Thursday, June 13, 2019

Trump's China Tariffs Helping Pakistani Garments Exports to America

Pakistan's garments exports to the United States have jumped 12% in first quarter of 2019 from the same period a year ago, according to USITC Dataweb.  This double digit exports growth is being partly attributed to US President Donald's Trump ongoing trade war with China with the US government imposing 10% to 25% tariffs on certain Chinese goods. Pakistani rupee devaluation has also contributed to the nation's overall competitiveness.

Textile Exports to United States. Source: Bloomberg

American buyers are diversifying their supplier base away from China, the No. 1 exporter of these goods to the U.S. Already, Bangladesh is close to snatching the trousers-to-towel crown, according to Bloomberg News. Pakistan, at No. 6 last year, has grown its own shipments to the U.S. by almost 12% this year. It may overtake India, which has seen virtually no improvement.

Pakistan's Real Effective Exchange Rate (REER). Source:  Bloomberg

Pakistani apparel exports are becoming more competitive in international markets because Pakistani rupee has declined by almost 25% recently. This has wiped out the currency’s overvaluation adjusted for inflation differences with trading partners, as estimated by the IMF.

Textiles industry is just one the export industries seeing exodus of manufactures and buyers from China.  Electronics industry is seeing similar moves. Engadget is reporting that Google is moving production of its US-bound Nest thermostats and motherboards to Taiwan. The Wall Street Journal has reported that Nintendo is shifting at least some production of its Switch console to Southeast Asia.

Last November, Nomura Securities strategists had said they expected Malaysia, Japan and Pakistan  to be the top 3 beneficiaries of import substitution triggered by US-China trade war escalation. Nomura's analysis is based on detailed study of 7,705 items which will be subject to tariffs and counter tariffs by US and China if the stand-off continues. Nomura developed two indices as part of its research on the subject: NISI (Nomura Import Substitution Index) and NPRI (Nomura Production Relocation Index).

Related Links:

Haq's Musings

South Asia Investor Review

Can Pakistan Avoid Recurring Balance of Payment Crisis?

Pakistan Economy Hobbled By Underinvestment

Pakistan's IT Exports Surging

Can Indian Economy Survive Without Western Capital Inflows?

Pakistan-China-Russia Vs India-Japan-US

Chinese Yuan to Replace US $ as Reserve Currency?

Remittances From Overseas Pakistanis

Can Imran Khan Lead Pakistan to the Next Level?

China to Expand Manufacturing in Special Economic Zones

15 comments:

Tan said...

Don't tell trump if and when Pakistan runs a trade surplus with the US. He'll come after you!

Riaz Haq said...

Tan: "Don't tell trump if and when Pakistan runs a trade surplus with the US. He'll come after you!"

Pakistan already runs a trade surplus with US.

The U.S. goods trade deficit with Pakistan was $783 million in 2018, a 2.2% increase ($17 million) over 2017.

https://ustr.gov/countries-regions/south-central-asia/pakistan

Riaz Haq said...

US #Trade with #Pakistan reached record high of $6.6 billion in 2018 , Asst Sec of State Wells tells Congress. Pakistan runs trade surplus of $782 million with the #UnitedStates - Newspaper - http://DAWN.COM

https://www.dawn.com/news/1488126

The Trump administration has informed Congress that trade between the United States and Pakistan reached an all-time high in 2018, as Washington endorsed Islamabad’s budget re-emphasis on a relationship built on trade, not aid.

Alice G. Wells, Senior State Department Official for South and Central Asian Affairs underlined this change in a written statement to the House Foreign Affairs Subcommittee for Asia, the Pacific and Nonproliferation. On Thursday, the panel began a hearing on the State Department’s 2020 budget requests for the South and Central Asian regions.

Ms Wells informed the lawmakers that in 2018, US-Pakistan bilateral trade reached an all-time high, exceeding $6.6 billion.

US exports to Pakistan rose 4pc to $2.9bn, also an all-time high, and the trade deficit sunk to 2pct, or $782 million. “Trade in agriculture was a particularly bright spot,” she said. US soybean exports went from $0 in 2014 to $689 million in 2018.

She noted that Pakistan was a market of more than 200 million people, including a growing middle class, and that’s why it “provides ample opportunities for US trade and investment to grow further.”

According to the US Trade Representative’s office in Washington, Pakistan is currently America’s 56th largest trading partner during 2018. US exports totalled $2.9bn while imports from Pakistan totalled $3.7bn. The US goods trade deficit with Pakistan was $783 million in 2018.

