Indonesia Ponders TPP Membership

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May 8 – The Indonesian government has shown interest in joining the United States-led Trans-Pacific Partnership (TPP), saying that its entry into the TPP negotiations would depend on trade agreements with key partners in the region.

The TPP is a trade bloc that links together trans-pacific nations, negotiations for which began in 2005. The countries that are part of or are negotiating on the TPP include Brunei, Chile, New Zealand, Singapore, the United States (U.S.), Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan. Their combined gross domestic product (GDP) accounts for US$21 trillion or 30 percent of global output.

Taiwan, Thailand, the Philippines, Laos, Colombia and Costa Rica have all also expressed interest in joining the partnership, which aims to assist lesser developed manufacturing nations conform to internationally held standards.

The scope of the TPP includes agricultural products, textiles, intellectual property rights, services and investments, state-owned enterprises, environmental protection and labor.

China has not been asked to join this partnership, which many analysts view as a move to decrease dependence on Chinese imports. For example, the successful implementation of the TPP may shift a large proportion of China’s textiles industry to Vietnam. The exclusion of China in TPP  negotiations has subsequently been met by criticism from China.

Indonesian Trade Minister Gita Wirjawan hinted that Indonesia may join the negotiations after significant progress was made on both Indonesia’s trade agreement with South Korea and the Regional Comprehensive Economic Partnership (RCEP) – a regional agreement between ASEAN, Australia, China, India, Japan, South Korea and New Zealand. The RCEP would create an economic bloc of over 3 billion people with a combined economic output of US$17.23 trillion by 2015.

In addition, Indonesia hopes to conclude a Comprehensive Economic Partnership Agreement (CEPA) with South Korea to help boost two-way trade to US$100 billion by 2020 by the end of the year.

“If talks on the RCEP and CEPA with Korea go well — apart from similar talks with partners either bilaterally or multilaterally — they will boost our mood to pursue other negotiations. It will not be impossible for us to seek other alternatives, including the TPP,” Wirjawan affirmed.

Indonesia had previously maintained a firm stance of not taking part in the TPP negotiations, as it was uncertain of any significant benefits that may arise out of the pact. However, Wirjawan’s statement may reflect new thinking over the TPP within Indonesia, perhaps to aid in the development of a future extensive Free Trade Area of the Asia Pacific (FTAAP) — an area that would represent 44 percent of global trade and 54 percent of global economic output. Furthermore, 27 percent of all Indonesian exports are sent to the countries currently in or negotiating on the TPP.

Djisman Simanjuntak, a senior economist at the Centre for Strategic and International Studies (CSIS), comments that “if the TPP progresses, but the RCEP stalls, I think Indonesia would have no choice but to consider joining.”

According to a study from the U.S. think tank Peterson Institute for International Economics, Indonesia’s GDP is estimated to rise 4 percent above baseline by 2025 if it joins the partnership. In addition, Indonesia’s exports are expected to increase by around 20 percent as a result of joining. The pact will also allow Indonesian exports to the U.S. to better compete with similar goods from China and Vietnam.

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