Speech Text, December 1, 2022 at the Asia-Pacific Forum 2022

Coalition of middle powers toward minilateralism /multilateralism in the AsiaPacific
byBy Choong Yong Ahn
Distinguished Professor
Graduate School of International Studies
Chung-Ang Univerisity

Thank you for inviting me to this great forum.
The Asia Pacific economies face currently several major headwinds and challenges: To
name important ones; First, a rising geo-economic fragmentation where the world isdivided in blocs due to the restrictive trade measures and lingering uncertainty spikedby the US-China trade war and further aggravated by the War in Ukraine: Second, aglobal financial tightening to fight the rising core inflation; Third, the war in Ukraine
has caused rapid rise of energy and food prices; Fourth, a sharp and uncharacteristic
slow down of the Chinese economy due to zero covid-19 lockdowns and crisis in real
property sector, impacting negatively many of regional economies; Fifth theimpending global climate change.
Thus, most Asia-Pacific economies are experiencing a broad-based and sharper-thanexpected slowdown, with inflation higher than seen in several decades. All theheadwinds weigh heavily on the regional economic outlook in the Asia-Pacific.
In terms of regional macroeconomic front, “King dollar” due to a series of big step
interest hikes by the US FED has weakened many regional currencies, causing manyof the Asia-Pacific economies to suffer the impossible trinity principle (trilemma), in
which three policy objectives of fixed exchange rate, free flow of capitals, andmonetary sovereignty cannot be achieved simultaneously. For the best policy option
for the regional economic revival in the Asia Pacific, monetary policy should stay thecourse to restore price stability, and fiscal policy should also aim to alleviate the cost1

of-living pressures while maintaining a sufficiently tight monetary policy. Thisrequires well coordinated prudential macroeconomic policies among major economies
in the region. For the best policy option for the regional economic revival in the Asia
Pacific, monetary policy should stay the course to restore price stability, and fiscal
policy should aim to alleviate the cost-of-living pressures. This requires wellcoordinated prudential macroeconomic policies among major economies in the region.
To a great dismay, trade policy formulations by big powers recently have been madeunder rising security-economy nexus. Under the name of economic security, bigpowers can constrain unilaterally cross-border flows of many high tech products andstrategic raw materials, being easily subject to export controls for security reasons.
Occasionally, they have also been “weaponized” by major powers to protect theirnational interests. Where we can draw a demarcation line between security items andordinary tradable goods remains a big question.
Despite the existence of a variety of regional economic and security architectures in
the Asia-Pacific such as CPTPP, RCEP, IPEF, Chip 4, Digital Economy Partnership
Agreement, Quad, and Quad plus, the regional economies likely suffer a“Kindleberger trap,” where the largest economic powers are not capable of providing
global public goods.
On-going neo-mercantilism such as reshoring and/or near and friendly shoring policy
with the government subsidies and export controls of strategic materials as a means ofretaliations for geopolitical reasons are destabilizing the fundamental free trade pillars
of non-discrimination and most favored nations principle, which have assured longrun post war global prosperity.
Given the macroeconomic trilemma and aggravating geo-economic fragmentation, thelikeminded middle and small powers in the region are highly urged to unite forsustaining a rule-based fee trade and investment regime against rising inward-looking
2protectionism by the key players in the region.
Middle and small powers should work together to assure that the US and China
maintain a stable U.S.-China relationship, and moving forward minilateral/
multilateral cooperation to search for fast-tracking recovery, the green energy
transition, and preventing supply chain disruptions and further geo-political and geoeconomic fragmentation.
In a fragmented world, Asia-Pacific economies risk losing more than anybody else
because it is key players in global supply chain. If the world fragments into two
separate blocs, then the losses become significant. Global losses are of 1.5% of GDP.
But whereas those of Asia are slightly over 3%, losses are especially large forcountries with a high level of openness and that have production structures thatstraddle both blocs.
Some of key priorities for the likeminded regional middle powers to overcome theseregional challenges are suggested as follows, advancing to minilateralism in the region
as well as multilateralism globally.
1. Middle powers should call for in unison for the US to reactivate the defunct

WTO dispute settlement mechanism by restoring the appellate body so that
abuse of protectionist policies could be avoided. This would help reduce theprotectionists’ measures such as the US enacted “inflation reduction act” andChina’s trade policy constraining cultural products flows and intra-regional
tourism.
2. The US initiated Indo-Pacific economic framework needs to be inclusive sothat any country willing to join the four fundamental pillars of IPEF could bea member. The middle powers should take initiatives in formulating specificaction agenda for the each of four pillars contained in the IPEF.
33. Middle powers should agree on green growth initiative and register a viablegreen growth technology standard.
4. Middle powers are urged to take formidable initiative to expand the existing

Digital Economy Partnership Agreement (DEPA) between Singapore, New
Zealand, and Chile to ensure free flow of especially SME products.
Thank you!

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