Straight talk about trade

Navigating the complex labyrinth of international trade policies is a daunting challenge for businesses and bureaucrats alike. It's also a business opportunity for the Singapore-based Asian Trade Centre (ATC), which is committed to using its unique expertise to provide quality information and practical insights.

With an academic background in international relations and political economy, ATC executive director Deborah Elms is no stranger to deciphering and predicting the next moves in foreign policy and trade agreements between Asian countries and the United States in particular. She believes her company's expertise will be in more demand than ever in the immediate future.

It will no longer be "business as usual" for Asian countries when US President-elect Donald Trump takes the helm at the White House on Jan 20, as the flamboyant property tycoon has vowed to impose trade protectionist measures, among other controversial policies, as a means to "make America great again".

Short of nothing but risk and uncertainty, Mr Trump's trade policy is radically different than what any other American presidents have espoused previously, therefore Asia should brace itself for difficulty in the trade realm, Dr Elms told Asia Focus in an exclusive interview.

"He is not interested in free trade agreements [nor] underwriting multilateral institutions," she said. "He sees any organisation that is larger than two as a problem because in his eyes, anything that is larger than two cannot be win-win, it can only be win-lose.

"He wants everything to default to bilateral agreements and I think that is not only in trade, [but] that is his view generally. So he will not be underwriting multilateral institutions in trade [and] security."

Based on her observations of his election campaign, she sees Mr Trump as believing that the US is engaged in a trade war and he will do whatever it takes to restore the advantage in America's favour, with the effort primarily focused on nemesis China, said Dr Elms.

"It is not going to be pretty here in Asia because it will be all enforcement and one-sided [policy]," she said, summing up Mr Trump's attitude as: "'You foreign Asians owe the US respect and you need to do whatever it is that you can to benefit the Americans.'"

Mr Trump is expected to slap temporary tariffs on imports of Asian steel, for example, but this protectionist policy is unlikely to last very long before certain US industries -- and members of Congress in districts where those industries are located -- start to remind the president about reality, she said.

"The point of this [policy] is supposed to be to divert resources to make these products in the US. They make steel in the US, but these are different kinds of steel and it is economically inefficient to make the same kind of steel that the Chinese do for a variety of reasons," Dr Elms explained.

"I do not think those jobs would come back in 180 days anyway. So now you are just going to cripple the industry and not bring the jobs back."

In the absence of a concrete and properly thought-out plan, it is expected that Mr Trump will not raise import tariffs across the board, but will opt to do so for certain products and targeted countries such as China and Mexico, she said.

The scope of risk and uncertainty under the Trump administration expands beyond trade as other notable flashpoints in Asia include the South China Sea disputes and North Korea's nuclear programme.

"He [Donald Trump] can be so unconstrained, does not follow the normal rules of the game, and he is not diplomatic. He's got a complete cast of characters around him who have no experience in government [and] almost all of them are outsiders," said Dr Elms.

Despite growing anti-globalisation sentiment and the rise of right-wing movement as mirrored through Brexit and the US election outcome, it is hoped that such developments would not occur in Asia because the collateral damage would be monumental, in her view.

"An export-oriented region is going to have a very hard time if anti-globalisation [sentiment] takes off. So the hope, from my perspective, is that Asia manages to escape this and that we remember how export-oriented economies grow and thrive," she said.

Employment opportunities and, to a greater, extent, economic growth could collapse amid such a protectionist mindset. A better solution is to equip citizens with the necessary skill sets to cope with changes in the modern era.

"Companies lax in reminding their own employees and politicians have got sloppy in reminding their own citizens that this matters, that you cannot stop trade and just turn back the clock. You cannot say, 'Wouldn't it be great if everything we had was made locally', because you cannot make everything locally," Dr Elms stressed.

SOLUTIONS THROUGH KNOWLEDGE

ATC's primary activities include research, training and advocacy. The company, based in Singapore, provides strategic thinking on complex policy and regulatory challenges, solutions for both governments and companies to trade problems, as well as suggestions for improving bottom-line performance for companies trying to make sense of trade agreements.

For instance, ATC conducts capacity building courses for government officials throughout Asia on all aspects of trade. Courses may include broad topics such as understanding the World Trade Organization (WTO) commitments, meeting the demands of the WTO Trade Policy Review mechanism, negotiating free trade agreements, or harnessing trade for economic development.

"What we are interested in is training more [people in] developing countries in Asia because that is where we think there is a huge need," said Dr Elms.

