Hero to Zero: Exports Turn to Source of Fragility in Asia
(Bloomberg Opinion) -- Exports have gone from a plus for Asia to a real drag.
Almost daily, trade data from somewhere show a deterioration. Monday was Japan's turn. Shipments dropped 1.2 percent in February from a year earlier, the third consecutive slide and twice the dip envisaged by economists.
Many people view Japan's challenges as unique and the country as in a long-term fade. But it remains one of the biggest exporters and deeply enmeshed in the technology scene. Exports to South Korea tumbled 14 percent. Korea itself dispatched 11.1 percent less stuff to the world.
For all Japan's differences, there is a broader story. Decelerating global activity, trade tussles between the White House and Beijing, China's longer-term slowdown and rising labor costs are eroding the foundations of the region's strengths.
Cycles have ups and downs. But it would be remiss to let this moment pass without some deeper scrutiny of what drives expansion, prices, employment and investment in Asia.
So often during a two-year assignment in Malaysia in the mid-1990s did I hear the refrain: It's so different here in Asia, it's all about growth! That idea was based in large part on attracting manufacturers to set up shop, assemble things and move them on either to home or somewhere else for further assembly. In the process, tons of people were given jobs and skills. The supply chain also meant lifting education standards as countries sought to climb the value ladder.
All the while, exports were key. China's geographic proximity and role as the workshop of the world added ballast. The `90s and the aughts feel like the salad days for this model.
Some of those ingredients are now not only absent, but going into reverse. It begs the question: Are parts of Asia losing what defined an economic model? Without the magic sauce of exports to contribute to relatively high growth, how different are these economies from, say, the West?
Rates of expansion are nowhere near where they used to be in the 1990s when they approached double digits and, as in the West, inflation is in long-term retreat. Central banks deciding interest rates this week would do well to consider how they calibrate policy for this era, not just this year.
By March 15, all emerging markets that had released trade numbers for February had shown a decline, Capital Economics wrote in a report last week. The picture is unlikely to brighten much even if Washington and Beijing can patch things up. The underlying cause of sickly export demand is anemic global growth.
Are there bright spots? Sure. Singapore said Monday that overall non-oil exports rose in February after three months of retreat. But drill down and the report points to broader challenges: Electronics exports fell 8 percent from a year earlier.
A trade deal between Donald Trump and Xi Jinping would be great. But it won't solve Asia's problems, even those in trade. An entire model needs reappraisal.
To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
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