Why Indonesia Should Not Join the Trans-Pacific
Partnership (TPP)?
After many negotiations,
Indonesia is still reluctant to join
the TPP, a free trade agreement
between countries surrounding
the Pacific Ocean, for several
valid reasons. Negotiations for
the TPP began in 2005 adding up
to 18 discussions as of 2013.
Despite having the 16th largest
economy in the world and the
biggest market in Southeast Asia,
Indonesia should not join the
TPP. They believe that they need
to improve the country’s
competitiveness by dealing with
their other trade agreements
such as the Regional
Comprehensive Economic
Partnership (RCEP) and by
improving inadequate
infrastructure and high costs.
They are currently the chair of
the RCEP trade negotiation
committee. The RCEP is
estimated to give the countries
involved income gains of $644
billion by 2025, which is equal to
0.6 percent of the world’s GDP
because of faster flow of goods,
services and investments and
labor. Indonesia in particular,
will expect a 1 percent increase
in GDP. Countries involved in the
RCEP include China, India and
Japan three of the largest
economies of the world.
Choosing to trade with these
countries rather than those in
the TPP will benefit Indonesia
more. The monetary gains from
the RCEP if it is well established
will be higher than the gains
Indonesia would receive from
the TPP leading us to believe
there is no significant benefit for
Indonesia to join the TPP.
Overall, Indonesia holds negative
feelings about liberalization of
their market. President Joko
‘Jokwi’ Widodo said after a
meeting with the Asian-Pacific
Economic Corporation about the
TPP, “Do not allow them to open
the market and flood our market
with their products.” He fears
that the large countries involved
in the TPP will overpower
Indonesia’s markets. Indonesia
favors government regulations
and enforces measures to
restrict imports in agriculture.
Readers should stay informed about this issue and keep an eye out
for Indonesia on their future action regarding the TPP.
Email comments or questions to fricket@arps.org
Responses
6/13/15
Fernanda&Maya: Good approach to compare the TPP and RCEP
on how they might benefit Indonesia. One question: WHY would
the gains from the RCEP be better than the TPP? Also, is
President Joko's opposition to the TPP based on valid economic
grounds, or are there political reasons for his opposition?
6/15/15
Great use of the Joko Widodo quotation - I was hoping for hear
some directly from Indonesians in your analysis. Can you
elaborate on the prospects for RCEP versus TPP? How can
economists credibly estimate the impact of either? Is it possible
that the two trade pacts will create rival systems? Maybe even
hostile systems that are not interdependent but instead
competitors for limited resources and markets? Are we headed
for a new era of quasi-imperial rivalry?
Has a free trade pact ever led to kind of flooding of local markets
that the Indonesian president warned about? NAFTA and the fate
of Mexican producers might be a guide there.
6/15/15
I understand that the RCEP and TPP could clash if they worked
together, but what kinds of benefits would Indonesia miss out on if
they join the RCEP rather than the TPP? Also, one of your
sources points out that some of Indonesia’s competitors are
joining both, and they could reap the benefits of both trade
agreements, why is it best for Indonesia to stick with only the
RCEP when they could be left behind by the competitors joining
both and getting both benefits?
Is the invasion of the Indonesian markets with outside products
something that does not happen with the RCEP as mentioned in
the quote from president Joko ‘Jokwi’ Widodo?
Are they concerned with being left behind if they don’t join the
TPP? Or do they consider themselves ok because of their RCEP
agreement with their neighbors? It seems like joining together in
partnership with some of the biggest and strongest economies
around the world should provide them with benefits and
strengthen their economy, even if there are segments of the
agreement that they do not like.
Nice work!
Meghan
6/15/15
I have to wonder why Indonesia should avoid the TPP in
favor of the RCEP. Sure there is a possibility greater short term
gains from the RCEP if it is well established, but I feel that if is an
important word there. It also has greater hurdles to overcome,
such as the strained political tensions between member nations.
Additionally, lifting the trade barriers of China and India would be
a risky move, as both countries have experienced growth slowdowns recently. The TPP and RCEP both have their own set of
benefits and peculiarities, and I’m not sure if one should be
excluded in favor of the other.
Adding Widodo’s perspective was a good move, it adds a lot
to the argument, but I would like to hear more from that on why he
is afraid of being flooded with products. From what does he draw
his conclusion? Your points were clear. I see that Indonesia
should be focusing on current costs like infrastructure, and I can
understand why in the short term Indonesia wants to avoid the
TPP.
Owen
6/15/15
Fernanda and Maya:
Good job incorporating quotes, images and quantitative evidence
into your website.
What gains would they receive if they were to join the TPP?
Why doesn't Indonesia want imports from the U.S.?
It was helpful that you added background on TPP as an
introduction.
The map really helped put the effects of TPP in perspective.
When you say: "Despite having the 16th largest economy in the
world and the biggest market in Southeast Asia, Indonesia should
not join the TPP," are you implying that being a big economy
makes the TPP more beneficial and if so, why does having a
large economy make it seem apparent that it would be beneficial
for them to join.
Rowan