ASEAN: From ‘Circumvention Export Hub’ to ‘Value Creation Hub’

As the U.S.-China rivalry hollows out the WTO, Japan and ASEAN have a chance to build something new.

The huge Chinese market and its BRI infrastructure investments remain highly attractive to ASEAN, China’s recession notwithstanding. Chinese manufacturing investment is also expanding, reinforcing ASEAN’s position as a key part of global production hubs and supply chains.

This growth model carries inherent risks, however. Dependence on China for key components and intermediate goods is raising American suspicions that ASEAN may be a hub for Chinese goods being rerouted to third-country markets. Beyond that, if the model hardens into simple assembly of Chinese-origin inputs for export to third countries, it will limit the added value and economic impact generated within the region itself.

At the same time, long seen as a counterweight to China, the United States is no longer an unconditionally reliable partner. While maintaining security engagement, Washington has distanced itself from the GATT and WTO free trade order that underpinned ASEAN’s growth, showing little inclination to open its own markets while imposing unilateral high tariffs in the name of reciprocity.

Yet ASEAN’s challenge is not merely a choice between the United States and China. It faces a new dilemma: deeper production dependence on China will stoke American wariness, while abruptly severing that dependence would damage the region’s own industrial base. What is needed is a framework that avoids over-reliance on either side, lets ASEAN generate its own value, and preserves the region’s freedom to choose its markets and partners.

Toward ‘Made in ASEAN 2.0’

This is where new opportunities for “co-creation” between Japan and ASEAN emerge. Going beyond conventional support for industrialization, the aim is to advance ASEAN jointly into a production region that generates distinctive value for global markets, based on industrial clusters and supply chains formed through investment by Japanese companies over many years.

First, ASEAN should shift from conventional assembly and export to become a high value-added “value creation hub” covering everything from research and development to design, components and materials, production, certification, and services. The key is not to exclude China. While continuing to source components from China and elsewhere, the idea is to promote substantial processing and accumulation of technology and knowledge within ASEAN itself, generating employment and income in the process. Call this “Made in ASEAN 2.0.” The label signals to global markets that these are not Chinese goods merely rerouted through ASEAN, but products whose value was created in ASEAN.

Second, the priority is to apply the expertise Japanese companies have accumulated in human resource development, local supplier formation, production management, and technology........

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