The top US export categories in 2018 were: miscellaneous grain, seeds, fruits ($694m), cotton ($615m), iron and steel ($225m), machinery ($211m), and optical and medical instruments ($117m).

US exports of agricultural products to Pakistan totalled $1.5bn in 2018, making the country the 19th largest agricultural export market. Leading domestic export categories include: soybeans ($689m), cotton ($615m), tree nuts ($49m), dairy products ($38m), and planting seeds ($37m).

Pakistan was America’s 58th largest supplier of goods imports in 2018.

US total imports of agricultural products from Pakistan totalled $126m in 2018. Leading categories include: rice ($31m), sugars, sweeteners, beverage bases ($30m), spices ($19m), processed fruit & vegetables ($9m), and snack foods ($7m).

The top import categories in 2018 were: miscellaneous textile articles ($1.3bn), knit apparel ($809m), woven apparel ($586m), leather products ($121m), and cotton ($112m). US foreign direct investment (FDI) in Pakistan (stock) was $518m in 2017, a 25.7pc increase from 2016.

Riaz Haq said...

A Study Commissioned by the Pakistan Business Council

https://www.pbc.org.pk/research/pakistans-readymade-garments-sector-challenges-and-opportunities/


The Pakistan Business Council (PBC) has commissioned CDPR to do this Study as part of its Make-in-Pakistan initiative. The Make-in-Pakistan initiative of the PBC aims to reverse the premature deindustrialisation of Pakistan, this initiative aims to promote jobs, exports of value-added products, import substitution and increase revenues for the government.

The textile is the most important sector of Pakistan’s economy. In 2017, it contributed almost 8.5% to the country’s GDP, accounted for one-fourth of industrial value-added and employed 40.0% of the industrial labour force. Amongst textile products, garments have the highest-value addition and is also the main export revenue earner. In 2017, Pakistan exported almost $5.0 billion worth of garments to the world: $2.52 billion (knitwear) and $2.47 billion (woven).

Although garment sector exports have increased over the years and it has been the best performing segment of the textile value chain, the sector is grossly underperforming relative to its potential. Pakistan lags behind its competitors in the global share in export of garments. In 2017, Pakistan’s share in the exports of garments was a meagre 1.10% compared to China’s 32.06%, Bangladesh’s 7.66%, Vietnam’s 5.94%, and India’s 3.81%.

The primary reason for this poor performance is the narrow export base, even this narrow base is biased towards low value-added unsophisticated items. The top 6 products exported by Pakistan account for 52.0% of Pakistan’s exports, but only 20.0% of total world garment exports. World demand has been shifting to man-made fibre, which Pakistan has been unable to exploit. In addition, Pakistan’s garment exports are not well diversified in terms of destinations. Almost 88.0% of garment exports are destined for the EU and the US.

Pakistan’s underperformance in exports can be attributed to a number of factors, divided into supply side, demand side and investment climate constraints.

Pakistan faces higher production costs and lower productivity compared to its peers. High production costs are in the form of import duty on cotton & MMF, high energy tariffs and minimum wage (Supply-Constraint). This has led to fierce competition with other low-wage competitors leading to small export orders for Pakistan (Demand-Constraint). Pakistan faces unfavourable tariffs in garment exports in the international market such as ASEAN, which restricts market access, and its currency in the recent past was overvalued with respect to the dollar, making exports less competitive against China, India, Bangladesh and Vietnam (Investment Climate Constraint). Other impediments include poor access to credit, delay in the payment of government-announced tax refunds, low technological adoption, and time-consuming export procedures.

Riaz Haq said...

Pakistan’s textile exports stagnant; RMG marks 3.2% growth
by Apparel Resources News-Desk
21-May-2019

https://apparelresources.com/business-news/trade/pakistans-textile-exports-stagnant-rmg-marks-3-2-growth/

Mainstay of Pakistan’s economy, the textile industry of the country is in a sticky situation lately.

As per reports, in the first 10 months of the current fiscal year of 2018/19, textile exports from Pakistan remained flat at US $ 11.1 billion, as compared to the corresponding period of the previous year. And this despite Government’s various measures to boost exports.

However, on the positive side, export of readymade garments, bedwear and knitwear registered growth in the period under review.

As per data from Pakistan Bureau of Statistics (PBS), export of RMG improved 3.2 per cent to US $ 2.1 billion, while export of knitwear exports increased by 7 per cent year-on-year to US $ 2.3 billion and, export of bedwear marked an increase of 2.4 per cent to US $ 1.9 billion.

