For Southeast Asia, growth prospects look comparatively better against the global backdrop at 4.6% as forecast by the Asian Development Bank (ADB). This was a slight downgrade from earlier predictions, due to lower export growth and a deceleration of industrial activity. Regional growth has been anchored by domestic demand and services, and the recovery of tourism activities. The need to fully leverage the region’s growth momentum amidst economic uncertainty and rising geopolitical risks was aptly highlighted by Indonesia’s ASEAN Chairmanship theme, ASEAN Matters: Epicentrum of Growth. The conclusion of the 43rd ASEAN Summit and Related Summits in September was once again a testament of Indonesia’s leadership, with over 90 documents issued and concrete deliverables announced throughout the three-day meetings that include several dialogue partners. Now that it has passed the baton to Laos, our Analysis contributors assess Indonesia’s Chairmanship and whether it has lived up to expectations.

Although it was unable to move the needle on the Myanmar crisis and the South China Sea, Jakarta managed to reaffirm ASEAN Leaders’ commitment to strengthen economic resilience. Among the Summit’s key economic outcomes were the launch of the Digital Economic Framework Agreement (DEFA) negotiations and the adoption of the ASEAN Blue Economy Framework. These outcomes embrace the region’s new growth drivers in an inclusive and sustainable way. With this in mind, this issue casts a Spotlight on the region’s many different emerging economic drivers. Our contributors look at potential growth engines in the region, from the quest for an ASEAN single QR payments network to the rise of unicorns, and the role of innovation in advancing digital health. Looking at external partners, regional experts examine how the Indo-Pacific Economic Framework for Prosperity (IPEF), the European Green Deal, and the Korea-ASEAN Solidarity Initiative can help unlock new economic and development pathways.

Beyond the economy, the region is facing another momentous development with several Southeast Asian countries undergoing leadership transitions. To help make sense of this changing political landscape and what it means for regional cooperation, ASEANFocus convened a roundtable featuring views from experts on seven ASEAN countries, namely Cambodia, Indonesia, Malaysia, the Philippines, Thailand, Singapore, and Vietnam.

To read the full report, click here.

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There are six sections in the survey. Section I covers the profile of the respondents by nationality, affiliation and age. Section II deals with questions on the regional outlook and viewpoints on international affairs in the past year. Section III covers regional influence and leadership of major and middle powers. Section IV deals with ASEAN’s options in the changing regional politicalsecurity architecture. Section V measures perceptions of trust among Southeast Asians towards five countries – China, US, Japan, the European Union and India. Section VI gauges levels of soft power in the region based on travel and tertiary education choices. The questions and results have been reorganised for logical flow and optimal reporting. The figures in this report have been rounded up or down to the nearest one decimal point.

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LDC exports to Canada in 2017 represented just under $4 billion, around one per cent of total Canadian imports (or, more colloquially, about two hours of Canada-U.S. trade.) Their importance lies in their sector specificity; the majority of manufactured exports are apparel. After the 2003 liberalization, Bangladesh and Cambodia became the second and third largest suppliers of apparel to Canada after China, as much an achievement in import diversification for Canada as in export growth for Bangladesh and Cambodia.

Between 2003 and 2017, Bangladesh’s year-over-year exports to Canada grew at an average rate of 22 per cent, Cambodia’s at 58 per cent, Laos at 17 per cent and Nepal at 10 per cent. On the other hand, Canada’s exports to Bangladesh grew six-fold between 2004 and 2018. Bangladesh is now Canada’s fourth largest importer of pulses.

The 2003 market opening was enabled by of a GATT/WTO rule that facilitates preferential arrangements for countries on the United Nations’ Least Developed Countries list; effectively, the world’s poorest countries. Canada’s initiative was a near-impeccable preferential arrangement. It grew trade in both directions between Canada and some low-cost exporters without the bother of negotiations for bilateral free trade agreements, and without significant trade diversion. Together with the EU liberalization (and subsequent liberalizations in several other countries), it contributed to both export-led growth and poverty reduction in some least developed countries.

