The ASEAN Way: A Blueprint for New Multilateralism?

Speaker A: This is a podcast from BFM 89.9, the Business Station.

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Speaker C: Good morning. You're listening to the Breakfast Grill. I'm Shazana Mokhtar. Asian countries, including in asean, have built their development strategies around a rules based economic system that champion globalization and multilateralism, with the United States as the dominant hedge fund. However, the escalation of geopolitical rivalry between the US And a rising China over the past decade is upending the established order and changing the calculus for multilateral collaboration. Can multilateralism survive these geopolitical tectonic shifts? And what role do smaller countries play in reshaping multilateralism for the future? I'm discussing this today with Danny Kua, the Li Ka Shing professor in Economics at the National University of Singapore. Uh, Prof. Good morning. Thank you so much for joining us today.

Speaker A: Good morning, Shaz. Good morning, everyone. It's a great pleasure to be here. Thank you for having me.

Speaker C: Now, to many, including myself, it may seem as though the breakdown in the multilateral system stems from President Donald Trump himself. The US Was previously the linchpin in multilateral organizations such as the United nations and also the upholder of international law. But the Trump administration has turned the tables on both counts. In his first, first and second terms, would we have seen this disintegration of multilateralism as quickly under any other U.S. president?

Speaker A: I think that, uh, there's no question that both the Trump administration and U. S. China rivalry have been extremely consequential for what's happening in the world today. But I also think that what's happening in the world today reflects longer term trends that actually go beyond both Trump and American, uh, rivalry with China. So let me say what I mean by that. Uh, in your beginning, Shaz, you described wonderfully the rules based multilateral order that the world has gotten to enjoy these past half a century. That multilateral order, as you say, did not come out of nowhere. It came out of the United States determination and efforts to build an international system. And we have to ask, did it do that out of the goodness of its heart? Did it do that because it was benevolent and wanted the rest of us to be prosperous and to have stability, uh, in the rest of the world? Or did it do that for other reasons and have those reasons changed? So let me suggest that when America built the liberal international order that we have, all of us benefited so much from, it did that not out of the goodness of its heart. It did that out of a geopolitical imperative. It did that coming out of the Second World War and then in the midst of the Cold War with the Soviet Union. And America at that time quickly realized that a strong, robust, prosperous global economy was a good bulwark against Soviet communist expansionism. It helped center America in a world order of its own making and it strengthened America in the process.

Speaker C: Mhm.

Speaker A: So at that time it was convenient for America to build a rules based multilateral order founded on economic principles, free trade, liberalization. Because that helped convince the world that America was the future. M and it was a set of beliefs that benefited us all. Today, America no longer has recourse to that. M Because if there's another country in the world that's even more enamored of the free market, of operating close to the mettle of profit, maximizing, shaving off inefficiencies, it is China. And America finds that it's now awkward to tell that story. So America has gone in a different direction. So in terms of the landscape that you've laid out, there's no question that competition with China has been consequential. But it is not just a competition with China based on the Cold War ideological differences. M is a competition with China based on economics. And America today would feel awkward if it were not just China that were behaving this way, but also India or Southeast Asia if we had greater prominence.

Speaker C: Right.

Speaker A: Uh, it's a slightly more nuanced telling of how global order is being disrupted.

Speaker C: Right. So like you said, the unipolarity of uh, the global order was because the US was trying to, uh, champion itself against, uh, the Soviet Union. So there was a very distinct context there. Did the Americans just not predict or didn't forecast the rise of China and perhaps other powers hence finding themselves in this predicament where they uh, don't want to prop up the rise of other, uh, economies at their expense. Where did the experiment go wrong for the Americans?