Further, in this period, export of raw cotton declined drastically by 67.2 per cent to US $ 18.5 million while export of cotton yarn fell 15.7 per cent to US $ 941.3 million.

Exports of cotton cloth also reportedly fell 2.7 per cent to US $ 1.7 billion (in the July-April period of the current fiscal year).

It may be mentioned here that due to continuous devaluation of rupee (fell by around 20 per cent in last year alone), exporters are able to improve on their margins on exports but on the flipside cost of doing business has gone up significantly.

Syed H said...

Hi Mr Haq, I was just wondering what you think about the recent commentary on something truly breathtaking: how India's growth rate has been overstated by as much as 2.5% per annum between 2012-17 (so, not the much trumpeted 7% annual growth, but more like 4.5%).

The consequences of flawed methodology of GDP calculation in India are the stuff of a working paper at Harvard University's Center for International Development (Harvard Kennedy School of Government). This can explain several oddities about India's economy, e.g., India's surprisingly poor job creation, or why corporate India's did not get the returns it had expected in light of investments made by taking at face value high GDP growth rates, resulting in stressed balance sheets becoming a norm of sorts.

The paper in question: https://growthlab.cid.harvard.edu/files/growthlab/files/2019-06-cid-wp-354.pdf

A couple of news pieces on it, amongst several:

https://www.bbc.co.uk/news/world-asia-india-48609326

https://economictimes.indiatimes.com/news/economy/indicators/view-modis-suspect-gdp-numbers-have-done-real-damage/articleshow/69782308.cms

Looking forward to your thoughts, as I have for years.

Riaz Haq said...

Syed: "I was just wondering what you think about the recent commentary on something truly breathtaking: how India's growth rate has been overstated by as much as 2.5% per annum between 2012-17 (so, not the much trumpeted 7% annual growth, but more like 4.5%). "

I first wrote about it back in 2015.The title of post is "India's New GDP Figures: Modi Takes BS Seriously!"

I started it with the following quote from Wall Street Journal:

"The estimated “evacuation (defecation) rates” are 0.3 kilograms per day for goats and 0.8 kilograms per day for sheep. The study, titled “Positive Environmental Externalities of Livestock in Mixed Farming Systems of India,” was conducted jointly by the Central Institute for Research on Goats, in Makhdoom, Uttar Pradesh, and the National Center for Agricultural Economics and Policy Research in New Delhi. With all those “droplets” added in, the value of India’s livestock sector in the new GDP series is 9.1 billion rupees, or $150 million, higher than it was in the old series." Wall Street Journal on India's GDP Revisions


https://www.riazhaq.com/2015/04/indias-new-gdp-figures-modi-takes-bs.htmlTime is confirming that Modi's entire political career is based on lies.

His claims about "surgical strikes", hundreds dead in Balakot, shooting down of Pakistani F-16 have all been found baseless.

India has highest unemployment rate in 45 years and its economy ids not growing as fast as claimed and certainly not creating jobs for the burgeoning young population.

Riaz Haq said...

Risk looms in Southeast Asian economies amid industrial transfer from trade war

http://www.globaltimes.cn/content/1154194.shtml

Due to China's dwindling demographic dividend, rising production costs, and environmental protection pressure, many Chinese and foreign-invested companies in recent years have relocated their Chinese factories to Southeast Asia, where labor costs are lower. The intensified US-China trade frictions and deteriorating global trade environment have driven even more companies to move to Southeast Asian countries. However, the business environment in Southeast Asia is not as good as imagined, and industrial transfer doesn't mean that China has lost its competitiveness in the world manufacturing sector.

For instance, media reports indicate that the Cambodian garment manufacturing industry has seen a wave of shutdowns recently, for a number of reasons. First among them is an increase in labor costs. The minimum wage of Cambodian workers has jumped from $40 per month in 1997 to $182 per month this year. If various benefits and subsidies are included, the cost is up to $210 per month. By comparison, Bangladesh, Sri Lanka, India, Myanmar, Pakistan, and Laos all offer even lower labor costs for the garment industry. Another reason is Cambodia's incomplete supply chain. At present, the country's infrastructure and support facilities for industrial manufacturing are relatively weak, leading to relatively high overall costs. A third reason is low efficiency. According to some industry analysts, the productivity of Vietnam and Indonesian factories is about 80 percent of Chinese factories, while the productivity of Cambodian garment factories is only about 60 percent of China's. Additionally, workers' strikes and protests have increased difficulties for business operations, and there is uncertainty as to whether Cambodia's export price advantage will persist in the future. It is possible some garment companies will move out of Cambodia amid concerns over the possible suspension of EU trade preferences for the country.

