Lead by example: ASEAN+3 in a fragmenting world

Hoe Ee Khor & Jae Young Lee

The risks posed by the fragmentation of the multilateral trading system transcend mere inefficiencies. Without a coherent, rules-based framework, global value chains will become vulnerable, investment risks will rise, and smaller, trade-dependent economies will be left increasingly exposed to the arbitrariness of bigger nations.

More alarming still, fragmentation is heightening geopolitical tensions. As global trade splinters into competing blocs, escalating strategic rivalries are fueling mistrust and eroding the spirit of cooperation that underpins the multilateral order. Over time, this dynamic could drive a major economic decoupling, which would diminish economies of scale and undermine the broader welfare gains that free trade has historically delivered.

Emerging and developing economies will bear the brunt of trade fragmentation. Without robust mechanisms to ensure fairness and predictability, their ability to integrate into global markets and achieve sustainable growth will be severely constrained.

In this challenging environment, ASEAN+3 countries – the ten Association of Southeast Asian Nations member states, plus China, Japan, and South Korea – find themselves at a crossroads. Long reliant on open markets, integrated supply chains, and export-driven growth, the region has much to lose – but also much to gain if it successfully navigates the current challenge to the global trading system.

The Asian financial crisis of the late 1990s offers valuable insights into how to respond to the current economic environment. The crisis marked the region’s first major test, revealing deep structural vulnerabilities but also catalysing bold reforms and stronger regional cooperation.

What followed was a profound transformation, as sound domestic policies and deeper regional integration enabled ASEAN+3 economies to emerge stronger, more resilient, and more interconnected.

Now, a generation later, US President Donald Trump’s tariff war is undermining the foundations of the rules-based international order that enabled the rise of ASEAN+3 economies. This time, member states must do more than adapt; they must help to shape a global trading system that reflects their interests.

ASEAN+3 is a major driver of international trade and economic growth, accounting for roughly 30% of global GDP, 28% of world trade, and nearly 20% of foreign direct investment. Its deeply interconnected supply chains – from electronics to automobiles – have bolstered regional resilience and fostered a strong sense of shared purpose.

The region’s strengths extend well beyond trade volumes. ASEAN+3, with its vast and expanding consumer market and strong macroeconomic fundamentals, plays a central role in global value chains. A skilled workforce, dynamic tech ecosystems, and a sophisticated manufacturing base are also expected to support its transition toward high-value, knowledge-intensive development.

These assets position the region to lead in an innovation-driven world economy, particularly in strategic sectors like renewable energy, e-commerce, and robotics. But they also mean that ASEAN+3 economies have a responsibility to help safeguard the multilateral trading system

at a time when the Trump administration appears determined to defy established global rules and norms.

The region’s institutional architecture, from trade agreements to financial safety nets, further strengthens its capacity for coordinated action. Together, these frameworks could enable ASEAN+3 governments to help reshape globalization for the twenty-first century, making it more inclusive, resilient, and better suited to an increasingly fragmented world.

But to be a stabilising force, ASEAN+3 countries must act decisively in four critical areas.

The first is regional integration. Trade agreements like the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership offer promising pathways to advance open, inclusive, and forward-looking trade rules across the region and beyond.

Second, ASEAN+3 governments must actively support reforms to revitalise and strengthen the World Trade Organisation. Restoring the WTO’s relevance is essential to preserving a functioning multilateral trading system. The top priorities should be to improve its dispute resolution mechanism and update trade rules to address emerging challenges such as AI and climate change.

Third, ASEAN+3 countries must take the lead in promoting cooperation in areas that are increasingly vital for future competitiveness and sustainability, such as clean energy, digital technologies, resilient supply chains, and inclusive innovation. By aligning policy frameworks, sharing best practices, and investing in regional public goods, governments can help establish global standards while ensuring that the benefits of technological progress are distributed equitably.

Fourth, strengthening macroeconomic-policy dialogue and coordination remains crucial to the ASEAN+3 agenda. In an increasingly volatile global environment, closer cooperation on macro-financial stability, along with stronger mechanisms for crisis prevention and response, is imperative.

The Chiang Mai Initiative Multilateralisation (CMIM) – established in 2010 to provide short-term liquidity during economic crises – serves as a regional financing safety net. Together with the ASEAN+3 Macroeconomic Research Office (AMRO), which provides timely analysis and policy advice, CMIM reflects the region’s collective commitment to macro-financial stability, underscoring the enduring value of proactive policy coordination.

In the face of profound global uncertainty, ASEAN+3 countries must once again navigate a major external shock, just as they did during the Asian financial crisis three decades ago.

Member economies must remain vigilant and resist the pull of protectionism, even as they face pressure to engage in bilateral negotiations with the United States. Rather than turning inward, governments should reaffirm their commitment to free trade and focus on restructuring domestic industries and diversifying trade relationships to reduce overdependence on any single market.

By pursuing these strategies, ASEAN+3 economies can play a pivotal role in creating a more sustainable, equitable, and dynamic global trading system. Realising this vision, however, requires more than internal alignment; it calls for active engagement with like-minded partners and international institutions.

Ultimately, the region’s continued success will hinge on its ability to uphold the core principles underpinning its economic transformation: openness, cooperation, and a steadfast commitment to rules-based governance. By staying true to these values, ASEAN+3 countries can serve as an example for other emerging economies, showing that the next chapter of globalisation need not be defined by fragmentation and decline.

Hoe Ee Khor is a former chief economist at the ASEAN+3 Macroeconomic Research Office. Jae Young Lee is Group Head and Lead Economist at the ASEAN+3 Macroeconomic Research Office