Speaker A: I guess the prediction at that time, uh, in the throes of trying to bring China into the international system, which began with Richard Nixon and then proceeded all the way through George W. Bush and Bill Clinton, was an idea that China is too important to be left out of the international system. Richard Nixon said, uh, this planet is too small for a billion of its most talented people to live, uh, in angry isolation there to, you know, fester, to nourish their suspicions of the rest of the world to fester, uh, dissatisfaction with the world. So China had to be brought into the system. And Clinton and Bush idea at that time, the ideas of the American establishment at the time, was that prosperity, economic prosperity, would eventually make China more like them. China would become more like the United States. And strangely, I think what you and I would say is that China is becoming like the United States. But did America not expect that if China became more like the United States, it would become a systemic competitor, that America will no longer be number one in the world? So a question that those of us who live in Southeast Asia might ask is if America got its wish, China no longer lives in angry isolation. America got its wish, that China has become more like them. What more are they dissatisfied at? Did they not realize that their being number one was actually something hugely important to them? And perhaps that was the blind spot because they had experienced so much of a 20th century where they were so dominant in practically every domain. The idea that they would be challenged in technology, in appealing to the rest of the world in soft power, in being able to build infrastructure around the world and construct a sphere that was friendly, uh, to them, they did not appreciate that. What they also didn't appreciate was that trade competition with China would be so devastating for parts of the American working class. Competition with China was of a scale and speed that they simply could not keep up. And while as an economist, uh, I have to believe in comparative advantage, the idea that trade benefits everyone, which I do, but competitive advantage does not say that everybody within a society benefits equally. To the extent that competitive advantage disrupts markets, there will be someone somewhere within every trading partner that feels that they've lost.

Speaker C: There was something I was thinking about which was the use of geopolitics in the global economy. And some arguments say that, um, geopolitics is becoming more intertwined, um, with economic outcomes. But that. But that's not really correct, right? Prof. Because, as you said, the US had been using economic tools to get geopolitical aims. But I suppose under the Trump administration, now it just seems a lot more overt and a lot more transactional than perhaps how it was done before.

Speaker A: I think there's a growing awareness that even in the best of times, when America was building the liberal international order, geopolitics were always present. It's simply that it was so aligned with an economics of freedom, efficiency, liberalization, we didn't have to notice it because that's also what geopolitics wanted. M Today, geopolitics wants something else, and economics is being used to try and deliver on that. Something Else, um, the blind spot that, that we were talking about a minute ago is quite remarkable because it applies also to Southeast Asia. The same international system that America built that China has benefited so much from is something that we in Southeast Asia also benefited from. The liberalization of markets in electronics, in information technology, in textiles, in manufacturing is something that benefited Southeast Asia hugely. Southeast Asia, uh, is an electronics hub in manufacturing of semiconductors, consumer electronics for the world. America's building of the liberal international order allowed us to benefit from that. So perhaps the question is, and we have played the same game that China is playing, we too have learned how to leverage the rules of the international system to benefit our economies and our people. And in doing that, we have brought foreign direct investment and jobs to Southeast Asia. So a question here is, is it just a question of scale and speed that we in Southeast Asia somehow escaped America's scrutiny? M. Because China has not escaped America's scrutiny, and then neither did Japan. Japan in the 1980s and 1990s also attracted America's attention in terms of its competition. You know, in our discussion of the role that the President, Donald Trump now plays in US China rivalry, President Ronald Reagan was in the same seat when all of us, America especially, were thinking, is Japan now going to be number one? And what Reagan deployed at that time is different from what Trump is playing now, but it also has some elements of similarity. You know, Reagan at that time argued a rhetoric of free trade and market liberalization. But in America's dealings with Japan, there was strategic protectionism. America was very uncomfortable about how Japan was advancing in automobiles, so there were tariffs and quarters placed on automobiles. America was uncomfortable with Japan's lead in semiconductors, so protectionist quarters were placed. I mean, what Trump is playing is more extreme, but it is not unique in America's economic history. And we should be careful not to look back on America's history and view it with rose tinted lenses. Because the game that America is playing now is a game that it has played before. It might be more extreme now. Trump is more mercurial, attracts a lot more attention. He is much more volatile. He's not averse to sort of, uh, doing things that seem contrary to the rest of the American establishment. But this thing about strategic protectionism is not the first time America is playing this.

Speaker C: I'm speaking to Danny Kua, the Li Ka Shing professor in Economics at the National University of Singapore. After the break, could ASEAN be the model for a new order of multilateralism still? Stay tuned. BFM 89.9.

