ASEAN Supports Supply Chains Amid Trade Diversions

In this discussion, Dr. Mary E. Lovely, Senior Fellow at Peterson Institute for International Economics, and Sourabh Gupta, Head of the Trade & Tech Program at the Institute for China-America Studies, spoke about the growing importance of ASEAN and the current state of shifting supply chains the Southeast Asian region. This conversation is hosted by Owen Churchill, U.S.-Based Reporter at the South China Morning Post.

The Role of ASEAN in the Diversification of Supply Chains

The Association of Southeast Asian Nations, or ASEAN, is playing an increasingly important role in global supply chains and is having effects on many countries including the U.S., China, Vietnam, Mexico, and South Korea.

As a result of the U.S. tariffs that were imposed on Chinese goods, trade is being diverted to ASEAN regions. For example, there is some trade diversion to Vietnam, “particularly in more labor-intensive activities, including some parts of the electronic supply chain,” said Dr. Lovely.

Non-ASEAN countries also saw changes in supply chain involvement as Mexico was used for U.S. nearshoring, and South Korea began assembling and trading high-end components as opposed to using China as the “middle man”.

The Power of Partnerships and Making Them Work

Countries within the Regional Comprehensive Economic Partnership (RCEP) free-trade agreement have become a very robust closed-system supply hub, as 50% of RCEP trade is to other RCEP countries, Dr. Lovely stated. The RCEP is composed of ASEAN members as well as Australia, China, Japan, New Zealand, and South Korea.