‘Friendshoring’ of supply chains will be costly for everyone: Asian leaders

Countries in Asia do not want to choose between the United States and China, said the Sri Lankan President.

Lim Min Zhang

Lim Min Zhang

The Straits Times


Sri Lankan President Ranil Wickremesinghe said manufacturing and sourcing only from geopolitical allies run contrary to WTO rules. PHOTO: AFP

May 26, 2023

SINGAPORE – Sri Lanka and other Asian nations are opposed to economic coercion, which includes supply chain decoupling and “friendshoring”, said Sri Lankan President Ranil Wickremesinghe.

Manufacturing and sourcing only from geopolitical allies run contrary to World Trade Organisation (WTO) rules, he stressed at the annual Future of Asia forum organised by Japanese media giant Nikkei in Tokyo on Thursday.

“The rules of the game cannot be changed arbitrarily. The losers will be the middle-income Asian countries.”

Countries in Asia do not want to choose between the United States and China, he said, adding that the intensifying rivalry has led to the Quad four-country security dialogue and the Indo-Pacific on the one hand, and the Belt and Road Initiative (BRI) on the other.

“Many of us cannot make that choice because we have already made our choice, and that choice is Asia,” said Mr Wickremesinghe.

“We want an Asia that can accommodate the Indo-Pacific, the BRI, as well as the Asean Outlook on the Indo-Pacific,” he said, referring to the 2019 Asean document that lays out the bloc’s common position on regional cooperation, security and prosperity.

The US has advanced the concept of a “free and open Indo-Pacific” as its vision for the region, while the BRI – Beijing’s flagship infrastructure financing programme – is seen as a centrepiece of the country’s foreign policy.

Sri Lanka welcomed the pledge made at the Group of Seven (G-7) summit last week in Hiroshima to reject “decoupling” in favour of economic resilience and security, he added.

The G-7 introduced the term “de-risking” in its communique for the first time, seeing it as less aggressive than “decoupling”, a term that has gained popularity as the US and China seek to reduce their economic interdependence.

The Nikkei forum, held yearly since 1995, gathers political, economic and academic leaders from the Asia-Pacific. The deputy prime ministers of Thailand and Vietnam also warned against the costs of greater US-China competition for the region.

Thailand’s outgoing Deputy Prime Minister Don Pramudwinai said the ongoing reshoring – relocating of manufacturing and other industries back to home countries – and friendshoring of supply chains reflect the insecurity of major powers that put more emphasis on national security than cheaper production costs.

Such shifts in supply chains mean rising costs for all, he said.

“It points the world towards a new economic era, characterised by high public debts and prolonged high inflation. A new emphasis on defence spending may crowd out social programmes, making the global poor more susceptible to the problems of livelihood uncertainties.”

Describing the current geopolitical environment in stark terms, Mr Don said that a unipolar world, if it ever existed, is now gone. China has risen, both in terms of its economic and political clout, and the US resolves to remain an Asian, as well as a global, power.

Armed confrontation was unimaginable when the Cold War ended, but is now a real possibility, he said. This has brought about a new arms race that has made countries feel less secure, not more.

“Conceiving of geopolitics as a black-and-white morality play has deprived us of dialogue as a means to acknowledge and respect differences. Condemnations and sanctions have become the candies of the major powers – unhealthy to the receivers but gratifying to the dispensers,” he said.

Vietnam’s Deputy Prime Minister Tran Luu Quang also said that international peace and cooperation are being seriously affected by strategic rivalry, decoupling and conflicts in non-traditional domains, such as cyber security.

A rising Asia should take on greater responsibility in reforming global institutions such as the WTO, International Monetary Fund and World Bank, he said. The latter organisations have been criticised for under-representation of poorer countries.

“Asian countries need to strengthen exchange of views and coordination of stances on global governance. We need to support representatives of the region to be elected to international development agencies and organisations.”

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