By Tang Siew Mun and Sanchita Basu Das
President Barack Obama delivered the State of the Union Address on 20 January 2015 outlining his Administration’s plans and priorities for the year. Among them, four issues that should be closely watched by Southeast Asian nations are the state of the US economy, the Trans Pacific Partnership Agreement (TPPA), reshoring activities and the stability of the alliance structure in the region.
The US economy is cautiously regaining its economic footing and is recording lower unemployment rates, as well as cheaper oil and gas prices. While a recovering US economy will counterbalance a softening Chinese economy, the increase in household disposable income will stimulate demand for imports. These have implications for Southeast Asian economies, including additional incentive for ASEAN states like Brunei, Malaysia, Singapore and Vietnam to win over sceptics and galvanise domestic support for the TPPA.
The knock-on effect of the reshoring activities may be muted if ASEAN suppliers remain connected to the supply chain that now bypasses China and is rerouted directly to firms in the US. If done on a large scale, reshoring have the potential to realign the region’s trade flows by strengthening ASEAN-US economic and trade relations.
From a strategic perspective, the reshoring exercise coupled with the direct linking between Southeast Asian suppliers and US manufacturers will lessen ASEAN’s dependency on China. “Modernizing” alliance structures is a pragmatic approach to move beyond the confines left by the Cold War. This phenomenon is mainly limited to Japan, South Korea and Australia.
In Southeast Asia, tendering to political relations is as important as exploring new modalities of cooperation and modernizing alliances. Unless the US moves quickly to repair its political relations with Thailand, it risks alienating one of its closest allies in the region.
* Tang Siew Mun is Senior Fellow at ISEAS. Sanchita Basu Das is Fellow and Lead Researcher for Economic Affairs in the ASEAN Studies Centre at ISEAS