Many Asian countries, affected by the US downturn, are worried and trying to cushion themselves against the severe effects of the downturn. They fear the phantom of protectionism will return to haunt them.By Manik Mehta, AJOTWherever you go in Asia – be it Mumbai in India, Bangkok in Thailand, Kuala Lumpur in Malaysia, Shanghai and Hong Kong in China – you get to hear the same questions: When is the US economic crisis, which is adversely affecting most Asian economies, coming to an end? Can the stimulus package just signed by President Barack Obama help resuscitate the ailing economy? Will America retreat into a cocoon of protectionism? As the economic crisis deepens in the United States, the most important single market for many Asian supplying countries, there is grave concern in Asia that a worsening of the situation could lead to social unrest and even political instability as supplying factories close down and the hordes of jobless people continue to grow. Indeed, there are fears of a Domino effect across Asia. China is a classic example of how declining orders from the United States, where consumer demand has plummeted, are feeding fears of social and political turmoil in the country that is passing through a very critical stage. Indeed, the downturn in China has also affected trade with other nations. Its trade with Taiwan, for example, has contracted since the third quarter of 2008, raising doubts about the outlook for trade between the two in the current year. “Bilateral trade grew steadily since 2002, with particularly large gains between 2002 and 2004. In 2008, however, such growth slowed. During the first 10 months, two-way trade totaled US$93.96 billion, up 12.5% year-on-year, representing a 2.5 percentage point drop over the gain for the same period a year before that,” says an official of Taiwan’s Economics Ministry. Taiwan’s trade surplus with China had also slowed down during the period. China’s slowdown , a direct chain reaction from the US meltdown, has also caused a change in Taiwan’s trade pattern with China. Taiwan’s exports mainly are electrical equipment and parts; optical and photographic equipment, components, plastics and plastic products, machinery and parts and organic chemical products. However, as the crisis deepened in China, Taiwan recorded its highest growth in exports of fossil fuels (+320.4%) followed by organic chemical products, rising by 34.7%, and optical and photographic equipment and components, up 33.6%. The categories that performed poorest were steel, machinery and parts, synthetic fiber yarn, and copper and copper products. While China and Taiwan are trying out various measures to soften the blow of the economic turmoil in the United States, other countries in Asia are reacting differently to the changing demand and supply situation in the United States. MALAYSIA LOGISTICS SECTOR Malaysia, for example, is working fast to adapt to the changing situation in the United States that is its biggest export market. Malaysia, whose economy is becoming increasingly service oriented, is taking steps to further strengthen its logistics sector and upgrade its infrastructure. Jalilah Baba, the director general of the Malaysian Industrial Development Authority (MIDA), the investment promotion arm of the government, is bullish about Malaysia’s logistics sector, citing the country’s “excellent infrastructure and strategic location” in a region which is vital to global sea trade. Malaysia views the logistics sector as an important factor for its future development; it is trying to position itself now in preparation for the day when the US and, with it, the world economy makes a recovery. “The significance of the logistics sector for Malaysia’s economy can be seen from its contribution of 7.49% to the national GDP in 2007,” Jalilah explained in an interview with American Journal of Transportation in her office in Kuala Lumpur. Malaysia’s logistics sector has been elevated from a suppor