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Jakarta Post

Toward an open world economy

Against all odds, President Barack Obama has secured the Trade Promotion Authority (TPA) with Republican support in the House of Representatives and the Senate

Djisman S. Simandjuntak (The Jakarta Post)
Jakarta
Fri, July 3, 2015

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Toward an open world economy

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gainst all odds, President Barack Obama has secured the Trade Promotion Authority (TPA) with Republican support in the House of Representatives and the Senate.

With the TPA, President Obama and his successors are mandated to negotiate international trade agreements with a more or less free hand.

The TPA and the agreements that are likely to result from it are divisive, and not only among US democrats and citizens '€” its ripples are going to be felt across the Pacific and the Atlantic economies as a force of integration or fragmentation, depending on where one stands.

Negotiations on two regional mega initiatives are said to be nearing completion under Obama'€™s presidency. One is called the Trans-Pacific Partnership (TPP).

At the time of its hatching by Brunei Darussalam, Chile, New Zealand and Singapore, the TPP was hardly noticed.

But when it was hijacked by the US government and at a later stage joined by Japan, forming thereby a huge conglomerate of economies, it rose to prominence and became a major element in trade policy discourse.

Interestingly, it also includes Canada and Australia among developed economies, Malaysia, Mexico and Chile as upper-middle-income economies and Vietnam as a low-middle-income economy.

The other imitative is the Trans-Atlantic Trade and Investment Partnership (TTIP) relinking USA and Europe. With these two mega agreements, the US becomes a '€œpivot'€ for the whole world, not just in Asia.

The securing of the TPA has given the TPP and TTIP a strong tailwind, though it won'€™t be a panacea. Negotiation of regional agreements is always a complex undertaking. Too much diversity makes a consensus difficult to orchestrate.

Secondly, 21st-century trade agreements, a current US hobby-horse, are much easier to write than to translate into reality.

Thirdly, the fact that little is known about the TPP has not only led to widespread opposition in the US, but also underutilization of brain connectivity. In a knowledge society, it is hard to believe that a few policy designers know best what is good for the very diverse people who are going to struggle for a better life under the TPP and TTIP.

 Fourthly, leaks have given us some insight into certain basic features of the TPP. In the first place, it elevates the standards of trade and investment agreements to a much higher level than the current state.

The TPP is certainly an improvement on the way governments currently deal with a host of complex issues: free market access in goods and services, investor disputes with the state, intellectual property rights (IPRs), genetic resources, government procurement, limitations on state-owned enterprises and linking of trade and investment issues with labour rights and environmental standards, to name a few.

The TPA is a game-changer for the global economic agenda. While it will certainly have to co-evolve with other initiatives, the TPA is a tremor in a world of comfort. It pushes humanity to the edge of openness. Countries like Indonesia will have to come up with a proper response.

Most of all, Indonesia will have to restate its position on an open economy and forge a new strategy shared among politicians, officials, businesspeople, workers and civil society.

Secondly, Indonesia must collaborate with the rest of East Asia in introducing the ASEAN Economic Community (AEC) later this year and beyond, as well as the Regional Comprehensive Economic Partnership (RCEP) and other complementary initiatives such as that on the Asia Infrastructure Investment Bank (AIIB), a source of competitiveness rather than a place for seclusion.

Thirdly, Indonesia, China and India '€” three large economies that are part of the RCEP but not the TPP '€” must provide the RCEP an effective leadership.

Finally, Indonesians have the right to know as much as possible about the TPP, TTIP and RCEP.

Better understanding is a sine qua non of preparedness.
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The writer is chair of the board of directors at the Center for Strategic and International Studies (CSIS) Foundation in Jakarta.

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