Small States, Big Stakes: ASEAN’s Narrowing Space for Collective Agency

The Indo-Pacific region stands at a critical juncture. Intensifying US-China rivalry, rising trade protectionism, supply chain disruptions and broader geoeconomic and geopolitical risks are testing the resilience of the existing regional order. The recent energy crisis triggered by the US-Iran war further underscores the region’s vulnerability to external shocks. These disruptive developments do more than test the regional order, they are narrowing the window for small states and middle powers to exercise meaningful agency within it. In this context, the central question is no longer simply whether ‘ASEAN matters’, but whether the conditions that once made ASEAN’s agency possible are eroding faster than it can adapt.

For this discussion, small states and middle powers can be understood in more practical rather than theoretical terms. Small states command limited material resources and strategic weight while middle powers may possess significant economic, diplomatic and institutional capabilities but still lack the system-shaping coercive power of great powers. Japan, South Korea and Australia, for example, are important Indo-Pacific actors and active participants in global and regional frameworks such as the G20, Quad and APEC. However, their ability to shape major geopolitical outcomes remain constrained when compared to the US and China. The US-Iran war illustrates this point. Although most of the oil and gas transiting through the Strait of Hormuz is destined for Asia, even these established middle powers had little influence over the course of the conflict or its resolution.

The harsh reality is that small states and middle powers face significant structural constraints. The pressures confronting them are intensifying, while the space for strategic hedging and manoeuvre is narrowing. Economic coercion, especially through trade policy, has become a frequent tool for great-power statecraft. The US’ more assertive use of trade tariffs illustrates this shift: from reciprocal tariff measures imposed last year to more legalistic instruments such as Section 301 investigations (of the US Trade Act of 1974). These investigations, affecting major trading partners including several ASEAN member states (AMS), have targeted issues such as forced labour enforcement, manufacturing overcapacity, and intellectual property protection and enforcement. For AMS, this puts them in a difficult bind: compliance with US enforcement positions risks straining economic ties with China, their largest trading partner, while resistance invites further unilateral pressure. ASEAN’s traditional strategic neutrality can therefore become a source of vulnerability rather than an asset.

The US-Iran war may be an exceptional case but nonetheless illustrates a broader structural reality. Middle powers may possess some diplomatic influence and economic capabilities, but they lack the military might, economic scale and coercive leverage of great powers to dominate or decisively shape global outcomes. That said, dominance is not the only measure of influence. Small states and middle powers may lack the capacity to unilaterally determine global outcomes, but can exercise strategic agency in shaping the regional order through coalition-building, institutional engagement, agenda-setting and diplomatic coordination.

In this regard, ASEAN offers an important example. Established in 1967, ASEAN is the most consequential multilateral institution in the region. It was built and sustained not by great powers but by smaller states that recognised the value of regional cooperation and common frameworks for dialogue. ASEAN’s emphasis on regional economic cooperation and integration over the past few decades has resulted in a combined GDP of US$3.9 trillion in 2024, making it Asia’s third largest economy after China and Japan. These efforts have produced a durable institutional structure and mechanisms that treat all member states equally through its consensus-based decision-making. Even as geopolitical fault lines deepen, ASEAN retains the convening power to bring major powers together through its regular summits and ministerial meetings as well as platforms for economic and technical cooperation. This demonstrates how rules and norms developed by smaller states can acquire genuine regional weight.

Another example of ASEAN’s growing economic clout and coalition-building capacity is the Regional Comprehensive Economic Partnership (RCEP), which is the world’s largest free trade agreement (FTA), accounting for a third of global GDP. Driven by ASEAN, RCEP came into force in 2022 and brings together all AMS with China, Japan, South Korea, Australia and New Zealand. It is worth noting that this is the first FTA in which China, Japan and South Korea participate as equal partners in part because the trade pact was driven by ASEAN as a diplomatically neutral convenor.

These achievements were possible largely because ASEAN could position itself as a credible convenor, a role that depends on a degree of great-power tolerance for multilateral frameworks that is now severely under strain. RCEP’s success was predicated on conditions that are steadily eroding: US support for international rules-based trade, manageable US-China rivalry and ASEAN’s ability to engage economically with both superpowers.

ASEAN also wields influence beyond its size because it sits across critical nodes in global supply chains and hosts regional hubs in key sectors such as financial services, logistics, high technology and manufacturing. It is further seeking to future-proof its regional relevance through the ASEAN Digital Economy Framework Agreement (DEFA), concluded in May 2026 and expected to be signed at the 49th ASEAN Summit in Manila, Philippines, in November. These strengths were reinforced for decades by ASEAN’s ability to hedge strategically between the US and China, allowing global supply chains and production networks to flourish across the region. However, intensifying competition between the two superpowers is making this position increasingly more difficult to sustain.

AMS cannot eliminate their structural constraints, nor can they fully insulate themselves from economic coercion, great-power rivalry or external shocks. The urgency of the moment demands more than incremental adaptation of institutions and mechanisms. ASEAN must accelerate regional integration through initiatives like the ASEAN Economic Community (AEC), RCEP and DEFA, not as a shield against all disruptions, but as a buffer that strengthens regional resilience against future shocks. At the same time, ASEAN should defend and deepen the institutional architecture of summits, ministerial meetings and consensus-based frameworks that underpin its credible convening power. These are not relics of the past but are precisely the multilateral mechanisms that great powers cannot easily ignore.

The window for exercising collective agency is narrowing. Incremental institutional adaptation is no longer sufficient. The cost of delay is not merely diplomatic; it is strategic. In an increasingly contested Indo-Pacific, ASEAN’s collective agency has never been more consequential.

Editor’s Note:
ASEANFocus+ articles are timely critical insight pieces published by the ASEAN Studies Centre.