Trans-Pacific View | Economy | Southeast Asia

Major Southeast Asian Economies Targeted by New US Trade Probes

Against the backdrop of the war in Iran, the move is likely to create new points of friction in U.S. relations with the region.

Large container gantry cranes at Port Klang, Malaysia, Apr. 2, 2017.

Seven Southeast Asian nations, including those with the six largest economies in the region, are among the 60 nations that the U.S. government plans to investigate for failures to take action on forced labor.

The Office of the U.S. Trade Representative announced yesterday that it had initiated Section 301 unfair ​trade practices probes over foreign nations’ alleged failures to take action on forced labor.

The investigations will target Washington’s 60 largest trading partners, including seven Southeast Asian nations: Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The list also includes major U.S. partners and allies such as Australia, Canada, the EU, Britain, Israel, ​India, Qatar, and Saudi Arabia, as well as adversaries like China and Russia.

“For too long, American workers and firms have been forced to compete against foreign producers who may have an artificial cost advantage gained from the scourge of forced labor,” U.S. ​Trade Representative Jamieson Greer said in a statement.

“These investigations will ​determine whether foreign governments have taken sufficient steps to prohibit ⁠the importation of goods produced with forced labor and how the ​failure to eradicate these abhorrent practices impacts U.S. workers and businesses,” he added.

The probes are ​being conducted under Section 301 of ​the Trade Act of 1974, which, as per Reuters, “empowers the U.S. Trade Representative to ​impose tariffs or other retaliatory ​measures against trading partners determined to employ ‌unfair ⁠trade practices.”

The announcement came a day after Greer’s office declared that it was launching a separate Section 301 investigation into excess industrial capacity in 16 major trading ​partners. The purpose of the probe is to examine “structural excess capacity and production in manufacturing sectors” of the named countries, and “determine whether [their] acts, policies, and practices are unreasonable or discriminatory and burden or restrict U.S. commerce.”

Among the 16 named nations were six Southeast Asian nations – Vietnam, Thailand, Malaysia, Cambodia, Singapore, and Indonesia – as well as major U.S. trading partners such as China, the European Union, India, Japan, South Korea and ‌Mexico.

“The Trump administration’s reindustrialization efforts continue to face significant challenges due to foreign economies’ structural excess capacity and production in manufacturing sectors,” Greer said. He added that Washington would “no longer sacrifice its industrial base to other countries that may be exporting their problems with excess capacity and production to us.”

The new trade investigations are a means for the Trump administration to sustain its global tariff campaign after the Supreme Court ruled that most of the tariffs were effectively illegal. In its 6-3 ruling on February 20, the Court found that the 1977 International Emergency Economic Powers Act, which is designed to address national emergencies, did not provide the legal justification for most of the tariffs imposed last year.

Trump subsequently imposed a 10 percent tariff for 150 days under a different section of the Trade Act of 1974. Greer said that he hoped to conclude the two Section 301 investigations, including proposed ​remedies, before July, when these temporary tariffs are due to expire.

For Southeast Asia, the investigations promise a repeat of the uncertainties that followed Trump’s initial “liberation day” tariff announcement last April. Since then, Cambodia, Malaysia, and Indonesia have finalized “reciprocal” trade agreements with the U.S., while Thailand and Vietnam continue to negotiate the details of general “framework” agreements announced last year.

For these latter nations, the initiation of forced labor and excess capacity investigations could introduce new points of contention into already fraught negotiations, whether or not they are guilty of either of the alleged transgressions. Moreover, if the purpose of these probes is to create a new legal basis for tariffs that the Trump administration has already announced, it is only natural to question whether they are designed to reach a predetermined conclusion.

Coupled with Trump’s so-far disastrous U.S. war on Iran, which threatens significant damage to Southeast Asia’s export-oriented economies, continued pressure on the trade front is likely to further erode U.S. influence in the region as long as Trump remains in the White House, and perhaps beyond. The predictable outcome of this will be to burnish the image of its major regional rival – China –  as a steadfast and predictable economic partner and a force for stability at the global level.

Get to the bottom of the story

Subscribe today and join thousands of diplomats, analysts, policy professionals and business readers who rely on The Diplomat for expert Asia-Pacific coverage.

