The inauguration of Donald Trump as President of the United States deserves an epilogue. With his election campaign promises, the appointment of hawkish anti-trade personalities to key government trade posts, and his inaugural address, Mr. Trump has invoked a new wave of protectionism and unilateralism to safeguard American jobs and interests—to put “America first.” He indicated that hefty tariffs and a “big border tax” would be imposed on American companies planning to manufacture abroad, including in free-trade neighbor Mexico. It appears he will maintain a confrontational relationship with China to correct a trade imbalance that is in China’s favor. He also seems ready to brand China as a currency manipulator. Most importantly, Mr. Trump has made it very clear he will scrap the much-heralded Trans-Pacific Partnership (TPP) to protect American jobs and to ensure his mercantilist protectionist populism.
With a view of the world in which China’s gain is America’s loss, the Trump administration at this point appears likely to follow a zero-sum bipolar confrontation scenario between the United States and China toward an East Asian Economic Community, as described in this essay. If Trump’s anti-globalization policies are put into effect and the United States heads toward a collision course with China, the impact on the economic integration outlook for East Asia and Asia-Pacific would be far-reaching. But will Mr. Trump’s drastic shift to protectionism persist?
The departure of the United States from the concluded TPP has shattered the ideal of an enlarged, upgraded, and open regionalism in the Asia-Pacific. It is likely to cause serious setbacks to the implementation of a new set of trade rules that will set the tone for renewed regional multilateralism. Without the United States leading efforts to conclude an ambitious TPP with the highest global standards, which the Obama administration did, and to adopt a “Pivot to Asia Policy,” China is likely to take advantage of the U.S. leadership vacuum in Asia and establish itself as an economic hegemon in the unfolding Asian Century. It is also likely to push harder for the early conclusion of the Regional Comprehensive Economic Partnership to maintain its high-growth regime and to have greater influence on the Asian economy.
As President Xi Jinping emphasized at the Davos forum in early 2017, China has advocated active trade liberalism as a means of boosting global economic growth and well-being. It is ironic that China, with its socialist legacy, supports trade liberalism while the free trade champion that is the United States is resorting to protectionism. Evidence suggests that political campaign rhetoric is one thing and implementation is another. To follow-up on campaign promises, the Trump administration may take harsh trade-restrictive actions, such as anti-dumping measures, countervailing duties, and safeguards to target specific countries. In the short run, this might succeed in bringing tangible benefits to the United States in terms of job creation and trade-balance equilibrium. However, the founding spirit of the TPP may soon return after it becomes clear that protectionist measures in zero-sum mercantilism eventually harm the overall economic efficiency and consumer welfare gains of all countries. Furthermore, the United States cannot afford to shun the obvious attractions in the most rapidly growing and increasingly affluent Asian market.
Though we may see slower progress toward an East Asian Economic Community in the Trump era, market forces embedded in the 4th industrial revolution are expected to call for enhanced interconnectedness among East Asian economies for everyone’s gain. In this regard, each East Asian economy needs to upgrade its economic system to robust global standards, which would facilitate deep economic integration. The road may be bumpy, but East Asian economies will move steadily to a freer trade regime, which would eventually lead to an East Asian Economic Community. With multilateralism now under threat from various corners, East Asia needs more than national policies. East Asian countries must recognize the invaluable contributions of the international liberal economic system that led to the “East Asian Miracle.” They need to adapt the system to current needs and realities and to mitigate the negative consequences of globalization and openness, such as social and income inequalities. While building an East Asian Economic Community, East Asia needs to collectively turn the emerging tide against globalization and open trade by reshaping institutions of regional and global governance.