T

he government seems to have softened its stance over the initiative for a free-trade pact with the United States and other Pacific countries, saying its entry into the negotiations would depend on trade agreements with key partners in the region.

Trade Minister Gita Wirjawan hinted that Indonesia would possibly join negotiations for the pact, called the Trans-Pacific Partnership (TPP), once significant progress could be reached in its trade agreement with South Korea and in a regional agreement between ASEAN and six partner countries.

ASEAN is scheduled to have talks on the regional comprehensive economic partnership (RCEP) with Australia, China, India, Japan, South Korea and New Zealand in May.

This partnership will create a economic bloc of more than 3 billion people with a combined economic output of US$17.23 trillion by 2015.

In addition, Indonesia hopes to conclude a comprehensive partnership agreement (CEPA) with South Korea to help boost two-way trade to $100 billion by 2020 by the end of the year.

“If talks on 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,” said Gita.

Indonesia has on various occasions reiterated its firm position that in the short term it would not take part in the TPP negotiations as it is still uncertain of significant benefits from the pact.

However, Gita’s statement  seems to reflect new gestures over the TPP, seen by many as a stepping stone toward an extensive Free Trade Area of the Asia Pacific (FTAAP) representing 44 percent of global trade and 54 percent of global economic output.

Dubbed as “the next century-trade pact”, the TPP gears up for a high level of liberalization, comprising areas outside regular free trade agreements.

Debates about TPP are beginning to heat-up even in advanced countries like Japan, which already places a low import duty of 6.5 percent on average on most goods from its trading partners, but still imposes high import duty on agriculture produce, such as rice, sugar and dairy products, to protect its local farmers.

The talks on TPP, which began in 2005 and are now negotiated by 11 countries across the Pacific rim, are expected to conclude an accord by the end of this year, perhaps as early as October when regional leaders flock to Bali for the annual Asia-Pacific Economic Cooperation (APEC Summit).

Trade Ministry director general for international trade cooperation Iman Pambagyo described the commitments demanded by the TPP as “too high” for developing countries like Indonesia, citing that at the current time, the nation was not in a position to decide.

According to US think tank Peterson Institute for International Economics, the TPP will boost Indonesia’s economic output by 4 percent above baseline by 2025, partly helped by an increase in exports of around 20 percent.

The preferences contained by the pact will allow Indonesian exports (worth $4.5 billion) to the US to better compete with similar goods from Vietnam, which had already joined.

Djisman Simanjuntak, a senior economist at the Centre for Strategic and International Studies (CSIS), said that the possibility of Indonesia’s entry into the TPP would rely highly on the smooth sailing of the RCEP.

“If the TPP progresses, but the RCEP stalls, I think Indonesia would have no choice but to consider joining,” said Simanjuntak.

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