Canada’s relationship with these LDCs could change shortly. Along with six developing island countries and mineral-rich Angola, Bangladesh, Myanmar, Laos and Nepal are scheduled for graduation from the UN/WTO list of least developed countries (three were eligible as far back as 2018), and Cambodia has begun to meet the criteria for graduation. Graduation could mean the loss of the preferential tariff treatment that contributed to a rapid increase in exports in the last 17 years. Of the countries that are about to graduate, or have been graduated, the developing island countries export very little to Canada. Angola’s mineral exports enter duty free anyway, but the remaining countries – Bangladesh, Myanmar, Laos, Nepal and at some point Cambodia – are now heavily integrated into the Canadian apparel market. Apparel has become the primary manufactured export for most of these countries. Graduation therefore could have consequences for Canadian consumers, and for economic growth and poverty reduction in the countries concerned. Later, we discuss this problem specifically with reference to Bangladesh.

The earliest date for graduation is 2021; the latest date so far is 2024. Canada may agree to Bangladesh’s request for a three-year deferral from 2021, particularly in light of COVID-19’s impact on the economy, or it could follow the EU, which is reportedly considering a phased-in graduation process of three years, 2021-2024. If LDCs graduate, they will be subject to the tariffs and rules of origin of Canada’s General Preferential Tariff (GPT). Graduation is not restricted to Canada and the EU. During the World Trade Organization’s Doha round of multilateral trade negotiations, several WTO members offered similar concessions; graduation from the LDC list will require WTO members to consider whether to extend or terminate preferential treatment for the graduating LDCs.

Canada can continue duty-free treatment – to grandfather the zero tariff and maintain LDC treatment for as long as it deems desirable. It is also in Canada’s interests to do so; the relationship with the Asian LDCs has been a win-win for both sides. Graduation could cost Canadian consumers and exporters alike and if both the EU and Canada graduate these countries, it could stall economic growth and poverty reduction efforts in the LDCs.

This paper maintains that while COVID-19’s impact makes a short-term deferral likely, it makes more sense to look long term at both the trade and development implications of graduation for both Canada and the LDCs. It recommends that Canada continue preferential treatment for an extended period of time or simply leave the low tariffs in place.

Fauzya Moore is an Ottawa-based consultant and writer. She has worked as a Senior
Economic Advisor at the various iterations of Global Affairs Canada, and also as a Senior Advisor on Governance at the Treasury Board of Canada. She is also a graduate of the Harvard Kennedy School (2009) where she held both a Fulbright scholarship and a fellowship from the Ash Centre for Governance and Innovation. She has worked in both the developed and developing world.

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The ILO has also provided a variety of tools for support to its constituents (see ILO, 2020o for more details). The ILO–International Finance Corporation Better Work programme is monitoring the situation in its participating countries, and provides support to workers, factories and brands in addressing the crisis and protecting workers. The ILO has also convened forums for industry dialogue, discussion and exchange, as well as publishing a series of practical factory guides aimed at supporting business resilience through improved cash flow management, income and market diversification, workplace communication, and safety and efficiency in production (ILO, 2020p).

The ILO facilitated and supports the Call to Action, an international multi-stakeholder initiative which aims to spur industry-wide action to protect workers’ incomes, health and employment and support employers to survive during the COVID-19 crisis, and to work together to establish sustainable systems of social protection for a more just and resilient garment industry. The Call to Action is a positive example of global industry-wide collaboration, but it will need ongoing commitment and coordinated stakeholder action to be effective in achieving its intended objectives.

The decline in consumer demand for garments as well as the requirement to close workplaces to curb the spread of the virus, which resulted in a sharp decrease in garment production and employment, have charted a downward trajectory steeper than the one seen during the 2008-09 financial crisis. The depth of those declines and the speed and shape of the eventual recovery in the sector will likely not be (fully) visible until 2021 or 2022. Researchers will also require more time and data to measure whether government and industry interventions have been effective and sufficient to alleviate the crises.

