Trans-Pacific Partnership: To join or not to join? - Poppy S. Winanti

Trans-Pacific Partnership: To join or not to join?

Filled under: Articles / 16 May 2016 / Hits: 759

Trade-Pacific Partnership the (TPP), billed as among the biggest trade deals in history, against all odds, was concluded on Oct. 5 despite the fact that weeks prior to the conclusion sharp differences were prevalent among its participating countries on crucial aspects.

The 12 countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam) agreed to conclude the first round of negotiations. 

Pending ratification of its signatories, however, the TPP will remain a document.

Such process is tough, even in the US, the main advocate of TPP. Even though President Barack Obama, who received President Joko 'Jokowi' Widodo on Monday, has been granted Trade Promotion Authority (TPA), which will provide a way for the TPP to be implemented, current US domestic politics approaching the election will not be easy for its ratification process.

Nevertheless, the conclusion of the trade pact, which accounts for around 40 percent of global gross domestic product (GDP) and two-thirds of world trade, looks to leave Indonesia behind. Adding to the pressure is the fact that four ASEAN members (Singapore, Malaysia, Vietnam and Brunei) and three Regional Comprehensive Economic Partnership (RCEP) negotiating partners, New Zealand, Australia and Japan, are parties to the TPP. 

Their involvement in the TPP has sparked worry that they will lose their interest in concluding RCEP negotiations. The question is, should Indonesia remain outside of the deal or join the club? 

The TPP is regarded as 'beyond WTO trade deals'. Under the TPP, we are not talking merely about greater market access and trade liberalization. 

Trade liberalization is perceived as already given not only under the TPP but any other trade agreements ranging from the North American Free Trade Agreement (NAFTA) to the ASEAN Economic Community (AEC). 
 
Indonesia will lose its competitive advantage against TPP member countries

Under the TPP, we are dealing with different trade-issue aspects. the TPP not only covers market access for trade agendas that have also been under negotiation during the current Doha Round negotiations but also higher standards for those aspects.

This is evident in, for example, stricter and more rigorous standards for intellectual property rights, which give more privilege to the intellectual property rights owners. This aspect had created a feud between Australia and the US a few weeks before the TPP deal was struck. 

In addition, some controversial trade agendas, which have been postponed indefinitely in the WTO trade negotiations, such as labor and environmental standards, government procurement, competition policy and investment, managed to become part of the TPP deals. 

Along with these controversial agendas, the TPP also includes non-WTO trade agendas, such as provisions regarding small and medium enterprises (SMEs), state-owned enterprises (SOEs) and also investor-state dispute settlement (ISDS). 

This 'beyond WTO' nature obviously should be taken into account when Indonesia ponders inclusion in the TPP. Indonesia should carefully consider the cost of implementing those higher trade standards. 

Is the government willing to diminish its support for SOEs as part of its obligations under the TPP? Does the government dare to grant even greater privilege to intellectual property rights owners at the expense of public interest? 

Is the government ready to face lawsuits filed by foreign companies with international arbitration in times of dispute? These questions need to be answered carefully in order to assess what Indonesia will need to compromise as part of the TPP deals. 

A part from that, as a late comer, Indonesia will be obliged to comply with the agreed standards and would not have any chance to renegotiate what has been agreed to prior to Indonesis's accession. This will put Indonesia, again, as an agenda taker rather than an agenda setter. 

On the other hand, some may perceive that joining the club will be beneficial for Indonesia, at least in the long term. Joining a regional economic integration with high standards like the TPP will force domestic reform, which is difficult, if not possible, without any external pressures. 

In this context, as professor of economics Dani Rodrik argues, responding to international obligations can be seen as a way to domestic reform. This is, surely, a very legitimate reason, particularly for those who are quite frustrated by the foot-dragging reform at home and those who intend to advance Indonesia and help the country pursue high acceptable international trade standards. 

Moreover, some ASEAN members and RCEP negotiating parties are already joining the TPP. This peer pressure will put Indonesia in a situation where it will endure disadvantages of having no access to the TPP market. 

In particular, Indonesia will lose its competitive advantage against TPP member countries that produce similar commodities for export. 

This immediate economic loss, therefore, should also be taken into account when Indonesia decides whether or not to join the TPP. 

In conclusion, Indonesia's final say on TPP should follow thorough assessment. Unlike other trade agreements under the WTO that have placed Indonesia in a situation where it has no option, responding to the TPP essentially leaves Indonesia with options. 

Indonesia still has a chance to carefully assess its intention. In this regard, therefore, thorough political and economic assessment is needed to calculate whether the cost of joining really outweighs the cost of remaining outside the TPP.
 
Original source: The Jakarta Post  


Updated: 16 May 2016