ABSTRACT
The U.S. – China Trade War drives the world economy to be fragile with many alarming shocks and tribulation. In September 2019, the trade war escalated further with new tariffs imposed by the U.S., affecting USD112 billion of Chinese Goods. Consequently, additional U.S. tariff amounting to USD160 billion of Chinese goods are set to be effective in December of the year. In retaliation, China has imposed tariffs on a total of about USD188 billion worth of U.S. goods. While trade talks are still ongoing and President Trump has hinted at the possibility of an interim agreement, the prospects of both sides agreeing on a comprehensive US-China trade deal in the near-term remains cloudy. One thing is certain – Malaysia is in vulnerable state due to her reliance on global supply chain. Being a processing country for manufacturing industries, its economy depends highly on the movement of goods and global currency. Furthermore, Malaysia is dominantly attached to the Chinese economy. China is Malaysia’s largest trading partner (13.7% of Malaysia’s total trade in 2018), and a major source of foreign investment (19.7 billion worth of approved Chinese FDI in the manufacturing sector in 2018). It implies the fact that trade protectionism in the U.S. has resulted into a slowdown of Chinese growth, which eventually impacting Malaysian economy. As a result, U.S. total imports from Malaysia fell after the U.S. tariffs on Chinese goods are applied.
Even before U.S.-China Trade War escalates, Malaysia has always been situated in between gigantic economic power which urges Kuala Lumpur to maintain neutrality and non-interference with the economics giants. The previous administration can be seen to be actively engaging with both Washington and Beijing to maintain its bilateral relationship.
On the opposite, the trajectory of neighbouring countries suggests gains from this trade war. U.S. allies such as Japan and South Korea enjoy gains in products in selected tariff list. Taiwan surprisingly appears to have gained the most with increases in U.S. imports. Singapore too has seen a large increase due to its role as a major global trans-shipment hub. Both Taiwan and Singapore’s gains could be contributed by imports of electrical and electronic parts and machinery.
Ineffectiveness of multilateralism
Meanwhile, it is not hard to debunk the effectiveness of multilateralism since the last ten years. In fact, multilateralism has always be challenged since the embedment of International Terrorism in 2001. The coining of Global War on Terror has justified intervention of the world superpowers into Afghanistan and Iraq, superseding multilateral arrangements. International and regional institutions, and the United Nations in particular have failed to mitigate the aggressiveness of intervening states.
Since the formation of new government in 2018, Malaysian Prime Minister has used the platform in the UN to bombard the abuse of veto power within the UN. The speech could have upset major powers but the main issue remains – the ineffectiveness of multilateral setting in the global stage. Neo-liberalism is weakening (if not crashing), representing less concerns for the developing and least developed nations. Malaysia’s bravery in voicing the unequal distribution of power of the UN has received praises from many country leaders. On the regional level, ASEAN has maintained its status quo of non-interfering policy. Imminent issues of Rohingya refugees and trans-boundary haze demonstrate a poor coordination of the Association, if not nothing at all. Malaysia is still depending much on multilateralism, but what would happen to multilateralism remains unclear and skeptical.
Internal bickering
While the global development remains fluctuating and unstable, Malaysia faces internal instability. The unprecedented style of Pakatan Harapan coalition has caused power struggle between all coalition parties, as well as the struggle in gaining consistent confidence of the public. Certain policies have been drawn and launched, yet the people and the nation are still clueless on the country’s direction in the years to come. Furthermore, an uncertain power transitioning of the current Prime Minister to its successor has created a confidence deficit among the international and local communities on the government’s apprehension to steer a strong leadership in difficult times.
Despite that, the government still manages to attract FDI by securing few old and new investors. The Minister of Finance has recorded in the first half of 2019 that the accumulation of RM21.7 billion of FDI in early 2019 indicates the highest accumulation ever in the history with contribution from Japan (RM8.4 billion), Austria (RM3.7 billion) and Hong Kong (RM 2.8 billion). What is it in store for 2020 is yet to be ascertained, however the government keeps on giving a positive trajectory tone of the country’s accumulation.
Way forward: Continuity and Change
Witnessing the trade war between the US and China and other global uncertainties that dampen socio-economic landscape, Malaysia must be seen as neutral and non-confrontational in benefitting from its trading partners i.e. the U.S., China and other first world economies. In surfacing this uncertainty, the Prime Minister Tun Dr. Mahathir Mohammed lays out three frameworks that guide the conduct of Malaysian foreign policy. First, Malaysia remains as an active discussant at all platforms which Kuala Lumpur is already a member. Second, it will communicate its influence towards any decision-making processes in platforms which Kuala Lumpur is not a member. Third, Kuala Lumpur will align with the increasing penetration of Industrial Revolution 4.0 and the blue economy. This is pertinent for Malaysia especially in weathering unilateral and multilateral challenges particularly in the area of trade and investments and security, hence embrace greater harmony among countries while leveraging existing and potential resources overseas.
Malaysia as a developing country, is relatively small but blessed with skilled workforce that can be of a value to various aspect of socio-economic agenda. Therefore, continuity and change must be embraced ambidextrously for Malaysia, in ensuring nation building effort will progress strategically while holding strong to local values and wisdom. In essence, the renewed foreign policy outlined by Tun Dr. Mahathir must be adhered diligently; immerse effectively; and benefit the masses of the future.
With that, the government has reassured that basic elements of its foreign policy remains and consistent with the past while ready for future changes. Continuity and Change encompass a strong grip on the basics of a vision, while a modification in tactics is welcomed as a stronger reinforcing mechanics to the basics. Malaysia remains neutral, peaceful and non-interfering, but projects a stronger opinion on matters concerning its interest and its stakeholders. Post May 6 government portrays a consistent characters and behavior of Malaysia in positioning itself in the realm of global uncertainty.
Should this be the way from 2020 onwards or new strategies ought to be crafted? What are the contemporary indicators Putrajaya having to consider? Eventually, what could be the ultimate message Malaysia in positioning herself, which described her synergies and potential in near future?
As a local based think tank which focuses on leadership, research and diplomacy, Eirene Roundtable Discussion aims to entangle issues and challenges Malaysia faces in this realm of uncertainty.
