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Asean stands to gain from US-China phase one trade deal, AMRO says

Amala Balakrishner
Amala Balakrishner1/20/2020 12:21 AM GMT+08  • 2 min read
Asean stands to gain from US-China phase one trade deal, AMRO says
But phase two of the US-China trade deal might face some difficulties, says AMRO chief economist Khor Hoe Ee.
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SINGAPORE (Jan 20): The Asean +3 Macroeconomic Research Office (AMRO) has upgraded its 2020 growth forecast for Asean + 3 nations by 0.2 percentage points to 4.9%, just a month after its previous prediction of 4.7%.

The macroeconomic watchdog which monitors Asean, Japan, China and Korea says the upgrade follows the recent signing of the phase one trade deal between the US and China after nearly two years of trade tensions.

The data was unveiled by the AMRO’s chief economist Khor Hoe Ee in an outlook briefing on Friday.

Touching on the implications of the phase one deal, Khor noted it was positive move, “without which you would have had the tariffs on Dec 15”. Such a situation would have further shaken the global economy through higher costs of both intermediate and final exports from both superpowers.

Khor further added that the reduction of tariffs imposed in October by half under the phase one deal is also to the global economy’s benefit.

In the interim, the Asean +3 countries stand to gain from trade diversions, says Khor. And he highlights Vietnam and Malaysia as two countries that are in prime positions to attract more investments and trading activity.

To fully reap these benefits, he advises a mixture of structural, macroprudential, fiscal and monetary policies to prevent financial imbalances and enhance growth.

For now, Khor says the oft talked about phase two of the deal would be difficult, especially for China.

Already, China has a slew of issues to implement, such as lowering non-trade barriers on agricultural products, penalising trade secret theft and prohibiting the forced disclosure of technology from US firms, he says.

This will cause China “difficulty in delivering” if further requirements are imposed, Khor points out.

To this end, he does not envision further tariffs or talks on the trade war – at least until after the US presidential election that is scheduled on November 3.

“Our view is that we should be cautiously optimistic because the election and phase one provide breathing space for everyone, so take advantage of this time to consolidate, do structure reforms and build capacity,” Khor says.

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