{
  "title": "A Cooperative Advantage",
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  "summary": "Southeast Asia, a major beneficiary of the rules-based system, has a strong incentive to repair it",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Southeast Asia (11 countries with a combined population of more than 700 million) has been a major beneficiary of the postwar rules-based multilateral world order, which increased trade and openness and integrated the global economy.\n- Major regional gains since the end of the Cold War:\n  - Per capita GDP increased more than fivefold.\n  - Total GDP expanded eightfold.\n  - Extreme poverty (fraction of the population living on less than one international dollar a day) fell from more than half to one-sixteenth.\n  - Life expectancy at birth rose a full decade.\n  - Adult literacy increased by 20 percentage points.\n- Common denominator for these gains: gainful engagement with a rules-based multilateral order that provided a level playing field, peaceful dispute resolution, and cooperation on shared challenges."
    },
    {
      "heading": "How the rules-based order supported Southeast Asia’s development",
      "content": "- Structural advantages of the rules-based system:\n  - A level playing field flattens the distribution of geopolitical power and reduces wasted spending on displays of power.\n  - Peaceful dispute resolution lifts substantive issues above zero-sum aggression.\n  - Cooperation on shared challenges increases efficiency and avoids duplication, letting states contribute comparative strengths.\n- Factory Asia and trade integration:\n  - “Factory Asia” emerged with Southeast Asia, Japan, Korea, and—beginning in the late 1990s—China.\n  - Key international accords:\n    - 1996 Information Technology Agreement (WTO) eliminated tariffs on IT components/products, enabling Indonesia, Malaysia, the Philippines, Singapore, and Thailand to become manufacturing and assembly hubs for semiconductors, hard drives, and consumer electronics.\n    - Starting in 2005, after a 10-year phaseout of advanced-economy protectionist import quotas on textiles and apparel, Cambodia, Vietnam, and Indonesia attracted considerable foreign direct investment for those industries.\n  - Trade patterns:\n    - Trade within ASEAN amounts to 25 percent of GDP.\n    - Trade with the rest of the world fluctuates between 80 and 90 percent.\n    - For contrast: trade among European Union members exceeds 60 percent of the bloc’s GDP, more than its external trade of 40 percent."
    },
    {
      "heading": "Three cascading shocks reshaping the international system",
      "content": "- The China shock\n  - Character: a supply shock consistent with comparative advantage; exposes importing economies to a surge of inexpensive manufactured imports from China, increasing quantity and quality at any given price (supply curve shifts out).\n  - Effects: low-priced, higher-quality imports benefited consumers and downstream businesses but devastated firms exposed to import competition, causing factory closures and job losses and unequal distribution of gains.\n  - Key point: the China shock affects distribution within importing nations and is agnostic about bilateral trade balances.\n  - Industrial policy dimension: China’s state-guided industry reallocation contributes to global imbalances and fuels concern about anticompetitive behavior; other East Asian economies (South Korea, Japan, Singapore) have used industrial policy to avoid low-quality lock-in.\n  - Policy implication: importing countries would do better to redistribute some gains from sectors benefiting from trade to workers and communities hurt by it, rather than only using tariffs or quotas.\n\n- The US shock\n  - Character: a demand shock constituted by tariffs, sanctions, export restrictions, and investment controls applied broadly against other economies.\n  - Example: Vietnam had been sending a third of its goods exports to the US and was initially hit with a 46 percent tariff (later changed to a baseline of 20 percent, with 40 percent for some products).\n  - Reach: Even economies with US free trade agreements, such as Singapore and South Korea, suffered tariff actions.\n  - Trend: US trade policy has shifted toward fundamental skepticism about trade itself and is no longer using trade restrictions merely as temporary tools to advance wider objectives.\n  - US grievances include accusations that China follows WTO rules’ letter but violates their spirit (example: 2012–14 rare earth export restrictions) and that China exploits gaps and ambiguities in WTO regulations, leading to concerns of “rules-compatible mercantilism.”\n\n- The multilateralism shock\n  - Character: a system-wide shock where advanced economies, seeing deteriorating cost-benefit ratios from the rules-based order, retreat from full support and deploy industrial policies to recover positions, turning interdependence into strategic leverage and trade into disputes over chokepoints and balances of payments.\n  - Consequence: breakdown of the multilateral order produces collective harm, resembling a classic prisoner’s dilemma or an “epic fail” outcome (as termed in a 2026 paper by Shiro Armstrong and the author).\n  - Indicators:\n    - More than 70 percent of cross-border trade still follows WTO rules.\n    - Disruptions to trade by individual nations have risen more than threefold since 2019 (noted by IMF Managing Director Kristalina Georgieva)."