Given the scale of the pandemic and impact to date, the global garment industry may in the coming years face a structural realignment, shaped in part by trends that were already disrupting the sector prior to 2020. Public calls for a rethink of garment supply chains, towards greater equality, inclusivity and sustainability, are becoming louder, while technological innovation is reshaping the possibilities for how and where production takes place, and the role the factory workforce plays in this process. This reconfiguration of the industry should also take into account long-standing challenges and address the need for investment in transportation and communication infrastructure, reliable power generation, education and skills development, all of which restrict the move of the industry into higher value-added products and services. More research is needed to fully understand the potential scenarios emerging as a result of the continued disruptions brought about by the pandemic.

It remains to be seen as to whether the post-pandemic global garment industry will undergo a fundamental restructuring to forge a new – and possibly more sustainable and resilient path – or whether it will revert back to a largely ‘business as usual’ scenario. Whichever trajectory the industry now takes, workers and enterprises will be on the frontline of its impact.

It is ultimately upon national governments, workers and employers to work together with other industry powerbrokers to find collective solutions for a human-centred future of the industry – a future that can deliver on its promise to be a transformative force for social and economic good across Asia and the Pacific.

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© International Labour Organization 2020

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In recent years, the case for U.S. participation in the TPP has only become more compelling as the political and economic importance of the Asia-Pacific region has grown and concerns about Beijing’s economic model have mounted. East Asia is bouncing back from the COVID-19 pandemic before the rest of the world, and deepening economic ties with the engines of global growth will be an even more valuable proposition in the midst of a deep recession. Moreover, the pandemic has revealed serious vulnerabilities in supply chain networks, and the common standards and rules of the TPP can serve as the basis for establishing trusted supply chains in the region. But is there a path for the United States to return to the TPP or to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the 11 remaining countries finalized without the United States?

This report examines four options that the next administration would have for reengaging the CPTPP countries on trade: returning to the original TPP agreement, formally acceding to the CPTPP, seeking a broader renegotiation with the CPTPP as a baseline, or working on a narrower sectoral deal as an immediate, interim step. It then assesses the feasibility of each option based on domestic considerations and developments, as well as input from the CPTPP countries.

Domestically, a policy window may be opening for CPTPP reentry. Whereas trade was seen as toxic only four years ago, recent polls have found growing bipartisan public support for trade. At the same time, however, the views of the political parties on trade appear to be shifting. Some observers have gone so far as to suggest that the United States is on the precipice of a new trade order, with Republicans more protectionist and Democrats friendlier toward trade. This makes the domestic landscape and the outcome of a congressional trade vote uncertain. The strong bipartisan congressional vote in favor of the United States-Mexico-Canada Agreement (USMCA) led many to conclude that this agreement should be the new U.S. template for trade agreements. However, there may be factors unique to the USMCA that would not be in play in a negotiation with Asian countries. Another complicating factor is the fate of Trade Promotion Authority, set to expire in July 2021, which is a prerequisite for negotiations in the view of U.S. trading partners.

The prospect of CPTPP reentry also depends on the extent to which its members would be open to revisions proposed by the United States. To take the temperature of capitals in Asia, the Asia Society Policy Institute spoke with a dozen current and former trade officials from a diverse set of CPTPP countries. Those interviewed unanimously affirmed that they would welcome the United States back, but not at any cost. They are wary of being asked to make extensive revisions, having been scarred by the U.S. withdrawal after expending significant political capital during the TPP negotiations. Those countries  were accustomed to the uncertainties of the congressional approval process, but they now also worry about the presidential election cycle.

With the foregoing considerations in mind, the report offers a road map for the next administration to reengage with the CPTPP countries. Recommended steps include the following:

