTAs registered with the World Trade Organisation, and East Asian governments have signed over eighty of these.
An important catalyst of this FTA trend was the 1997-98 East Asian financial crisis, which exposed both the depth of regional economic interdependence and the lack of co-operation mechanisms to deal with mutual crisis situations. New FTA projects were initiated to help address these matters but the nature, content and effectiveness of these agreements have varied enormously. Those that have focused more on commercial regulatory areas (e.g. investment rights, intellectual property rights, technical standards, government procurement) rather than simply tariff liberalisation are viewed as relatively more useful to business. At the same time, the actual value-adding benefit of FTAs in terms of boosting trade and creating distributive prosperity has been questioned. FTA utilisation rates that measure the extent to which firms use these agreements have been generally low.
However, there is a general consensus in East Asia that liberalisation and commercial regulatory convergence alone are not enough to deliver desired trade outcomes. The region’s predilection to frame FTAs as ‘economic co-operation agreements’, where development capacity-building measures are also incorporated, is reflected in the current Regional Comprehensive Economic Partnership (RCEP) negotiations. The same could not be said for the U.S.-led Trans-Pacific Partnership (TPP), now superseded by the scaled down and later discussed Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP). The aims of the RCEP, which draws inspiration from other East Asia centred ‘economic co-operation agreement’ FTAs, are therefore more congruent with those of the aforementioned infrastructural diplomacy ventures such as China’s BRI.
The emphasis on development capacity-building is likely to remain a core feature of East Asia’s approach to trade diplomacy, not least because it is aligned with the region’s developmentalist ideologies. East Asia’s future trade agenda will also be increasingly shaped by global challenge issues like climate change, resource security and development divides. In the first half of the 2010s, a number of East Asian nations including Japan, China, South Korea and Singapore were engaged in the plurilateral ‘Environmental Goods Agreement’ (EGA) with over forty nations, which sought to liberalise trade in clean energy and other environmental products. These talks have been stalled since 2016, but as global challenges become more acute they will impinge more on East Asia’s future trade agenda through a combination of issue-linkage, commercial and socio-political pressures for action in these areas.
Trump, Brexit and East Asia’s Trade Futures
It is not the intent of this paper to discuss the various technical aspects of President Trump’s futile U.S.-China trade war. Rather, the aim is to assess the wider ramifications of Trump’s trade nationalism for East Asia. The U.S.’s current retreat to a unilateralist, trade protectionist position is not new. There are striking similarities with how the United States behaved on the international trade stage not just in the 1930s but also for much of the late 19th century. At this time, America was much like China today – an emergent economic superpower causing structural disturbances in the global economic system and criticised for not taking on international responsibilities befitting its geo-economic weight. For example, in 1890, then President William McKinley raised the average tariff rate on U.S. imports to 50%, at a time when global tariff rates had been falling for some time. In the same year, Britain and France’s average tariffs were by comparison 5% and 8% respectively. President Trump’s aggressive attempts to ‘leverage’ national economic interests are furthermore based on an outdated 19th century ‘exports good, imports bad’ understanding of the world economy. This is not only damaging to the U.S. and East Asia but is also creating a broader geopolitical environment for tribal national conflict. The tension and uncertainty caused by this development will have significant negative impacts on East Asia’s trade.
The outcome of the 2016 Brexit referendum is also indicative of a rising tide of defensive economic nationalism and has important historic parallels with the late 19th century. In the 1890s, after the world’s ‘Long Depression’ that stretched over the previous two decades, Britain adopted a ‘splendid isolation’ foreign policy of withdrawing from continental European affairs and concentrating on its own national economic plight in troubling times. This also included attempts to strengthen its imperial trade bloc as part of a post-recession strategy. The Brexit vote outcome of 2016 could be partly attributed to the economic austerity conditions caused by the post-2008 ‘Great Recession’ and populist dissatisfaction with globalisation. The U.K. government is currently peddling the idea of a ‘Global Britain’, just as it counterparts did in the 1890s. Depending on Brexit’s political outcome, it could open up possibilities for Britain to sign new trade deals with East Asian nations, and even potentially join the CPTPP – ironically, a trade agreement that President Trump withdrew the U.S. from. But this all depends on which of the ‘50 Shades of Brexit’ Britain will eventually opt for – if indeed it ever makes such a majority decision – and therefore what scope it will have to conduct an independent trade policy.
A ‘soft shade’ Brexit involving only partial disengagement with European Union (EU) trade rules will limit London’s ability to pursue FTAs with East Asian nations. The May Government’s new ‘All of Asia’ policy signals that the region is a priority within a wider ‘Global Britain’ foreign policy framework. It has already approached Japan with the view of brokering a fast-track FTA post-Brexit, and Tokyo in turn has invited Britain to accede to the CPTPP. However, the net impact of Brexit is most likely going to be negative for both Britain and East Asia. By leaving the EU, Britain would also be withdrawing from the many FTAs the EU already has, or is currently negotiating, with East Asian nations. This will have deleterious effects on East Asian firms with commercial interests in Europe. It would take years of renegotiation for Britain to re-establish these FTA links bilaterally with East Asian countries. Moreover, an EU without Britain – by far its most globally connected member State – internationally weakens Europe’s regional community of states and, inevitably, EU trade links and diplomacy with East Asia.
More broadly, like Trump’s ‘America First’ doctrine, Brexit is ultimately a rejection of international society ideals, and fundamentally represents a retreat to defensive economic nationalism that risks destabilising the world trade order. It may come to pass that Trump and Brexit will soon fade into the distance, and they were just one-off shocks to the system on the long bumpy road of globalisation. Alternatively, they may form part of a paradigm shift towards a neo-Westphalian world and return to late 19th century great power politics, creating escalating tensions and a chain of events that will end in catastrophic global conflict, as it did just over a century ago. Trade interdependence is far more functionally integrated now than it was then, and countries are more bound together by ‘mutually assured production.’ Nevertheless, both Trump and Brexit in their own ways cause East Asian trade-dependent nations to be at least very uncertain about their shared economic futures in the current volatile world.
 Dent, C.M. (2017) ‘East Asian Integration: Towards an East Asian Economic Community’, Asian Development Bank Institute (ADBI) Working Paper Series No. 665, Tokyo: ADBI.
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 When in June that year 51.9% ‘majority’ of those eligible Britons who voted expressed their desire to leave the EU.
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 Speech of Mark Field, Foreign & Commonwealth Office Minister for Asia and the Pacific, at the Centre for Strategic and International Studies, Jakarta, 14 August 2018, available online at <https://www.gov.uk/government/speeches/minister-mark-field-speech-the-uk-and-all-of-asia-a-modern-partnership>.
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