Compared with Cambodia, countries like Vietnam and Malaysia may benefit more from the US-China trade war due to manufacturing transfer. According to a recent Nomura research report, the import substitution effect has been seen in 52 percent of tariffed goods during the US-China tariff war. Vietnam is regarded as the biggest beneficiary and could see a 7.9 percent increase in its GDP. This has prompted many to start planning investment in Southeast Asia so as to avoid risk from the trade war. Yet, these small Southeast Asian economies, represented by Vietnam, are currently facing both opportunities and challenges, which may lead to greater risks if not handled properly.

----------------

In addition, while a large number of companies left China due to costs, it doesn't mean China has completely lost its industrial advantages. China is undergoing economic restructuring, and its comprehensive industrial competitiveness and market space are incomparable to those Southeast Asian countries once it gets through the difficult stage. It should also be pointed out that in a world of excess production, the manufacturing capacity formed as a result of industrial transfer from China to Southeast Asian countries will make global overcapacity even more serious, which may trigger a new global economic crisis. These small economies will be hit harder once such a crisis breaks out.

Anonymous said...

http://www.kamakurashirts.net/shop/pages/400_m.aspx

Japanese shirt made from suvin gold cotton.
Indian scientific community successfully develop and market "Suvin Gold" the world's best cotton..sells for a premium over Giza 45 and Sea Island cotton...

Moving up the value chain at all levels including raw cotton !!!

Anonymous said...

Yes but Suvin Cotton is like Caviar.Constitutes 0.0004% of Indian cotton production.

Beautiful luxury product and a scientific feat by Indian Agro Scientists but statistically insignificant.

Most Indian cotton is short staple cotton.Indian textile industry is a very big net importer of high quality ELS cotton from Egypt and the US which it processes into finished fabrics.

However Suvin Cotton like Giza 45 and Sea Island Cotton is mostly processed into yarn and fabric outside India in Italy and Switzerland in mills such as Alumo and SIC Tess.

Riaz Haq said...

#Pakistan-#Qatar sign 3 MOUs during #Emir's visit to #Islamabad. 1. #trade/#investment, 2. Sharing #financial #intelligence to stop #MoneyLaundering, 3. #tourism and #business. #ImranKhanPrimeMinister https://www.dawn.com/news/1489767

Soon after his arrival, a one-on-one discussion between the two leaders was held at the Prime Minister House in Islamabad, followed by a delegation-level meeting between representatives from both countries in which "both the leaders covered the entire gamut of bilateral relations to enhance cooperation in diverse fields", according to a statement by the Prime Minister's Office.

Later, a ceremony was held to mark the signing of memoranda of understanding (MoU) between the two countries. The details of the agreements signed are listed below:

MoU on the establishment of Pakistan and Qatar Joint Working Group (JWG) on trade and investment signed by Qatar Finance Minister Ali Shareef Al Emadi and Advisor on Commerce Abdul Razak Dawood.
MoU for cooperation in the field of tourism and business events between Qatar and Pakistan signed by Secretary General of Qatar National Tourism Council Akbar Al Baker and Inter-Provincial Coordination Minister Dr Fehmida Mirza.
MoU on the establishment of cooperation in the field of exchange of financial intelligence related to money laundering associated predicate offences and terrorism financing between Qatar's Financial Information Unit and Pakistan's Financial Monitoring Unit. This was signed by Head of Qatar Financial Information Unit Sheikh Ahmed bin Eid Al Thani and Acting DG Financial Monitoring Unit Muneer Ahmad.
Engagements during visit
Qatar's Emir Sheikh Tamim bin Hamad Al Thani receiving a bouquet of flowers at Nur Khan airbase. — PID
The Qatari emir was accorded a red carpet welcome upon his arrival on Saturday evening at Rawalpindi's Nur Khan airbase. He was received by the premier who personally drove the leader from the airport to the Prime Minister House.

Prime Minister Imran Khan drove the Qatari leader to the PM House. — PID
At the Prime Minister House, an official welcome ceremony took place, during which personnel of all three services presented the Qatari leader a guard of honour.

Qatari emir inspecting the guard of honour. — PID
A fly-past of JF-17 Thunder jets also took place, followed by a brief gathering where introductions between delegations of both sides were held. The Qatari emir is accompanied by a high-level delegation comprising key ministers and senior officials.