• Launch an interim sectoral agreement: As a first step, pursue a limited, sector-specific Asia-Pacific trade deal with the CPTPP members, and perhaps other countries, to set high standards, rebuild trust, and build momentum. Promising topics include:
  • Digital trade, an area that represents more and more of overall trade, particularly now that the COVID-19 pandemic has accelerated the digitalization of the global economy.
  • Trade in medical and other essential products, a sector in which COVID-19 has focused attention on trade restrictions and vulnerabilities in global supply chains.
  • Trade and the environment/climate, which may be of particular interest to a Democratic White House.
• Invest in competitiveness and adjustment at home: Build support for trade agreements generally and the CPTPP specifically at home by investing in competitiveness and adjustment policies and programs. Doing so would take the pressure off trade agreements to achieve goals they are not designed to tackle, such as ensuring more equitable income distribution.
• Make the case for trade: Explain to the American public that deeper U.S. trade engagement with Asia-Pacific partners is integral to building an alternative economic model to Chinese state capitalism, diversifying U.S. trade beyond China and, ideally, promoting reforms within China.
• Prioritize negotiating proposals: Develop and prioritize concrete proposals for U.S. reengagement with the CPTPP based on input from business, labor, and civil society groups throughout the country, as well as Congress.
• Consult with trading partners: Consult with the CPTPP members to understand their limits, priorities, and concerns around U.S. reengagement.

These steps would pave the way for U.S. reentry into the CPTPP. Even then, CPTPP reengagement would be a heavy lift that would require flexibility and creativity from both the United States and the CPTPP countries. Returning to the original TPP by signing on to a five-year-old agreement that faced considerable opposition at home is not a realistic proposition in 2021. The approach with the best odds of success would likely fall between formal CPTPP accession and a more extensive renegotiation. For that to work, the United States would need to focus on the most important changes and modernizations needed, while the CPTPP countries would need to be more open to changes than during a typical accession.

Given the domestic and international challenges outlined in this report, it is understandable that many would question whether returning to the CPTPP is worth all the trouble. Despite those concerns, rejoining the CPTPP is one of the most impactful ways in which the United States can work with likeminded countries in the region to promote an alternative economic model to state-led capitalism and help shape the economic future of a region that is increasingly the engine of global growth and innovation.

Wendy Cutler is the Vice President and Managing Director of Washington DC Office of the Asia Society Policy Institute and former Deputy USTR.

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The strategy has a supply side, transport and end-use side which are all actively being pursued through pilot and large scale projects involving a number of Japanese companies and increased public funding. Japan’s hydrogen energy ambition is an industrial endeavor aimed at fostering technological innovation. The domestic energy policy has so far left little room for clean technologies (other than nuclear), choosing to prioritize nuclear energy and fossil fuels instead in the long term. While the importance of decarbonized hydrogen production is communicated through the strategy, this must not become an afterthought, as decarbonization is the only property that makes hydrogen marketable. The strategy is also not prioritizing applications in some hard to abate sectors, such as air transport or heavy industries, and focuses rather on sectors where electrification (and decarbonization through renewables) could be more preferable.

Japan is a hydrogen frontrunner in terms of mobilizing research and development (R&D) across various sectors and has successfully completed many first of a kind demonstrations. It remains to be seen whether hydrogen will be the preferred fuel for shipping, while there are high expectations for ammonia and organic carriers. Ambitious targets in power generation and fuel cell vehicles (FCVs) appear questionable though, meeting the thermal generation targets could require between 100 to 1,000 times higher volume of hydrogen than the demand of 800,000 fuel cell vehicles, which constitutes in itself an ambitious ten-year goal given that circa 3,700 FCVs have been sold in six years. The international hydrogen value chains that Japanese stakeholders are exploring in view of meeting the bulk of domestic demand are more interesting in combination with the development of clean hydrogen, notably via the use of carbon capture and storage (CCS) or low carbon electricity electrolysis. Overall, despite a high energy price environment in Japan, the competitive edge of hydrogen will prove challenging to materialize, especially in a low cost oil, gas and coal environment.

