“We don’t do sanctions …” was a calm response, with a disarming smile, of an ASEAN (an association of ten Southeast Asian nations) official to western demands to punish and expel one of its member-countries allegedly violating a democratic code of statecraft.

Americans and Europeans were also startled when ASEAN refused to yield to western agenda during the trilateral summit meeting in Phnom Penh, Cambodia, in November 2022. No joint communique could be issued.

Undeterred, Cambodia published ASEAN’s own communique before handing over the gavel to Indonesia, the group’s next year chair, pledging that the region will remain a “peaceful, caring and prosperous community,” and an “anchor for global stability” rather than “a proxy to any powers."

Holding firmly to that solemn commitment, East Asia continues to work patiently to preserve peace, harmony, cooperation and an increasingly free regional trade.

World’s principal growth engine

Last year, ASEAN’s economy is estimated to have grown 4.2%, and consensus forecasts for this year put its GDP on a 4.6% growth path.

East Asia -- commonly understood to include ASEAN plus China, Japan and South Korea (ASEAN +3) – remains the principal growth engine of the world economy.

The area’s sustained economic expansion and free trade agreements are generating strong and steady flows of commerce and finance.

In the first two months of this year, China and ASEAN were by far the largest trade partners. Their $140 billion bilateral merchandise trade was up 5% from the same two months of 2023.

And with trade transactions already running at an annual rate of $840 billion, China and ASEAN will easily remain the world’s largest trade partnership.

Japan, by contrast, does only 15% of its trade with ASEAN, but that group of countries and China represent 35% of Japan’s foreign trade.

Unfortunately, serious political and security tensions are eroding the Sino-Japanese trade and investment relations. The history of Japan’s brutal aggression of China in 1931, war atrocities committed during China’s occupation until 1945 and contested territorial claims in the East China Sea are a painful background to what China sees as Tokyo’s enduring hostility and a revival of its militaristic ambitions.

Japan has confirmed that ominous impasse in its latest defense white paper by labeling China as “an unprecedented and the greatest strategic challenge.”

All that looks like an unpopular view in East Asia which remembers Japan’s wartime history but now seeks peace and cooperation. Japan, therefore, runs the risk of damaging its regional ties.

South Korea understands that and is doing much better in preserving and expanding its trade and investment business with Asian neighbors. In the first two month of this year, Seoul exceeded Japan’s trade transactions with China. Korean exports to China soared 26.2%, and ASEAN stood as its third-largest trade partner (after China and the U.S.).

The U.S.-China competition

Some of the booming regional trade in Northeast Asia has been caught up in a fiercely competitive game between the U.S. and China. Japan and South Korea are America’s treaty allies, hosting 80,000 of U.S. military personnel. China, however, is by far the biggest trade partner to Japan and South Korea.

That is especially the case of South Korea. China is South Korea's largest trade partner and largest import and export market, and South Korea is China's fourth-largest trade partner.

And this is the geostrategic game: Washington wants to strengthen its alliance with Japan and South Korea to oppose China, while Beijing wants to loosen up that alliance by expanding trade and investment ties with Tokyo and Seoul.

Who will win?

The U.S. is winning for now. Japan has been offered free access to American markets, and a very liberal trade and investment regime with the European Union. The same trade policy is being implemented with respect to South Korea. Large Korean corporations are to reduce their operations in China while stepping up production and investments in the U.S. That will put Seoul in a difficult position, but it will have no choice, especially in hi-tech trades like semiconductors.

China, for its part, seems reluctant to hit Japan with trade limitations, but most of Japanese products and services are already being squeezed out in Chinese markets by competitive local substitutes. South Korea is in a similar situation.

China is making big and quick strides in all top technology areas. That is the central point of its quest for an innovation driven “quality growth.” Japan and South Korea have lost to China the race to conquer Asian and world markets. And, as the automobile trades show, both countries could suffer big losses if China were to initiate an aggressive marketing campaign.

Ultimately, the game will be decided by the outcome of the U.S.-China confrontation.