Get unlimited access to in-depth analysis you won't find anywhere else, from South China Sea tensions to ASEAN diplomacy to India-Pakistan relations. More than 5,000 articles a year.

Unlimited articles and expert analysis

Weekly newsletter with exclusive insights

16-year archive of diplomatic coverage

Ad-free reading on all devices

Support independent journalism

Already have an account? Log in.

Seven Southeast Asian nations, including those with the six largest economies in the region, are among the 60 nations that the U.S. government plans to investigate for failures to take action on forced labor.

The Office of the U.S. Trade Representative announced yesterday that it had initiated Section 301 unfair ​trade practices probes over foreign nations’ alleged failures to take action on forced labor.

The investigations will target Washington’s 60 largest trading partners, including seven Southeast Asian nations: Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The list also includes major U.S. partners and allies such as Australia, Canada, the EU, Britain, Israel, ​India, Qatar, and Saudi Arabia, as well as adversaries like China and Russia.

“For too long, American workers and firms have been forced to compete against foreign producers who may have an artificial cost advantage gained from the scourge of forced labor,” U.S. ​Trade Representative Jamieson Greer said in a statement.

“These investigations will ​determine whether foreign governments have taken sufficient steps to prohibit ⁠the importation of goods produced with forced labor and how the ​failure to eradicate these abhorrent practices impacts U.S. workers and businesses,” he added.

The probes are ​being conducted under Section 301 of ​the Trade Act of 1974, which, as per Reuters, “empowers the U.S. Trade Representative to ​impose tariffs or other retaliatory ​measures against trading partners determined to employ ‌unfair ⁠trade practices.”

The announcement came a day after Greer’s office declared that it was launching a separate Section 301 investigation into excess industrial capacity in 16 major trading ​partners. The purpose of the probe is to examine “structural excess capacity and production in manufacturing sectors” of the named countries, and “determine whether [their] acts, policies, and practices are unreasonable or discriminatory and burden or restrict U.S. commerce.”

Among the 16 named nations were six Southeast Asian nations – Vietnam, Thailand, Malaysia, Cambodia, Singapore, and Indonesia – as well as major U.S. trading partners such as China, the European Union, India, Japan, South Korea and ‌Mexico.

“The Trump administration’s reindustrialization efforts continue to face significant challenges due to foreign economies’ structural excess capacity and production in manufacturing sectors,” Greer said. He added that Washington would “no longer sacrifice its industrial base to other countries that may be exporting their problems with excess capacity and production to us.”

The new trade investigations are a means for the Trump administration to sustain its global tariff campaign after the Supreme Court ruled that most of the tariffs were effectively illegal. In its 6-3 ruling on February 20, the Court found that the 1977 International Emergency Economic Powers Act, which is designed to address national emergencies, did not provide the legal justification for most of the tariffs imposed last year.

Trump subsequently imposed a 10 percent tariff for 150 days under a different section of the Trade Act of 1974. Greer said that he hoped to conclude the two Section 301 investigations, including proposed ​remedies, before July, when these temporary tariffs are due to expire.

For Southeast Asia, the investigations promise a repeat of the uncertainties that followed Trump’s initial “liberation day” tariff announcement last April. Since then, Cambodia, Malaysia, and Indonesia have finalized “reciprocal” trade agreements with the U.S., while Thailand and Vietnam continue to negotiate the details of general “framework” agreements announced last year.

For these latter nations, the initiation of forced labor and excess capacity investigations could introduce new points of contention into already fraught negotiations, whether or not they are guilty of either of the alleged transgressions. Moreover, if the purpose of these probes is to create a new legal basis for tariffs that the Trump administration has already announced, it is only natural to question whether they are designed to reach a predetermined conclusion.

Coupled with Trump’s so-far disastrous U.S. war on Iran, which threatens significant damage to Southeast Asia’s export-oriented economies, continued pressure on the trade front is likely to further erode U.S. influence in the region as long as Trump remains in the White House, and perhaps beyond. The predictable outcome of this will be to burnish the image of its major regional rival – China –  as a steadfast and predictable economic partner and a force for stability at the global level.

Sebastian Strangio is Southeast Asia editor at The Diplomat. 

Trump administration trade policy

U.S Trade Representative

U.S.-China competition in Southeast Asia

U.S.-Southeast Asia relations

© The Diplomat