Numbers usually speak for themselves. And in this case, I refer to what the trade numbers for the first half of this year are telling us. To be sure, the past couple of years and 2020, in particular, have been unprecedented for the entire globe, but they also represent a crossroad of sorts from where new trends will evolve. Sadly, those are and will not be on the basis of generic economic development only but driven by the geopolitical struggle we already are in the midst of.
The most important cue to be taken from the 6-month data is that intra-Asian trade is not just on the rise, it is sort of accelerating. As we have known for a little while, ASEAN has become China’s largest trading partner. Now, that would have happened in any case by way of proximity and growth dynamics of the region, but it has undoubtedly been helped by America’s newly found foreign policy conduct under the Trump administration, policies that are driven by a blatant carrot-and-stick approach.
Much like Russia was pushed into the welcoming arms of China in the wake of the sanction regime starting five years ago, so has Beijing been forced to recalibrate its global supply chain due to an aggressive US trade policy. Washington has prominently shut China out from access to US technology, and Chinese manufacturers have been mobilising Asian suppliers to make up for the shortfall. Also, production has physically been shifted into ASEAN to mitigate US import tariffs on Chinese goods.
Despite Covid-19 and all, China’s total trade with ASEAN in the first half increased by +2% to almost 300 billion dollars. The bloc accounted for 14.7% of China’s overall trade, up from 14% during the first 6 months last year. In stark comparison, trade with the EU decreased by -5% in the same period, and trade with America suffered the biggest blow by recording a drop of -10%. A couple of years ago, that picture was upside down.
A major contribution to the rise in Asian trade has been semiconductors, kind of logically if you read the news. In a world that is still globalised, it seems possible to circumvent simple political directives by routing shipments across different countries. And while Washington doesn’t want to disadvantage their so-called allies in Asia on trade, companies based in Vietnam and other places are assembling products on the basis of mostly Chinese parts and export them to America.
Why would we be surprised about such development? Donald Trump has let it be known that he is not interested in a sequel of the January trade agreement. Even the phase one deal he has put in doubt. Under these circumstances, what is China’s motivation to live up to it then and buy all these soybeans just to keep up the hope that America remains well-disposed to China, something that has little chance of materialising anyway, even beyond Trump?
The Foreign Policy magazine had an
article titled “The Asian Century is Over” last year, citing conflicts, stagnating economies and political troubles as reasons why the coined term is misleading. I obviously disagree and rather hold it with Parag Khanna’s book “The future is Asian”. China and South-East Asia will never be the same nor might they ever be friends, and they will probably differ on lots of issues going forward. But disagreement does not prevent trade and other exchange, as long as their respective peoples benefit.
The Asian bloc as a vast trade sphere is only in its formation, and other areas may quickly learn from its economic successes. The EU, or at least individual European countries such as Germany, will likely adopt the Chinese-advocated concept of co-existence on commercial grounds and without criticising partners for their own value set, governance, and domestic affairs and lay the foundation for further economic integration across the Eurasian plate.
