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Indonesia caught in US-China free trade proxy war: Institute
Indonesiaâs interest in joining the Trans-Pacific Partnership (TPP) is due to political and economic factors, as it is caught in a proxy trade war between the United States and China, according to the Institute for Development of Economics and Finance (INDEF)
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Indonesia's interest in joining the Trans-Pacific Partnership (TPP) is due to political and economic factors, as it is caught in a proxy trade war between the United States and China, according to the Institute for Development of Economics and Finance (INDEF).
INDEF researcher Bhima Yudhistira Adhinegara said that compared to other on-going regional agreements the TPP was the largest, its 12 countries representing 40 percent of the world's gross domestic product (GDP).
The GDP share of the Regional Cooperation Economic Partnership (RCEP), for example, which is a partnership between ASEAN and Australia, China, India, Japan, South Korea and New Zealand, is only 28 percent.
"These [GDP share] numbers affected Indonesia's decision to join the TPP as well as the RCEP," said Bhima during a discussion in Jakarta on Friday.
Bhima also said that the TPP was far more liberal than the other free-trade agreements. The RCEP would cut 65 percent of export and import tariffs, but the TPP cuts almost all tariff barriers.
"[On the other hand,] RCEP negotiations are more transparent than the TPP's," he added.
One of the TPP's agreements includes giving drug companies up to eight years of protection from cheaper competitors, which critics said would increase the price of medicine.
The TPP also regulates intellectual property rights and investor-state dispute settlement and allows multinational companies to challenge a country member's laws and regulations in an international tribunal when claiming unfair trade barriers.
"The country members' position is like an enterprise; they may be sued by companies and investors in an international arbitration. This means a loss of trade law sovereignty for the TPP members. The outcome [of the arbitration] can include confiscation of assets," said Bhima.
In the global supply chain, he continued, Indonesia acts as a raw material exporter and as a consumer and most of its imports are value-added goods. From this point of view, any regional cooperation would not benefit the archipelago.
"Indonesia will only become a destination market of the other TPP members. It should be a concern since we have a large domestic market,' he said.
Another INDEF researcher, Heri Ahmad Firdaus, said that Indonesia's total trade has increased significantly in the last 10 years because of partnerships with many countries, yet it has been dragged down by a preponderance of raw material and commodity exports.
The country experienced high export growth of 35 percent in 2010, but suffered from a negative 13.29 percent growth in September 2015.
"The high growth was due to high commodity prices. After the prices plummeted, the impact [was felt by] Indonesia's exports," said Heri. (kes)
