Scenarios for a Global New Normal and ASEAN Value Chains

Global economic shocks, geopolitical tensions, and an intensified backlash against globalization are changing the outlook for growth and economic cooperation in trade-oriented economies. We provide a comprehensive review of these developments using a new CGE model that also analyzes effects on global value chains. We examine policy scenarios ranging from geopolitically motivated reshoring, near-shoring, and friend-shoring of trade to East Asian proposals for extending regional trade agreements. We find that (i) recent shocks like the Russian invasion of Ukraine and higher natural resource prices are likely to have persistent, adverse effects on Southeast Asia and similar economies; (ii) geopolitical interventions like those in discussion would substantially undermine trade and the structure of global value chains, again with adverse effects on Southeast Asia; and (iii) East Asian proposals for renewed economic cooperation via RCEP, the CPTPP, and still wider initiatives offer potent tools for responding to developments outside the region’s control