KUALA LUMPUR, Feb 13 — Asia needs to have its own trade body and a monetary system like the Asian Trade Organisation and Asian Monetary Fund to buttress trade, economic activities, and above all reduce poverty through business transactions, according to IQI Global’s chief economist.
Shan Saeed said the United States’ recent action to remove preferential treatment of 15 countries including Malaysia has baffled many decision-makers, questioning the existence of a trade body like the World Trade Organisation (WTO).
“WTO has become irrelevant for trade engagement. It’s totally irrational and non-pragmatic. In my view, WTO has become totally irrelevant to the global financial markets and like rating agencies soon becoming history.
“The US protectionist policies would hurt American consumers more than global consumers. American consumers drive 70 per cent of gross domestic product (GDP), and with protectionism/tariff/quota structure in place, price inflation would jump by 4-5 per cent easily, resulting in decreasing purchasing power,” he told Bernama TV in a telephone interview here, today.
According to reports on Monday, the US narrowed its internal list of developing and least-developed countries in order to reduce the threshold for triggering a US investigation into whether nations are harming US industries with unfairly subsidised exports.
As such, the country eliminated its special preferences for a list of self-declared developing countries, namely Albania, Argentina, Armenia, Brazil, Bulgaria, China, Colombia, Costa Rica, Georgia, Hong Kong, India, Indonesia, Kazakhstan, the Kyrgyz Republic, Malaysia, Moldova, Montenegro, North Macedonia, Romania, Singapore, South Africa, South Korea, Thailand, Ukraine, and Vietnam.
Shan viewed the move as a strategic agenda of US President Donald Trump.
“It’s an election year and President Trump wants to win the battle. He has the following agenda to appease his voters/constituencies like the trade war deal with China, renegotiated trade deal with Canada/Mexico, the tariff on Europe, and removing the preferential trade deal.
“Among others, the agenda also includes bringing second tax reduction to win corporate flags and pressuring the Federal Reserve to reduce the discount rate to less than one per cent to bolster consumption/GDP outlook,” he said, adding the global trade hit a dead end, resulting in losses to US consumers.
He said the supply chain was also affected by the unreasonable American approach.
“More and more countries have moved away from dollar trade and looking to trade with the Chinese Yuan due to the republic’s consistent economic policies based on mutual trade understanding and collaboration. Yuan becomes the currency for the emerging markets,” he said.
Shan said IQI made the first call about the yuan on Jan 7, 2011 in New York while the US trade policies came under scrutiny and were not respected by other members of the WTO.
He said WTO lost its platform status and engagement of members since it was not germane to the market anymore and members had lost trust in the trade organisation.
Following irrational US decisions, he said, the global economic growth was shaved by 0.2 to 0.3 per cent.
Moving forward, Shan said member countries like China, Malaysia, South Korea, Indonesia may soon present their case, to form their own trade body in Asia and bypass the spineless WTO.
Meanwhile, Dr Oh Ei Sun, a senior fellow with the Singapore Institute of International Affairs, commenting on the US’ move to revoke WTO subsidy preferences for some developing nations, said that the Trump administration appeared to have an insatiable fixation with what it perceives as “unfair trade”, and which the rest of the world merely sees as inevitable trade imbalances.
According to him, such imbalances were inevitable because they are primarily caused by three American-originated factors that only America itself could resolve.
“The first was the previously high business taxes in America that drove many American companies to relocate not only their productions but also their registrations overseas,” he said, adding, it was only partially ameliorated when the Trump administration pushed through a major tax cut bill through Congress that slashed corporate taxes almost by half.
However, Oh said many previously American businesses continued to view the runaway welfare spending of the American government with wariness and hesitated to repatriate.
Another factor, he pointed out, is the high labour cost in America as compared with many other countries with less powerful labour movements.
“This is still so even as the labour movements in America decline in their influence and intensity in recent years. American businesses that relocated overseas to avoid high labour costs would still think twice before moving back,” he said.
Oh, who is an international relations expert, said the third factor had to do with the stringent environmental regulations in America that often strangle industrial productions.
“Factories complying with these strict regulations would have to rev up their costs, so they chose to relocate overseas,” he said.
He opined that although the Trump administration is widely considered to be less environmentally obsessive as with the previous administration, American factories would still ponder about moving back as the next administration might reinstate many of the regulations waived by the Trump administration.
“So both the Trump administration and the American voters must realise that as long as these negative factors are not satisfactorily resolved, American companies overseas, many of which are beneficiaries of the trade subsidies of their new hosts, would most probably not move back to America, no matter how serious the trade sanctions are imposed on other countries, developed or developing alike.
“This sort of imposition of essentially trade sanctions against friends and foes of America alike would perhaps be detrimental to strategic American national interests in both the long and short runs,” Oh added. — Bernama