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JAKARTA
POST, 01 Juli 2013
With the 18th round of the Trans Pacific Partnership (TPP)
negotiations coming up in Malaysia this July, Japan, as the 12th country to
join the TPP, is gearing up to take part in the negotiations after it was
accepted by participating countries last April.
Japan’s participation in the TPP sends out a signal to China, Korea and other ASEAN member states about the urgent need to join the TPP.
With Brunei, Malaysia, Vietnam and Singapore in the TPP, and the Philippines and Thailand considering the possibility, the following question is inevitable: Is the TPP bandwagon leaving Indonesia behind, particularly in regard to its fellow ASEAN member states?
The stalled WTO Doha Round and the global financial and economic crises have forced countries and regions to resort to trade protectionist measures. The absence of world trade rules has prompted regions and countries to opt for bilateral and regional free-trade agreements (FTAs).
The Asia-Pacific region is witnessing the rapid proliferation of FTAs, thus placing it at the forefront of global FTAs. One of these FTA initiatives is the proposed US-led TPP, which is envisioned as a comprehensive, next-generation regional agreement that is designed to liberalize trade and investment, as well as tackle new and traditional trade issues and challenges in the 21st century.
One of the countries expected to join the TPP is Indonesia. As the world’s 16th largest economy, Indonesia is the biggest market in Southeast Asia, boasting a burgeoning consumer class of 45 million people.
These numbers, and their potential to provide for new markets, make it inevitable for Indonesia to be invited to take part in this initiative, as the country’s participation and its leadership in the region is crucial to the success of any FTA in Southeast Asia.
Many analysts have argued, time and again, about whether Indonesia should or should not join the TPP. For this reason, it is necessary to identify the TPP’s place within the context of the regional economic architecture and its relations vis-à-vis other FTA initiatives in the region.
It is also necessary for Indonesia to weigh the costs and benefits that the TPP would bring, and to consider developing a multi-faceted trade strategy to determine how best to use these FTAs to sustain Indonesia’s strong economic growth.
While the TPP would undoubtedly bring opportunities and benefits to Indonesia, in my opinion the country is not ready yet to join the TPP as Indonesia still has to primarily focus on the establishment of the ASEAN Economic Community (AEC) and negotiations of the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) as a gradual process to improve its competitiveness.
Moreover, some analysts also argue that the TPP might potentially threaten the centrality of ASEAN, which is still in the community-building process, and is therefore not a strong and cohesive organization yet.
Though I believe that Indonesia is still not ready to join the TPP, there is no denying that it will have important implications for the country’s trade, investment and GDP.
In addition, the TPP may potentially bring many benefits for Indonesia, such as access to the US market and those of other developed markets such as Canada, Australia and New Zealand.
In addition, it is imperative for Indonesia to be present in the early stages of the negotiations, in order to take part in the formative phase of the TPP.
In relation to this, it is my view that Indonesia should not rule out the possibility of joining the TPP, and that it should join the TPP in the medium or long term.
This is particularly relevant in light of the fact that there are four ASEAN member states that are members of the TPP and the RCEP. Consequently, these countries could have an advantage over Indonesia with regard to access to the US and other major TPP economies.
The losses would grow even higher if other ASEAN members joined the TPP while Indonesia stayed out. As a result, Indonesia may also suffer trade diversion and a small decline in its GDP.
Whether or not Indonesia decides to join the TPP in the medium or long term, it still needs to make a choice between furthering integration within the ASEAN/ASEAN+3 through the RCEP and joining the TPP for the following reasons: First, Indonesia can, and should be, members of both the RCEP and TPP in the future.
For starters, Indonesia might wish to consider applying for observer status in the TPP, as was done by Vietnam before it became a full member at the fourth round of negotiations.
Second, it could also be argued that the TPP and RCEP are not competing initiatives, but are instead processes that complement one another, since they could both be viewed as building blocks to achieving regional integration in the Asia Pacific region through the formation of the APEC Free Trade Area of the Asia Pacific (FTAAP), contained in the Busan Roadmap and various APEC declarations. Hence, this will make liberalization of trade and investment in the Asia-Pacific region inevitable. ●
Japan’s participation in the TPP sends out a signal to China, Korea and other ASEAN member states about the urgent need to join the TPP.
