SINGAPORE – Agency, agency, agency.
With Trump 2.0 tariffs lurking on the horizon, that was the common refrain invoked by several world leaders visiting Singapore this week, in asserting the idea that smaller economies have the power to act for themselves to mitigate the fragmenting effects of the rivalry among great powers such as China and the US.
In the Asia-Pacific, that could well mean increasing regional trade to ensure economic stability. South-east Asia as a bloc is expected to be the world’s fourth-largest economy after the US, China and India by the end of this decade.
“In the context of intense pressure on the global trading system, our region has agency,” Mr Don Farrell, Australia’s Minister for Trade and Tourism, said on Dec 2 in an address at the annual Next Step (Solutions To Economic Problems) Global Conference. It was organised by the Lee Kuan Yew School of Public Policy and Paterson Institute for International Economics.
“In 2025, it will be incumbent on those of us who understand the benefits of global trade rules to actively engage in support of the multilateral trading system with the World Trade Organisation at its core,” he added.
Incoming US president Donald Trump has so far vowed to impose punitive tariffs on China, Canada and Mexico, and he promised more while on the campaign trail. If he goes through with these measures, they may spur retaliatory moves, triggering a trade war. Growth could slow in China, and the reduction in demand would in turn hurt many other exporting countries in the Asia-Pacific.
“The way we manage our interests in the face of challenges involving great powers is only partly through direct dealing. Much of the answer lies in approaching these challenges in regional terms,” Ms Penny Wong, Australian Minister for Foreign Affairs, said on Dec 3 in a dialogue convened by geopolitical think-tank International Institute for Strategic Studies (IISS).
“There is a lot that happens in the thousands of kilometres between Australia, the United States and China, just as there is a lot that happens in the broader Indo-Pacific,” she added.
“I often say that when Australia looks up to the world, we see South-east Asia,” she noted. “This space is central to Australia’s future.”
Australia builds stronger trade ties with South-east Asia
As part of Australia’s economic strategy to increase trade with South-east Asian nations, a A$70 million (S$60.5 million) investment in the country’s last budget to increase the number of Australian trade officials, among other things, has helped to generate A$1 billion worth of trade in the last 12 months, Mr Farrell told conference participants.
Canberra’s South-east Asia Economic Strategy to 2040, launched in September 2023, was born partly out of necessity to look for new export markets after Beijing imposed harsh tariffs in 2020. These came about when Australia’s previous government called for an inquiry into China’s role in the origins of Covid-19.
China is by far Australia’s largest trading partner, worth – by some estimates – about a third of Australia’s annual gross domestic product. Beijing’s retaliatory move adversely affected bilateral trade, hitting Australia’s wine producers particularly hard.
In a paper released in April 2024, the Organisation for Economic Cooperation and Development said a 10 per cent reduction in trade among the major economies could shave 1.2 per cent off Australia’s gross domestic product.
China’s tariffs have largely been removed since current Prime Minister Anthony Albanese came into power in mid-2022. Australia and China notched up A$327 billion of two-way trade in 2023, surpassing the A$271.5 billion in 2020.
While Australia’s trade with South-east Asia still pales in comparison to its trading relationship with China, Canberra’s experience in having to diversify trade could also be instructive for its Asia-Pacific neighbours.
Strong bilateral relationships have underpinned these efforts in a world that is far less hospitable, with two wars raging in Europe and the Middle East, in addition to the ongoing China-US rivalry.
