Tags: america | southeast asia | economy | obama

America's Benign Neglect of Southeast Asia Will Haunt Our Economy

America's Benign Neglect of Southeast Asia Will Haunt Our Economy

(Getty Images/Saul Loeb)

By    |   Friday, 07 October 2016 01:55 PM


 

If you ever wanted to see a part of the world that craves American goods and services, it is Southeast Asia.

I have been for many year’s a major manufacturer and exporter of American food-service equipment to Southeast Asian restaurants, hotels and institutions. If it carry’s the label “Made in the USA,” it is golden.

Historically America has enjoyed robust trade with Southeast Asian countries as if it was our own backyard.


Yet, somewhere along the line, Southeast Asia has looked for other opportunities because American trade policies have become so stupidly outdated. And with our two presidential candidates spewing their ignorance, things are going from bad to worse.

The Council on Foreign Relations suggests that Southeast Asia deserves more sustained attention from American policymakers than it has received in the recent past.

They write that “Southeast Asia has a long history of important security and economic ties to the United States and is of strategic interest. Yet the United States has benignly neglected the area and growth potential for almost two decades.

With the economic crisis in the Association of Southeast Asian Nations in the late 1990s, the reestablishment of U.S. diplomatic ties to Vietnam, and the recent ethnic strife and devolution in Indonesia, the region and its member nations are back on the international skyline.”

The upshot is that the U.S. is largely ignoring a population of 525 million with an annual gross national product of $700 billion. Southeast Asia has become America’s fifth-largest trading partner and is home to several emerging democracies.

This trade potential is hard to ignore and one nation in particular has made Southeast Asia a trade priority. That nation is China, which signed the ASEAN-China Free Trade Area (ACFTA), a free trade area between the 10 Association of Southeast Asian Nations member states and China.

The initial framework agreement, signed on November 4, 2002 in Phnom Penh, Cambodia, was designed to establish a free trade area among the 11 member nations. The free trade area came into effect on Jan. 1, 2010.

The ACFTA is the largest free trade area in the world in terms of population and third largest in terms of nominal GDP, trailing only the European Economic Area and North American Free Trade Area.

Under the free trade agreement, tariffs will be reduced to zero on 7,881 product categories, or 90 percent of imported goods. This reduction already took effect in China and the six original members of ASEAN: Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The remaining four countries will follow suit the end of this year.

The average tariff rate on Chinese goods sold in ASEAN countries decreased from 12.8 percent to 0.6 percent starting Jan. 1, 2010. Meanwhile, the average tariff rate on ASEAN goods sold in China decreased from 9.8 percent to 0.1 percent.

This is all the more troubling because America once had a thriving trade relationship with the core counties of the ASEAN Economic Community. Many American politicians paint China as the villain but they are only doing what is best for their workers, entrepreneurs and citizens when they enter these trade agreements.

Many American products that have traditionally been sold to thriving Southeast Asian markets are now being substituted for China goods. Products coming from my U.S. factories that have compressors such as refrigerators and ice machines often have duties assessed of 20 percent or more. These same products coming from China factories are now duty free. This is just one example of many where American products have become uncompetitive because of our unwillingness enact trade agreements.

The irony of course is ASEAN was brought about with the strong support of the United States as a hedge against Chinese influence in the region. China has now used ASEAN to kick American manufacturers out of its once-upon-a-time dominating marketplace. Who is the smarter of the two?

The New York Times has reminded readers that “trade between China and the United States — which reached $598 billion in 2015 — has generated large economic benefits for Americans. Manufacturing many goods in China, whether sneakers or smartphones, has kept their prices lower than they would be if made here. That’s been a boon to American consumers, especially those with less money.”

A study by the Federal Reserve Bank of San Francisco estimated that 55 cents of every $1 spent by an American shopper on a “Made in China” product goes to the Americans selling, transporting and marketing that product. Suppressing Chinese imports would harm shopkeepers and truck drivers.


The solution is not to try and punish China—it’s to revitalize our trade partnerships throughout Asia.

One of those solutions is the largely misunderstood Trans Pacific Partnership (TPP), which will make it easier for American entrepreneurs, farmers, and small business owners to sell Made in the USA products abroad by eliminating more than 18,000 taxes & other trade barriers on American products across the 11 other countries in the TPP—barriers that put American products at an unfair disadvantage today.

This is not the time for America to close its borders and divest from long standing relationship around the world.

Instead, it’s time to reinvigorate our small businesses by fixing our archaic tax code, reduce regulations, and show U.S. manufacturers that the government stands behind them and will provide the level playing field they need to compete globally.

Neal Asbury is chief executive of The Legacy Companies. To read more of his work, CLICK HERE NOW.

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NealAsbury
It’s time to reinvigorate our small businesses by fixing our archaic tax code, reduce regulations, and show U.S. manufacturers that the government stands behind them and will provide the level playing field they need to compete globally.
america, southeast asia, economy, obama
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2016-55-07
Friday, 07 October 2016 01:55 PM
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