With Brunei, Malaysia, Vietnam and Singapore in the TPP, and the Philippines and Thailand considering the possibility, the following question is inevitable: Is the TPP bandwagon leaving Indonesia behind, particularly in regard to its fellow ASEAN member states?
The stalled WTO Doha Round and the global financial and economic crises have forced countries and regions to resort to trade protectionist measures. The absence of world trade rules has prompted regions and countries to opt for bilateral and regional free-trade agreements (FTAs).
The Asia-Pacific region is witnessing the rapid proliferation of FTAs, thus placing it at the forefront of global FTAs. One of these FTA initiatives is the proposed US-led TPP, which is envisioned as a comprehensive, next-generation regional agreement that is designed to liberalize trade and investment, as well as tackle new and traditional trade issues and challenges in the 21st century.
One of the countries expected to join the TPP is Indonesia. As the world’s 16th largest economy, Indonesia is the biggest market in Southeast Asia, boasting a burgeoning consumer class of 45 million people.
These numbers, and their potential to provide for new markets, make it inevitable for Indonesia to be invited to take part in this initiative, as the country’s participation and its leadership in the region is crucial to the success of any FTA in Southeast Asia.
Many analysts have argued, time and again, about whether Indonesia should or should not join the TPP. For this reason, it is necessary to identify the TPP’s place within the context of the regional economic architecture and its relations vis-à-vis other FTA initiatives in the region.
It is also necessary for Indonesia to weigh the costs and benefits that the TPP would bring, and to consider developing a multi-faceted trade strategy to determine how best to use these FTAs to sustain Indonesia’s strong economic growth.
While the TPP would undoubtedly bring opportunities and benefits to Indonesia, in my opinion the country is not ready yet to join the TPP as Indonesia still has to primarily focus on the establishment of the ASEAN Economic Community (AEC) and negotiations of the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) as a gradual process to improve its competitiveness.
Moreover, some analysts also argue that the TPP might potentially threaten the centrality of ASEAN, which is still in the community-building process, and is therefore not a strong and cohesive organization yet.
Though I believe that Indonesia is still not ready to join the TPP, there is no denying that it will have important implications for the country’s trade, investment and GDP.
In addition, the TPP may potentially bring many benefits for Indonesia, such as access to the US market and those of other developed markets such as Canada, Australia and New Zealand.
In addition, it is imperative for Indonesia to be present in the early stages of the negotiations, in order to take part in the formative phase of the TPP.
In relation to this, it is my view that Indonesia should not rule out the possibility of joining the TPP, and that it should join the TPP in the medium or long term.
This is particularly relevant in light of the fact that there are four ASEAN member states that are members of the TPP and the RCEP. Consequently, these countries could have an advantage over Indonesia with regard to access to the US and other major TPP economies.
The losses would grow even higher if other ASEAN members joined the TPP while Indonesia stayed out. As a result, Indonesia may also suffer trade diversion and a small decline in its GDP.
Whether or not Indonesia decides to join the TPP in the medium or long term, it still needs to make a choice between furthering integration within the ASEAN/ASEAN+3 through the RCEP and joining the TPP for the following reasons: First, Indonesia can, and should be, members of both the RCEP and TPP in the future.
For starters, Indonesia might wish to consider applying for observer status in the TPP, as was done by Vietnam before it became a full member at the fourth round of negotiations.
Second, it could also be argued that the TPP and RCEP are not competing initiatives, but are instead processes that complement one another, since they could both be viewed as building blocks to achieving regional integration in the Asia Pacific region through the formation of the APEC Free Trade Area of the Asia Pacific (FTAAP), contained in the Busan Roadmap and various APEC declarations. Hence, this will make liberalization of trade and investment in the Asia-Pacific region inevitable. ●
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