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Asia must jointly tackle external risks amid looming US-EU ‘subsidy war’

Jointly prevent possible job losses in manufacturing at a time when the US and EU are likely to become embroiled in what has been termed a looming “subsidy war” aimed at propping up regional industrial chains. should be a top priority for the economy and the economy. Trade cooperation between Asian economies in the near future.

The growing impact on Asia from the restructuring of the global industrial chain by the United States and Europe has highlighted the urgency of Asia’s need to strengthen the development of the industrial chain. If Asian economies cannot coordinate on the same front, the regional industrial chain will be fragmented. This is an important issue not only for China, but also for South Korea, Japan and ASEAN, where the industrial chain is integrated.

It should be pointed out that it is too simplistic for Asian economies such as Japan, South Korea and Vietnam to think that the US would benefit from suppressing China’s industrial chain. US-led factions in the semiconductor sector have made it clear that the US’ pursuit of more self-interest will only hurt them.

The EU is preparing to push for massive subsidies to help EU companies stay competitive, Politico reported, citing two senior EU officials. EU officials also mentioned the idea of ​​a “European Sovereignty Fund” to counter Washington’s inflation-cutting law.

Given the high energy prices caused by the conflict between Russia and Ukraine and US practices that violate the principles of free and fair trade, the EU faces increasing risks of de-industrialization and should urgently build on that trend. It’s rather normal to have to put it back. But a back-and-forth subsidy war between the EU and the US will have adverse effects globally. To some extent, this means that the global economy will be characterized by more fragmentation and protectionist measures, which could lead to more challenges for Asian industrial chains.

Since U.S. President Joe Biden signed the anti-inflation bill into law encouraging consumers to “buy American” on products such as electric cars, European governments have warned that the law will push European companies into a corner. We have been concerned that this is likely to undermine the European manufacturing sector. The unfavorable situation puts pressure on companies to move new investments to the United States.

With communication with the US through diplomatic channels seemingly futile, it seems increasingly likely that the EU will have to do something similar to prevent its own industrial chain from being undermined. If anything, this could be a policy turn that sends red flags for Asian economies.

In the latest sign of that policy trend, EU nations on Wednesday announced €43 billion ($44.4 billion) to boost semiconductor production in the block, with an ambitious target of producing 20% ​​of the world’s semiconductors by 2030. ) has agreed to pursue its plans, Bloomberg reports.

The chip industry is highly globalized, and over the past decades, Asia has become the region with the most concentrated chip production capacity as a result of globalization’s division of labor and huge market demand. At present, both the US and the EU are aiming to reshape the current pattern of the global semiconductor industry, which will upset the old balance of the industry chain and bring shockwaves to Asia’s semiconductor industry chain.

In fact, semiconductors are just one example of Asian industrial chains facing various risks. High-tech sectors such as new-energy vehicle manufacturing could also bear the brunt of growing anti-globalization sentiment.

Under these circumstances, while the Asian economy remains firm in its support for globalization and free trade, it not only prevents the artificial shift of the manufacturing industry to the west, but also further strengthens regional industrial chain cooperation to strengthen external cooperation. You have to dodge the risks. From another perspective, changes in the external environment offer opportunities for Asian industrial chains to be further integrated into the high-tech sector.

As for the high-tech sector, despite geopolitical headwinds, China has accumulated manufacturing and market dominance after years of development, gaining an important position in the Asian industrial chain. Still for regional industries, major economies such as China, Japan and South Korea need to strengthen communication to strengthen the region’s competitiveness in technology-intensive industrial chains.

Furthermore, China and ASEAN have highly complementary industrial chains and resource distribution structures. Therefore, as China seeks to upgrade her free trade area with ASEAN, it is possible to focus on industrial chain cooperation and common market development to promote industrial upgrades and unlock economic potential.

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