Current funding for the company comes from a wide range of sources. They include companies (Google, Rio Tinto, UPS and HP Inc), governments (Taiwan, the Embassy of Vietnam in Singapore, and the EU Delegation), aid agencies (USAID and the British Prosperity Fund), multilateral institutions (the World Trade Organization and Asia Pacific Economic Cooperation), think tanks (Fung Global Institute and Geneva Network), as well as chambers of commerce and trade associations (the US-Asean Business Council).

ATC recently split its structure into two entities since the company could only register its status as a "for-profit" company in Singapore as mandated by law. Its non-profit entity, named the Asian Trade Centre Foundation, is registered in the US and is aimed at capacity-building for governments.

Dr Elms explained that the plan was for the company to eventually separate into two institutions, with a similar scope of work between them. The process remains ongoing because it is awaiting US tax officials' approval of non-taxable status for the US-based entity.

But funding is a challenging issue as, in her words, it is hard to convince companies to pay for services and these companies take a tight-fisted approach toward services expenditure.

For a small company, funding from large corporations has the added disadvantage of delay as it often takes 90 days for funds to be transferred to the company's bank account, she said.

"In Singapore, where you might think that we have decent financing for small companies, we have no financing for small companies. Access to credit is appalling for small companies," she said.

"In Asean [countries], it is very hard for services companies because banks will usually lend against collateral, and collateral for banks is physical inventory, [of which] services companies have none."

In her view, Asia claims to be supportive of knowledge and innovation, but the regional financing structure at the moment does not lend support to such grand ambitions.

Manpower is another enduring challenge for a company engaged in a specialised field like ATC, said Dr Elms. Compounding the challenge is the fact that Singapore has manpower restrictions, meaning the company has to find Singaporeans who have qualified knowledge in international trade and are willing to work in a small company

"Most Singaporeans do not [want to work for a small company] so that is a 40% price premium for Singaporeans to work in a small and medium-sized enterprise. That is a challenge."

'ONE SHOT AT YOUR REPUTATION'

Though she doesn't see herself as a perfectionist when it comes to broad-spectrum work, Dr Elms admits that things have to be "perfect" when it comes to client-facing products because the company's reputation could deteriorate instantly if poor quality products or services are delivered to customers.

"At our company, you only get one shot at your reputation, so it is really vitally important that we manage our reputation at all times, because it takes just one bad product to cause major problems for a small company," she said.

"We have to be very careful, from my perspective, in who we work with. I want to make sure that we always work with partners who have the highest quality. We definitely turn down projects that are not heading in the right direction for us [or] do not match up with our overall objective. We [also] turn away projects that are too complicated or the timeline is too short for us to turn around something of the right quality."

But as it turns out, the company is experiencing the opposite problem. Employees are "over-delivering" on small budgets, said Dr Elms.

"They [clients] are delighted because they are getting way more output than they should for the amount of money they are giving us. But, at least for us, that is better than the alternative, which is turning around something and having them say, 'Well, what is this?'"

She used to think that spending a huge sum of money on corporate lobbying was a bad idea, but after more than a decade of being involved with trade negotiations and policies, she sees the alternative, which is barring corporate lobbying, does more harm than good.

"No corporate lobbying, no corporate engagement, no corporate-government discussions in the process of policy-making is actually worse because you are leaving it to government bureaucrats, most of whom have no experience in business at all, to come up with policy outcomes," Dr Elms said.

The possible negative impact of such top-down, narrowly focused policy decisions is not limited to businesses, but also expands to consumers, workers and the environment.

"Government bureaucrats, even really good ones, just don't have the experience to understand some of the ramifications of policies that they are considering because of their narrow remit. And if they do not reach out beyond other government bureaucrats, then they are never going to know what the consequences of some of their decisions are," she said.

In her view, the Regional Comprehensive Economic Partnership (RCEP) is an example of a bad and secretive trade negotiation compared with the Trans-Pacific Partnership (TPP), which featured a more open negotiation process.

The RCEP, for which talks are expected to conclude sometime next year, involves the 10 Asean member states together with China, Japan, South Korea, India, Australia and New Zealand. With the TPP now on its deathbed because of opposition from Donald Trump, the RCEP could become even more significant, and that concerns Dr Elms.

Problems associated with digital technology and e-commerce regulations could arise under the RCEP, she points out, as officials responsible for trade negotiations have not properly discussed the implications with companies engaged in the digital arena.

For example, data localisation is a policy promoted by the RCEP countries where user data is stored in a data centre that is physically situated in the same country where the data originated. But for a small company such as ATC, this could have an adverse effect because the company might not have expertise in data security, consumer privacy, and, most importantly, hosting data locally.

"Singapore is so tiny," she said. "What if, heaven forbid, something happens in Singapore and all of the servers go down? I would lose all of the data for my company.

"The problem is, if you leave it to people who have no experience in business, you would end up, in my view, with rather poor policies."