Speaker B: You're listening to the BFM Breakfast Grill with you mobile's Ultra 5G, the next gen network for Malaysia.

Speaker C: If you've just tuned in, you're listening to the Breakfast Grill. I'm Shazana Mokhtar and today I'm discussing the future of multilateralism with Danny Kuo, the Li Ka Shing professor in Economics at the National University of Singapore. Now, earlier in the conversation we were discussing how the US China rivalry is resulting in the unraveling of the multilateral order at as we know it. And in your writings, Prof. You've described multilateralism as a public good that was being footed by the US and arguably wealthier countries. Is this model no longer valid in the current geopolitical competition climate?

Speaker A: The good things associated with rules based multilateral order remain and they are very important to us here who live in Southeast Asia. We have a strong incentive to try and continue that kind of a system. A few minutes ago we were discussing how America, uh, felt it an imperative to support that system in an earlier era, the past half century. It no longer sees that incentive. And many other rich countries are similarly positioned for them. The cost benefit calculations are such that they feel they don't get so much out of this anymore. And particularly rules based multilateralism has succeeded. And in succeeding it reversed the equation so that those of us who were previously less developed now see greater benefit in it, whereas previously it was the opposite. So how do we keep that system now? Uh, I think that the rules based multilateral order of the last half century came with other baggage. It was America centered. America wanted to keep that. America's universalist view of the world. Everybody else had to become like America is deeply ingrained in America's geopolitical strategy. That is, um, not necessarily something we in Southeast Asia want to buy into. We have our own cultural and historical trajectory. We don't necessarily buy into what the transatlantic region thinks. So peculiarly, this might be an opportunity for us to keep the best of rules based multilateral order while shedding a lot of the excess baggage. What will you and I think of as the best? I think we would think of maybe three things. That there's a level playing field so that small countries, countries that are not yet so rich, can engage with others equally toe to toe that no one else exercises. Uh, might makes right strategy against us, that we have confidence in that. So on our wish list for a new system would be a level playing field. The second item on our wish list might be peaceful dispute resolution. We do not need displays of Military power to enforce on us a decision. What we want is uh, a genuine debate over real issues and then a resolution that is good for everyone. So peaceful dispute resolution. And third, uh, given the way the world is, we've got pandemics, we've got a global climate crisis, we've got AI regulation. They are common challenges to all of us. And we would like as part of this rules based multilateral order a uh, norm of cooperation and collaboration. So faced with common challenges, we should come together to work together, not unnecessarily, uh, duplicate functions that would then be as productive. So we'd like these three things. The question they ask is can we, Malaysia, asean, Southeast Asia generally build a system that has these three features in it? I think we can. I think we're already trying to do that. In the form of asean, in the form of the regional comprehensive, uh, economic partnership, in the form of the cptpp, the Comprehensive Progressive Trans Pacific Partnership, we are building new trade agreements, uh, the future of investment and trade partnership, we are building new digital economy partnerships, all of which try to take on board these three core principles of rules based multilateral order. So I think we can curiously.

Speaker C: Prof. All those three groupings you mentioned, none of them involve the US to a, uh, major extent. I mean you could argue the US is a dialogue partner of asean, but uh, in the RCEP and in the cptpp they're not part of it. So does charting a multilateral framework for the future mean excluding the US from the picture?

