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U.S.-China Trade Spat puts Southeast Asian leaders ahead

SINGAPORE – Leaders of Southeast Asia at a regional summit here are concerned that their countries are among the most exposed to the negative effects of a trade war between the US. UU And China, with the costs of tariffs that are likely to have an impact on global supply chains, costing billions of dollars in lost revenue.

The deepening conflict between the two largest economies in the world has made the leaders at the top nervous as they look for ways to prevent their trade-dependent economies from becoming collateral damage in the dispute. [19659004] "The political mood in many countries has shifted against free trade," said Singapore's Prime Minister

Lee Hsien Loong,

whose country chairs the Association of Southeast Asian Nations this year. "In particular, commercial tensions between the US and China are our most immediate and worrisome concerns."

Still, analysts and trade negotiators say that Southeast Asia has done little to prepare for a trade war between its two largest trading partners and shows little sign of concluding deals negotiations that can mitigate the negative effects.

Some countries are "badly exposed," said Deborah Elms, founder of the Asian Trade Center in Singapore. "It's going to be harmful, and I think the challenge is that most companies do not realize that it's going to be harmful," he said. "Nobody really ran the numbers."

The problem, says Ms. Elms, is that even companies entangled in global supply chains do not necessarily know how exposed they are, "so suddenly, out of the blue, you could be losing contracts or paying more money. "

The USA is expected UU and China begin negotiations in Beijing next week with the aim of avoiding multi-billion dollar mutual tariffs after the president.

Donald Trump

He instructed officials to design a package of commercial actions aimed at retaliating against what he says are the unfair policies of Beijing. China is committed to respond.

Singapore, a transshipment center, would be very exposed to a commercial war between the US. UU And China. For example, it manufactures hard drives that become part of products assembled in China and shipped to the US. UU This process of adding value to Chinese exports was worth almost $ 3 billion annually for Singapore in 2011, the last year for which data is available. according to the Organization for Economic Cooperation and Development.

Malaysia and Indonesia, which build parts for Chinese exports to the United States of heavy machinery and other goods, added $ 3.9 billion and $ 2.7 billion to the value of those exports each year. Analysts said the figures in 2018 will likely be considerably higher.

One hope is the negotiation of a trade agreement called Regional Economic Partnership or RCEP, which began with the 10 countries of Southeast Asia and includes China and five other countries. with which the region has free trade agreements.

The 22nd round of negotiations for RCEP began on Saturday in Singapore, but few expect much progress, with talks of almost six years stalled by disagreements on tariffs. That leaves the countries of Southeast Asia with few political tools to protect against a trade war.

"The impending trade dispute is a growing concern for export-oriented economies in ASEAN," said Chen Chen Lee, director of policy programs in Singapore. Institute of International Affairs, a group of experts. The trade dispute demonstrates the need for the region to accelerate economic integration, but "it needs to go beyond free trade agreements if it wants to take advantage of this new wave of protectionism," he said.

Undoubtedly, some trade experts said that the region could benefit from a tariff dispute between the US. UU and China if Chinese and American companies rely on another party to avoid new measures. "People will look for different export platforms," ​​said Michael Michalak, senior vice president of the Asean Business Council of the United States and former US ambassador to Vietnam.

On Saturday, ASEAN leaders stressed the need to accelerate integration, warning that they must cooperate in the face of increasing protectionism. In the past, the organization has been bogged down by competing interests in an economically and culturally diverse region of 10 countries and a philosophy of government that all decisions must be made by consensus.

"Individually, ASEAN member states will find it difficult to have much impact on their own," said Singapore's Prime Minister Lee. "But when we speak in a single ASEAN collective voice, we can be effective"

Write to Jake Maxwell Watts at jake.watts@wsj.com


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