Abstract
By offering the Trade Sustainability Impact Assessment (TSIA) assessment tools and beyond, the article discusses economic and non-economic aspects worth considering in light of Indonesia’s interest to join the Trans-Pacific Partnership (TPP). It identifies trade and non-trade elements of which future signatories of TPP Agreement such as Indonesia must take into account prior to its final decision on whether to join. Utilizing sustainable development perspective to assess a free trade agreement (FTA), TSIA offers a distinctive feature of measuring not only an FTA economic impact, but also non-trade ones that potentially arise from the agreement. This chapter accordingly offers a framework by which a careful and thorough assessment is required and of which rational calculation is settled on whether the benefits of joining TPP would outweigh the costs of remaining outside the agreement.
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Notes
- 1.
The agreement is designed as a comprehensive 21st century trade agreement for the Pacific Rim in order to achieve trade liberalization, not only in goods and services, but also in trade aspects beyond the WTO trade negotiations (see e.g. Fergusson (2013), Fergusson and Vaughn (2011), Winanti (2015) for elaborate explanation).
- 2.
Key objectives of the TPP Agreement are greater market liberalization in which signatories will also have to deal with different aspects of trade issues. It thus does not only cover market access for trade agendas negotiated under the WTO Doha Round. Instead, it will increase standards in many areas, such as on provisions that heighten intellectual property rights protection. Several controversial trade agendas which were postponed in the WTO trade negotiations, such as labour and environmental standards, government procurement, competition policy and investment are part of the agreement. Along with these controversial issues, it also includes non-WTO trade agendas, such as provisions with regards to small and medium enterprises (SMEs), state-owned enterprises (SOEs) and investor-state dispute settlement (ISDS).
- 3.
Cheong (2013, 11–12).
- 4.
Geopolitical considerations are linked to the US containment policy with regards to China. The US involvement to promote TPP is part of the US policy to address (and contain) a rising of China as well as consolidate its own dominance in the region. See Cheong (2013) 12.
- 5.
Yu (2013) 1.
- 6.
The final draft of the TPP Agreement consists of 30 chapters covering provisions and issues in areas as wide as trade in goods, textiles and apparel, rules of origin, customs administration and trade facilitation, sanitary and phytosanitary (SPS) measures, technical barriers to trade (TBT), trade remedies, investment, cross border trade in services, financial services, temporary entry for business persons, telecommunication, government procurement and intellectual property rights. In addition to such enlarged provision, the text also presents several “horizontal chapters” which cover trade-related issues, such as labour, environment, regulatory coherence, competition policy, development, cooperation and capacity building, competitiveness and business facilitation, dispute settlement, transparency and anti-corruption, exceptions, administrative and institutional provisions. See United States Trade Representatives (USTR) (2015) 1–2.
- 7.
Plummer et al. (2010) 1.
- 8.
Stevens et al. (2015) 1.
- 9.
Trade SIA is carried out for all the EU’s major trade negotiations. It was first introduced by the European Commission to assess the WTO Doha Development Round negotiations after the failure of the WTO ministerial meeting in Seattle in 1999 (European Commission, External Trade 2006) 1.
- 10.
- 11.
Plummer et al. (2010) 7–72.
- 12.
LSE Enterprise (2015) 1.
- 13.
European Commission, External Trade (2006) 7.
- 14.
- 15.
- 16.
Under such analytical model, Cheong applies three scenarios, i.e. TPP-9 (nine TPP members), TPP-12 (12 members), and TPP-12 + PRC (13 members) for his simulation model employing the GTAP 8 database. TPP-9 consists of Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, United States, Viet Nam and TPP-12 are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, Viet Nam. See Cheong (2013) 9–11, for description of complete findings of the analysis.
- 17.
See Deardorff (2013) 8–11, for details of his methodological framework.
- 18.
The work by Petri et al. (2012), using a quantitative assessment for assessing economic implications of TPP for the so-called Asian Tracks (FTA) agreements, projected a noteworthy point on Indonesia’s position should the country decide to join TPP. Despite overall rapid trends in the acceleration of income gains of TPP-Asian Tracks towards the end of their projection periods (i.e. by 2020 to 2025), Indonesia should expect much lower income gains position under TPP Track along with several other Asian-Track economies such as the Philippines, Thailand, China and Hong Kong. The work projected that the benefits on the TPP and Asian Tracks would rise rapidly to US$232 billion and US$251 billion, respectively, by 2020. Under TPP Track, in 2025, Indonesia’s income gain is projected to be −0.2% of change from the baseline (GDP US$1549 billion, 2007). However, under Asian Track and both tracks of TPP and Asian, the country is forecasted to gain 0.8 and 0.7% respectively. See Petri et al. (2012) 36–43.
