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TPP needed to offset '€œlow-quality trade'€ with China: Economist

  • Anton Hermansyah

    The Jakarta Post

Jakarta   /   Mon, February 22, 2016   /  10:26 am
TPP needed to offset '€œlow-quality trade'€ with China: Economist About TPP: D​emocratic presidential candidate Sen. Bernie Sanders, I-Vt., reacts during a news conference to discuss the Trans-Pacific Partnership (TPP) trade agreement at the IBEW 490 Hall on Feb. 3. (Associated Press/John Minchillo) (TPP) trade agreement at the IBEW 490 Hall on Feb. 3. (Associated Press/John Minchillo)

About TPP: D'€‹emocratic presidential candidate Sen. Bernie Sanders, I-Vt., reacts during a news conference to discuss the Trans-Pacific Partnership (TPP) trade agreement at the IBEW 490 Hall on Feb. 3. (Associated Press/John Minchillo)

Indonesia should consider joining the Trans-Pacific Partnership (TPP) agreement as part of a strategy to reduce dependency on China, which mostly consumes raw materials and low-grade products, an economist has said.

According to Bank Central Asia (BCA) chief economist David Sumual, the TPP could be a way to boost advanced industry. The agreement might attract advanced technology-based investors from the TPP member countries to invest in Indonesia and develop advanced industries.

"If we relied heavily on China, our exports will be mainly commodities, cheap low-value-added products with a lack of technology but lots of environmental issues. We need the TPP to balance our trade," he said to thejakartapost.com in Jakarta on Feb. 18.

Aside from that, developed countries in the TPP such as Japan and the US were leaving the labor intensive sectors in which Indonesia is good, such as in making garments, textiles and footwear. It opened an opportunity for Indonesia to survive in the competition.

However, David supported the government'€™s stance not to rush to join the TPP and to choose to create a special team to assess the costs and benefits. "It is better to take a longer time before deciding, especially as Indonesia is not ready yet. But do not take too long, as we may lose momentum."

Also of concern were the new economic dynamics among the TPP members. In Japan, Abenomics has yet to revive the economy and has lost public confidence amid industrial losses, while in the US debates on the TPP were heating up as more presidential candidates attacked the agreement.

In Japan, Abenomics is being challenged because Japan's economy failed to escape deflation amid falling profits and massive layoffs among Japanese corporations. The Bank of Japan even launched a negative interest rate recently to combat deflation.

In the US, Hillary Clinton recently criticized the trade agreement, along with other presidential candidates such as Bernie Sanders and Martin O'Malley. Even President Obama'€™s party, the Democratic Party, opposed the trading agreement.

The TPP is supposed to be ratified as soon as May or June this year after being formally signed in New Zealand in January.

"Parliament of the TPP members need to ratify it and it takes more than two years. Until then, the agreement will not come into effect yet. It gives us time to asses the TPP," Institute for Development of Economics and Finance (INDEF) economist Berly Martawardaya said. (ags)(+)

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