Japan still needs to decide what greenhouse gas (GHG) trajectory it will take in the coming two decades, and whether it wants to give priority to its economic short term competitiveness over longer term environmental and international benefits. Current policy dynamics in Japan give a smaller voice to the proponents of an environmentally friendly policy compared to the interests of the industrial sector, which has been sounding the alarm over higher energy prices in Japan and now more recently, over the consequences of the COVID-19 recession. As an example, discussions around a carbon price are nowhere close to consensus. An encouraging sign for clean technologies has been the recent government announcement on the phase out of inefficient coal and a statement by Minister of Economy, Trade and Industry (METI) in July. As a result, it appears that Japan will deepen deliberations on making “renewables the main power source”. It remains to be seen to what extent this shift will be reflected in the 2021 revision of the Basic Energy Strategy, which will shape Japan’s energy mix for the next decade and beyond. The current (2018) Strategy gives renewables a 22-24% share of the electricity mix compared to a greater 26% share of coal by 2030. Without a coordinated policy and business direction towards economy-wide decarbonization, especially in a context where even the more mature renewables struggle to gain a foothold, it is hard to see a business case for clean hydrogen and fuel cells in the near future.

At a time when the European Union and its Member countries are coming up with ambitious clean hydrogen strategies and sector coupling plans – with large state driven funding soon available, considerations on raising internal carbon prices and the development of a carbon border adjustment mechanism – Japan could reconsider its options. Failure to advance its decarbonization could ultimately lead to trade tensions with the European Union and constrain its industrial leadership ambitions globally.

Monica Nagashima is an engagement manager for the Japan Energy Transition Initiative & Researcher at the Institute of Energy Economics. 

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The importance of digital policies has grown as countries seek to harness the tools of big data, artificial intelligence (AI), and vital infrastructure to trace outbreaks of the virus and assist efforts to find cures and vaccines. While digital tools are proving vital in efforts to track outbreaks and trace contacts, legitimate concerns are growing about potentially invasive government surveillance even after the virus retreats.

These policy areas—health, trade, and digital—overlap in the international, national, and local efforts to reduce the duration of the pandemic and mitigate its effects with respect to human lives and economic well-being.

The analysis in this paper, while initially conducted before anyone had ever heard of COVID-19, has been impacted by its sudden emergence and will likely require updating to assess the experiences of this ongoing crisis. The paper, which focuses on the U.S.-India bilateral relationship, concludes with a series of questions, as opposed to policy recommendations. This is due partly to the very complexity that all governments confront in mapping out digital policies given the ubiquitous role digital networks and devices play in our daily lives. But these questions may have even more tangible relevance now that COVID-19 is forcing a reckoning with a severe interruption in global economic growth, which could be on the scale of the Great Depression in the 1930s. Ultimately, the governments of India, the United States, and other nations will determine for themselves what answers are relevant to their individual circumstances.

Mark Linscott is a Nonresident Senior Fellow in the South Asia Center of the Atlantic Council. 

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The current conflict with China over its highly restrictive trade barriers and violations of American intellectual property rights (IPRs) has created a dilemma for U.S. companies that depend on Chinese partners to manufacture goods under their labels or provide critical parts and components for their global operations. Intellectual property–copyrights, patents, trademarks, and processes–represent the “crown jewels” of U.S. high technology and are critical to maintaining our commercial and military edge against an ever more assertive Chinese challenge. President Trump’s call for U.S. companies to get out of China has intensified many companies’ ongoing efforts to reduce the role of Chinese partners in their global “supply chains.” Getting out of China requires relocating to somewhere else. The President has acknowledged that most of this production is unlikely to come home to the U.S. because of higher costs and other factors. The President and Congress can help the relocation of U.S. production to countries and regions that are strategically beneficial to U.S. security and economic interests by:

• Using and significantly broadening the vision for the landmark October 2018 BUILD Act (Better Utilization of Investments Leading to Development) to help facilitate the relocation of U.S. companies from China to nearby Southeast Asia countries or other suitable locations.
• Using the new International Development Finance Corporation (DFC), the main feature of the Act, to significantly support U.S. private investment in Vietnam, Malaysia, Indonesia and other developing countries in Southeast Asia through loans, loan guarantees, political risk insurance and in some cases limited equity investments for private sector projects.
• Using the U.S. Agency for International Development (USAID), State, Commerce, Energy and other relevant departments and agencies to promote the necessary legal, policy, regulatory reforms and private sector and governmental capacity to help make potential relocation countries better able to attract and accommodate expanded U.S. manufacturing and services investment.

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