ZERO PER CENT TARIFFS: KEY TO NEGOTIATIONS?
Economic researcher Dandy from CSIS said that Vietnam, Indonesia and the Philippines held several negotiation talks with the US before reaching an agreement.
He added that the zero per cent tariff on US goods could be an example for other ASEAN countries to follow if they are looking to secure their own deals quickly.
“The key to negotiations between Indonesia, Vietnam and the US is the zero per cent tariff,” he said.
He added that the exception so far is Japan, which also struck a deal with Washington on Tuesday, but managed to get a 15 per cent tariff – lower than the three Southeast Asian countries.
Trump said the deal would include improved market access into Japan for American goods including automobiles, rice and other agricultural products.
Japanese autos, which account for more than a quarter of the country’s exports to the US, will see existing tariffs cut to 15 per cent from levies totalling 27.5 per cent previously.
Japan will keep its existing tariffs on imports of US agricultural products. The country will import more rice from the US but within the existing tariff-free quota, Japanese Prime Minister Shigeru Ishiba said.
“Japan seems to be an exception, because they’re clearly a source of investment from the United States,” said Dandy.
He added that the zero-tariff tactic is applicable to most countries in Southeast Asia, apart from Singapore, where US goods are already duty-free.
Instead, Singapore may work on other deals, such as those involving weapon purchase, he said.
But not every country may want to impose a zero tariff for the US, experts noted.
Indonesia has reached a deal with the US because it is committed to buying US products, said Andry from INDEF, and it can do so because it is a large market.
Smaller Southeast Asian countries may not be able to do this as they don’t need large quantities of (imported) products, said Andry.
However, he and Made Supriatma, a political expert and visiting research fellow at Singapore’s ISEAS-Yusof Ishak Institute, said that Indonesia’s talks to purchase 50 Boeing aircraft were already in place during the previous Joe Biden administration, so it is not new.
“The same goes for the export of agricultural products – that was also part of Biden-era agreements. Now Trump is trying to claim them as his own,” said Made.
Manufacturing countries like Thailand may not be able to adopt the same approach of granting zero tariffs on US goods, said Andry.
He said Thailand, which faces 36 per cent of tariffs, usually imports spare parts. It does not typically import whole products, since it has a strong domestic manufacturing sector, he added.
In any case, Thai economist Somjai Phagaphasvivat said in an interview with the Bangkok Post that the Kingdom cannot offer the same kind of trade proposals to the US as Vietnam.
Thailand cannot remove tariffs on all US imports because it has free trade agreements with fewer than 20 countries, while Vietnam has more than 20, of which most set import tariffs to zero, Somjai said.
If it has to do so, the products for which import tariffs should be reduced to zero per cent should be those that Thailand does not produce domestically or can only produce in limited quantities, he said.
Malaysia, on the other hand, is a major player in the semiconductor industry, said Dandy from CSIS, so it could offer the US something in this sector.
This could be zero tariffs for US semiconductor goods imported into Malaysia or Malaysia purchasing large quantities of US products for its semiconductor industry.
Its tariff was increased from its original 24 per cent to 25 per cent.
While other Southeast Asian countries are still negotiating, and could ultimately even end up with a better agreement than Vietnam, Indonesia and the Philippines, Dandy said, ASEAN should be more united moving forward.
It should have negotiated with the US as a group, and not individually, because as a bloc, the countries are stronger and would have more bargaining power.
Made, the visiting fellow at ISEAS-Yusof Ishak Institute, said that reaching a deal as a regional bloc will become more difficult now because individual countries are competing against each other.
This will have consequences, he said.
“ASEAN countries are bound by the Regional Comprehensive Economic Partnership (RCEP), which aims to create a shared market,” said Made.
“If competition among member states increases, this cooperation could become even harder to realise.”
https://www.channelnewsasia.com/asia/indonesia-vietnam-southeastasia-us-trade-tariff-5253951