Sheikh Al Thani also planted a sapling at the lawn of Prime Minister House as is customary when a foreign dignitary visits.

Tree sapling planted by the Qatari emir. — PID
He is visiting Pakistan after a break of over four years. He last toured Islamabad in March of 2015.

The Qatari leader will also meet President Arif Alvi tomorrow where an investiture ceremony is expected to be held.

A post on the prime minister's official Instagram account showed the premier signing a cricket bat for the visiting dignitary.

The Qatari leader also presented a sports jersey to the prime minister.

In an earlier Instagram post, Prime Minister Khan claimed the Qatari emir would announce a multi-billion dollar investment. This would be greater than the investment promised by Saudi Crown Prince Muhammad bin Salman earlier this year.

Riaz Haq said...

Govt to set up 1,000 garment stitching units

https://tribune.com.pk/story/1979951/2-govt-set-1000-garment-stitching-units/

In an effort to boost value addition in the garment sector, the Pakistan Tehreek-e-Insaf (PTI) government has revived the project of establishing 1,000 industrial stitching units, which will provide employment and business opportunities to youth of the country.

Though the project was approved by the previous Pakistan Muslim League-Nawaz (PML-N) government, it came to a halt as the previous administration could not earmark funds for the project from the Public Sector Development Programme (PSDP) for the ongoing financial year 2018-19.

However, the present government has endorsed the transfer of funds from the “Research/Holding of Workshops and Technical and Feasibility Studies” programme for the “Establishment of 1,000 Industrial Stitching Units” project to give it a fresh lease of life.

According to officials, the government will set up 1,000 industrial stitching units across the country in a bid to encourage young entrepreneurs and boost value addition in the garment sector. The Economic Coordination Committee (ECC) of the cabinet was informed in a meeting that the Textile Division had envisaged a project titled “Establishment of 1,000 Industrial Stitching Units” in order to promote public-private partnership and boost value addition in the field of textile garments. The stitching units would be set up through strengthening small and medium enterprises (SMEs), the ECC was told.

Some 60% of the funding for purchase of machinery for the stitching units will be provided from the PSDP whereas 40% of the cost will be borne by the owners of stitching units. The purpose of the project is to provide job and business opportunities to the youth at their doorsteps.

The Central Development Working Party (CDWP) approved first phase of the project for setting up 150 industrial stitching units on January 15, 2018 during the tenure of previous PML-N government at a cost of Rs350.54 million without any foreign exchange component with 40% equity share. However, no allocation was made from the PSDP during the current financial year.

Consequently, the Textile Division approached the Planning Commission for the allocation of funds out of the savings of PSDP 2018-19.

The Planning Commission approved Rs46 million for the project out of the blocked allocation for the “Research/Holding of Workshops and Technical and Feasibility Studies” project, which was available in the development grant of the Ministry of Planning and Development. The Finance Division has endorsed the proposal.

The Textile Division proposed that allocation of Rs46.2 million may be approved for the project through the transfer for funds from the development grant during the current financial year.

The ECC considered the Textile Division’s summary and approved allocation of Rs46.2 million in favour of the project by transferring funds through the technical supplementary grant.

Riaz Haq said...

Chinese Companies To Relocate Factories To Pakistan Under CPEC Project

https://eurasiantimes.com/chinese-companies-to-relocate-factories-to-pakistan-under-cpec-project/

Several Chinese organisations have shown enthusiasm to relocate their industrial units to Pakistan in the second phase of industrialisation under the China-Pakistan Economic Corridor (CPEC) according to media reports.


Chinese manufacturing units of textile and leather would be relocated to Faisalabad. Chinese company Long March International would also set up a tyre manufacturing plant in Pakistan, revealed advisor to PM Imran Khan – AR Dawood while addressing a press conference, along with Chinese Ambassador to Pakistan Yao Jing, on Friday.

“We have not given attention and the Chinese industry has been relocated to the Far East, Ethiopia and Egypt. We should grab the opportunity this time around,” the PM adviser emphasised.

He said the government would prefer the Chinese companies forming joint ventures with Pakistani companies. Earlier, they were focused on imports. “Shifting and trading ‘Make in Pakistan’ products is our priority to increase exports,” he said.

“If Chinese companies do not enter into joint ventures with Pakistani companies, we will allow them 100% ownership,” he said, adding the relocation of Chinese industrial units would create job opportunities and enhance skills of local people.

Pakistan is eagerly awaiting the benefits of relocating the Chinese industry to Pakistan in the second phase of industrialisation under CPEC, which will help increase exports.