Speaker A: Okay, I think what we would like to have is a system that's open and inclusive but internally rules based. And uh, by that I mean that if somebody wants to join us the door is open but they have to agree to the rules. They can't come in and say I'm going to rewrite the rules in my own image. So we would require that. Now you've absolutely correctly, uh, and pointedly indicated how these groupings don't have the United States as a central partner. CPTPP is very interesting in this regard because TPP actually began with a P4 grouping of just small states in this region, including Chile, coming together and saying, let's have a uh, trade partnership America became interested in and ran away with it and it became this big unwieldy thing which America in the Clinton Obama era began to feel uneasy about. Already Donald Trump on the first day of Trump 1.0 presidency tore up. TPP said it was the worst deal ever. So did that leave the rest of us, uh, desolate and bereft of further trade partnerships in our region. No, we went ahead, Japan and others went ahead and said, okay, you've torn up tpp, let's make a new one. We call it cptpp. And lo and behold, CPTPP actually inherits a lot of the same features as tpp, except that America is no longer in it. And interestingly, even though Trump objected to TPP enough to tear it up, he has said not a single word about cptpp. It's like, if this happens, it benefits you, but it doesn't intrude on me, the powerful United States. I'm happy to let it continue. So there's a lesson here because sometimes people worry, observers worry, that if we form our own, uh, groupings, our own coalitions, and it makes America feel awkward, will America come and interfere? We don't know the answer to that. But if TPP made m America feel awkward, the same, uh, structure in CPTPP does not draw America's objection. So there's a possibility that we can build this grouping. Now you refer to it as, uh, groupings that don't have the United States in it. I prefer to think about it as a G minus kind of grouping. It's not G1, it's not G2, it's not G7. It's G minus in the sense that whoever doesn't want to be in it doesn't have to be in it. And if we have no great power in it, that's fine with us too. There are those who look at RCEP and say, well, it's got China in it. M But we notice that the rest of the world does not object to this because ASEAN is in the driving seat. China is a member of rcep, but ASEAN drives rcep and ASEAN is a group that respects due process and respect rules. And I think the world sees value in that. So RCEP is a good model.

Speaker C: It's so interesting that you're pointing out, uh, the fact that ASEAN believes in rules and respect as a good thing because so often we hear about ASEAN being um, ineffective or too much of a talk shop. Uh, but perhaps in this new multilateral landscape or geopolitical landscape, this is the model that will actually see the least, um, uh, friction or at least a friction in a physical sense. I want to end the conversation looking ahead and bringing in this scenario of the Thucydides trap that some commentators have spoken about. The idea that similar, um, to there can be no two tigers on a mountain, right? You've got these two great powers who will not Give in to each other. Is that scenario more likely than not? I suppose. How do you see this new multilateral, um, dynamic? Can it prevent, ah, the worst scenario of the Thucydides trap?

Speaker A: I think peculiarly, Trump's machinations and his volatile actions in the world, for me, has diffused the danger of the Thucydides trap. America is no longer so unified on the idea that it must keep China down. Trump says he wants to make deals. I don't think that's necessarily a good language, but what it does is open up space for a reasonable conversation where America can get something out of this situation we find ourselves in. China can get something out of the situation we find ourselves in. So it's diffused that. But I worry about flashpoints. I think Taiwan is a flashpoint. The South China Sea could potentially be a flashpoint. I think that the Trump administration's actions in Gaza and Iran have not at all built towards world peace and have actually been extremely destructive for humanity's well being. But in terms of the competition with China, perhaps we can have some breathing space now. Let's discuss fentanyl, let's discuss soybeans, let's discuss semiconductors and AI. Let's talk about those things and then some deal might come out. I want to quickly emphasize that in our conversation so far, we have ranged over a set of issues that relate to U.S. china, competition, but not 100%. America's awkwardness and discomfort in the world have something to do with China, but not all to do with China. It's America's own issues with the multilateral system. China's behavior in terms of its export and manufacturing prowess, in terms of what sometimes people call the China shock. The inability of other nations to keep up with China in economic competition also calls for a recalibration on that front. Nobody is noble and high in all of this, but everyone has had some blame for the fraying of the multilateral system. But out of this, I think we can build a better one. I think that, you know, each of these major powers can be sensible, can still get what they want. They are not entirely comfortable with the way the world is, but in thinking about it further, we can build structures that can make them feel more comfortable and that give us the rest of the world, the 80% of us who don't live in America or China, enough economic and security space that we can continue to prosper and be stable.

Speaker C: I like that framing. Prof. Because it does give us more agency than perhaps we can give ourselves credit for. Thank you so much for such a fascinating conversation.

Speaker A: Thank you, Shaz. Wonderful talking to you.

Speaker C: I've been speaking to Dani Kua Li Ka Shing, professor in Economics at the National University of Singapore. This has been the Breakfast Grill on BFM 89.9.

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