    },
    {
      "heading": "“Multilateral enough” as a pragmatic path forward",
      "content": "- Central proposal: a return to the old rules-based multilateral order is unlikely; Southeast Asia should pursue a system that is “multilateral enough”—coalitions of like-minded states focused on particular goals and built around aligned incentives rather than universal consensus.\n- Core principles for any successful coalition (same as bedrock of the old system):\n  - A level playing field.\n  - Peaceful dispute resolution.\n  - Cooperation in the face of shared challenges.\n- Features of a multilateral-enough topology:\n  - Flexible coalitions can form without forcing universal participation; groups can pursue treaties or foster unintentional cooperation based on aligned incentives.\n  - ASEAN as an example: focused on specific member challenges, open to new members (recently accepted Timor-Leste).\n  - Other examples:\n    - Regional Comprehensive Economic Partnership (ASEAN plus China, Japan, and South Korea).\n    - Comprehensive and Progressive Agreement for Trans-Pacific Partnership (recently added the UK).\n    - WTO’s Multi-Party Interim Appeal Arbitration Agreement: set up in 2020 with 16 signatories and has grown to more than twice that number across six continents.\n- Role for international institutions:\n  - Institutions such as the IMF can play a critical, independent role by keeping new flexible topologies open and inclusive.\n  - A flexibly multilateral world need not ossify into competing spheres of influence if coalitions remain open and aligned on incentives."
    },
    {
      "heading": "Implications for Southeast Asia",
      "content": "- The region is strongly motivated to repair elements of the rules-based order because it benefits most from those core functions and lacks unilateral capacity to restore the old global consensus.\n- The China, US, and multilateralism shocks are planet-scale trends unlikely to be undone by a single election or personality change in leadership; nevertheless, core principles of the multilateral system can survive within a flexible topology relying on aligned incentives.\n- If successfully deployed, multilateral-enough coalitions would allow Southeast Asia to continue to secure growth, jobs, and well-being while contributing affordable mass-produced electronics and textiles to the world.\n\nSource: A Cooperative Advantage — DANNY QUAH, F&D Magazine, September 2026.\n\n---\n\n Content in this bundle\n\n- A Cooperative Advantage\n  - A Cooperative Advantage (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - A Cooperative Advantage (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2026/09/a-cooperative-advantage-danny-quah"
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    "Authors: DANNY QUAH",
    "Published: September 2, 2026",
    "Southeast Asia (11 countries with a combined population of more than 700 million) has been a major beneficiary of the postwar rules-based multilateral world order, which increased trade and openness and integrated the global economy.",
    "Major regional gains since the end of the Cold War:",
    "Common denominator for these gains: gainful engagement with a rules-based multilateral order that provided a level playing field, peaceful dispute resolution, and cooperation on shared challenges.",
    "Structural advantages of the rules-based system:",
    "Factory Asia and trade integration:",
    "The China shock",
    "The US shock",
    "The multilateralism shock",
    "Central proposal: a return to the old rules-based multilateral order is unlikely; Southeast Asia should pursue a system that is “multilateral enough”—coalitions of like-minded states focused on particular goals and built around aligned incentives rather than universal consensus.",
    "Core principles for any successful coalition (same as bedrock of the old system):",
    "Features of a multilateral-enough topology:",
    "Role for international institutions:",
    "The region is strongly motivated to repair elements of the rules-based order because it benefits most from those core functions and lacks unilateral capacity to restore the old global consensus.",
    "The China, US, and multilateralism shocks are planet-scale trends unlikely to be undone by a single election or personality change in leadership; nevertheless, core principles of the multilateral system can survive within a flexible topology relying on aligned incentives.",
    "If successfully deployed, multilateral-enough coalitions would allow Southeast Asia to continue to secure growth, jobs, and well-being while contributing affordable mass-produced electronics and textiles to the world.",
    "**A Cooperative Advantage**"
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