- 19.
The work of Petri et al. (2012) defines ‘TPP Track economies” to include the US, Australia, Canada, Chile, Mexico, New Zealand and Peru, while “Asian Track economies” to cover China, Hong Kong, Indonesia, the Philippines and Thailand, and “Two-Tracks economies” to comprise Japan, Korea, Brunei Darussalam, Malaysia, Singapore and Vietnam. Overall forecast of the work of Petri et al. (2012) additionally suggests that the TPP track would generate greater FDI impacts than the Asian track where TPP members play a larger role in outward foreign investment (FDI). In such a condition, Asian track economies would also expect stiffer competition for FDI and shall anticipate for high value added ones if they are to stay in business. As Table 2 also puts it, questions on whether Indonesia should strategically select sectors, products or commodities with high value-added trade and FDIs are among the issues need to be taken earnestly given such a “dim” projection for the country’s investment performance in light of he soon-to-be-implemented TPP agreement. See Petri et al. (2012) 43–46, for further elaboration on trade and investment effects.
- 20.
Debates on the issue are shared among economists, public officials, private sector representatives, public leaders and social activists as well as wider civil society members, as e.g. recorded in recent media reports: ‘TPP ‘yarn-forward’ may be hurdle for Indonesian textiles,’ the Jakarta Post (2016) 1, available on-line at: www.thejakartapost.com/news/2016/02/22/tpp-yarn-forward-may-be-hurdle-indonesian-textiles.html; ‘Indonesia wants to join TPP as Vietnamese threat looms,’ Fibre2Fashion.com (2015) 1, available on-line at: www.fibre2fashion.com/news/textile-news/indonesia-wants-to-join-tpp-as-vietnamese-threat-looms-175181-newsdetails.htm; ‘Indonesia’s textile sector stands to gain most from TPP trade deal: association,’ The Petrochemical Standard (TPS) (2016) 1, available on-line at: www.petchemstandard.com/indonesia%E2%80%99s-textile-sector-stands-gain-most-tpp-trade-deal-association); and ‘Asian garment makers brace for a TPP-empowered Vietnam,’ Nikkei Asian Review (2016) 1, available on-line at: http://asia.nikkei.com/Politics-Economy/Economy/Asian-garment-makers-brace-for-a-TPP-empowered-Vietnam?page=2.
- 21.
Works by Kimura (2006), Kuroiwa and Heng (2008), Oikawa (2008), Ando and Kimura (2009), IDE JETRO and WTO (2011) offer hints and significant observation of Indonesia’s manufacturing sectors attachment to regional and global production networks related to manufacturing industries. Works by Negara (2010), Athukorala and Kohpaiboon (2013), JAMA (2013), and Arfani (2015) took deeper insight in manufacturing sectors of textile, machinery, electronics and electrical appliances and automotive industries.
- 22.
“Evergreening in a general sense refers to the extension of the duration of an existing contemporary monopolistic or market dominant position by various means or strategies” (Grandstrand and Tietze 2015: p. 3).
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Acknowledgements
The original version of this article was presented at the Conference on “Trans-Pacific Partnership: A Paradigm Shift in International Trade Regulation?” jointly organised by the Centre for Financial Regulation and Economic Development (CFRED), Faculty of Law, the Chinese University of Hong Kong (CUHK) and the Asia WTO Research Network (AWRN) (Hong Kong, May 16–18 2016). The authors would like to thank Ms. R.V. Anuradha (Partner, Clarus Law Associates, New Delhi, India) and Mr. Heng Wang (Associate Professor, University of New South Wale, Australia) for their enlightening insights and worthwhile comments and suggestions during the discussion following our presentation. Acknowledgement also goes to fellow AWRN members and conference participants during the question and answer session for their valuable comments and inputs.
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Arfani, R.N., Winanti, P.S. (2017). How Far Can Indonesia Go? Utilizing TSIA on the Would-Be TPP Impact for Indonesia. In: Chaisse, J., Gao, H., Lo, Cf. (eds) Paradigm Shift in International Economic Law Rule-Making. ODS 2017. Economics, Law, and Institutions in Asia Pacific. Springer, Singapore. https://doi.org/10.1007/978-981-10-6731-0_27
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