China has also expressed its willingness to relocate its industrial units to Pakistan. It wants Pakistan to make policies more attractive for investors in order to address the challenges of the next phase of industrialisation.

Speaking on the occasion, Chinese Ambassador Yao Jing said if policies were good and attractive, challenges would be less. Pakistan had streamlined its visa policy but the process of obtaining the visa was too long.

Chinese giant Li Fung, having a value of $60 billion and operating in 50 countries, produces goods on behalf of suppliers. It is currently placing an order with Pakistan worth $100 million and plans to enhance it to $1 billion later this year.

Riaz Haq said...

Asia labor costs and China manufacturing relocation impact considerations

https://www.ventureoutsource.com/contract-manufacturing/asia-labor-costs-china-manufacturing-relocation-impact-considerations/
Below, the annual cost (average) per manufacturer worker in China, Thailand, Malaysia, Indonesia, Pakistan, Philippines, India, Vietnam per Japan external trade organization (JETRO).

Average annual cost of a manufacturing worker (US$, 2017)

China: $10,131
Thailand: $6,997
Malaysia: $5,900
Indonesia: $5,421
Pakistan: $4,379
Philippines: $4,102
India: $3,982
Vietnam: $3,673

Riaz Haq said...

#Asia #Pacific trade pact can go on without #India 'for the time being' as China grows impatient with the slow progress on the #RCEP talks. #Malaysian PM Mahathir proposes going ahead with just 13 countries — without #India, #Australia and #NewZealand. https://cnb.cx/2L91HdL

Malaysian Prime Minister Mahathir Mohamad said on Saturday that he’s willing to conclude a mega Asia-Pacific trade agreement without India “for the time being.”

Mahathir was referring to the Regional Comprehensive Economic Partnership, or RCEP, which involves 16 countries in Asia Pacific. Negotiations have been going on since 2013, with one of the major sticking points being India’s reluctance to open up its markets.

A recent report by Nikkei Asian Review said China, growing impatient with the slow progress on RCEP talks, proposed going ahead with just 13 countries — removing India, Australia and New Zealand from the deal.

The 16 countries involved in RCEP are the 10 Southeast Asian nations and six of their large trading partners: China, Japan, South Korea, India, Australia and New Zealand. If the agreement is finalized, the 16 countries will form a major trading bloc that covers around one-third of the world’s gross domestic product.

GP 190621 Containers at Lianyungang Port
Aerial view of shipping containers sitting stacked at Lianyungang Port on June 3, 2019 in Lianyungang, Jiangsu Province of China.
Wang Jianmin | Visual China Group | Getty Images
In an interview with CNBC’s Tanvir Gill, Mahathir acknowledged the hurdles in reaching a deal among the 16 countries.

“I think we will work towards it. It’s quite difficult because we are competing economies ... we’re competing with each other and from there, to go on to work together requires some radical change in our mindset. That will take time,” he said in Bangkok, Thailand, where he’s attending a summit for the Association of Southeast Asian Nations.

In the end, we have to stop this trade war and certainly not to escalate (it).
Mahathir Mohamad
MALAYSIAN PRIME MINISTER
The Malaysian leader added that RCEP participants will have to consider which framework works best: China’s proposed 13-nation deal or the original one involving all 16 countries.

“But I think I would prefer 13 ... for the time being,” he said, suggesting he’s open to having India, Australia and New Zealand joining the pact in the future.

Trade war escalation
Several participating countries of RCEP have expressed hopes of coming to an agreement by the end of this year, as they say the U.S.-China tariff fight has brought fresh urgency to wrap up talks in Asia Pacific.

U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet later this month at the G-20 summit in Japan. But Mahathir — like many who follow the developments closely — said he doesn’t expect much to come out of that meeting.


Taking sides in the trade war will be a ‘disaster for the world:’ Mahathir
Malaysia has often been cited as one of the beneficiaries of the trade war as companies move production out of China to circumvent elevated U.S. tariffs. Muhammed Abdul Khalid, an economic advisor to Mahathir, told CNBC in May that the Southeast Asian nation’s growth is set to gain an additional 0.1 percentage points due to the trade diversions to his country.

While that’s good for Malaysia, Mahathir on Saturday cautioned that such benefits may only be temporary. He explained that if there’s a change in government in the U.S., the new administration may have a new set of policies that could once again prompt companies to rethink where they want to locate their production and supply chains.

“In the short term, I think it is good news. But in the end, we have to stop this trade war and certainly not to escalate (it),” he said.