WARNING that the US-China trade war could turn ugly, Prime Minister Dr Mahathir Mohamad urged for stronger collaboration between Malaysia and its Asean neighbours to build competitiveness to cushion the blow.

The prime minister warned that this was necessary as there are signs that the trade tension between the economic giants could turn into something worse.

Speaking at the Malaysia Beyond 2020 conference, Dr Mahathir said a trade war between two of the largest economies is bound to fracture the world trading system, adding that slapping tariffs to hinder free trade is now the “new normal”.

“Businesses need to plan smoothly and avoid disruption. But tariffs, counter-tariffs and other impediments to free trade are now becoming the ‘new normal’,” he said.

Malaysia is unfortunately caught in the middle in this trade duel because of its economic links to both markets and also for geographical reasons, he said.

“There are even suggestion that we ourselves would be a target for sanctions.

“The US-China mega-trade war may be a symptom of something far worse – growing rivalry between the world’s two biggest powers developing into another Cold War.”

“Even if geostrategic rivalry is not already behind their current trade dispute, it is likely to be the result of the prolonged trade dispute on a global scale. It is disappointing to see the proponents of free trade now indulging in restrictive trade on a grand scale,” he said.

On that note, Dr Mahathir said the country can hope for the best and prepare for the worst by working with its Asean neighbours to cushion the impact of the superpower collision.

“We have to enhance our collaboration. This means building capacity by developing our competitiveness.”

In addition, Dr Mahathir said it is crucial to develop world-class companies to take on rivals.

“One way to achieve this is by identifying our assets and capabilities so as to enhance our capacities to take advantage of the new technologies. And then include the quality of our human resources.”

He said the regional bloc of 10 countries has stood firm unlike other similar pacts in other parts of the world, adding that Asean has a similar approach towards problem-solving.

“Asean is one of the very few regional organisation that is functioning today. Most of the other regional organisations even the European Union is not functioning very well, Nafta is not functioning very well but Asean has stayed together.”

In addition, Asean’s strategic location in the trading route between East and West makes it even more important to maintain peace and stability in the area.

“In the Straits of Malacca and South China Sea, passenger ships are still free without any obstruction but once people start sending warships into this area, there will be tension. Our appeal to all the big powers is to keep out all these weapons of war in this area because there will be accidents and accidents will lead to war,” he said.

In response to a question on strengthening bilateral ties with Indonesia, Dr Mahathir said Malaysia’s policy has always been to be friendly with everyone and as a trading nation it needs markets and cannot afford to make enemies.

Malaysia will continue to leverage on trade for its future growth. – October 21, 2019.