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Indonesia Does Not Need the Trans-Pacific Partnership

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The controversy over President Joko Widodo’s statement of intention that Indonesia wants to join the Trans-Pacific Partnership (TPP) is yet to calm down. The sentence, practically crammed in the middle of a joint statement between President Widodo and President Barack Obama on the 26th of October, 2015, triggers a debate that almost neglects various achievements that President Widodo has brought home from Washington, D.C.

The achievements are by no means small. Both countries agree upon a commercial agreement worth around US$ 20 billion. Strengthening the American-Indonesian strategic partnership is also one of the main issues of the visit. In addition, various other fields of cooperation, including maritime cooperation, climate change, fishery, and investment in technology are also evidences of President Widodo’s fruitful trip to the United States.

For observers, the TPP can be seen as an effort by the United States to maintain its power in the Asia-Pacific region, especially when placed with President Obama’s rebalancing (pivot) strategy, since 2011. Even more explicit if we see how China is not even in the negotiating level to join the TPP. We should not forget, though, that the TPP is the culmination of a long process, starting from the Trans-Pacific Economic Strategic Agreement (TPESA), the one that begun without the United States.

Aside from those ideas, we can see a number of reasons why this is not the best time for Indonesia to take part in TPP, even if the benefits probably are looking enticing.

Let us begin with something that is definitely not the reason why Indonesia does not need to join the TPP: Indonesia’s obedience to the independent-and active foreign policy (IAFP).

This foreign policy principle has been used all too much, and always starts any discourse on Indonesian foreign policy, that today the meaning is often diluted, misunderstood, and astray from its original intention. Of course, any student who has learned IAFP identifies the word “independent” with neutrality, not siding with any bloc, not tending to any bloc, considering the Cold War setting when this principle appeared.

Even so, in an important article (1953), Mohammad Hatta, former vice president and one of the fathers of Indonesian foreign policy, clearly denied that. Hatta firmly stated, “As a member of the United Nations, the Republic of Indonesia cannot adopt an attitude of neutrality… the policy of the Republic of Indonesia is not one of neutrality, because it is not constructed in reference to belligerent states but for the purpose of strengthening and upholding peace. Indonesia plays no favorites between the two opposed blocs and follows its own path through the various international problems.”

Thus, philosophically, the word “independent” in IAFP should not be identical to the word “neutrality”, which brings the impression that Indonesia is trapped in the middle of a conflict. The Oxford English Dictionary even states that the word “neutrality” can be emphasized as not supporting or helping any conflicting party (see Hatta’s explanation above), or the absence of decided views. Should then, Indonesia stand just somewhere in a vacuum, seeing nothing, observing nothing, and deprived of any interest of embracing all parties?

On the other hand, if we use the logic that IAFP should prevent Indonesia from joining the TPP, then how about Indonesia’s participation in the Regional Comprehensive Economic Partnership (RCEP), which is initiated by ASEAN member states along with China and some other Asia-Pacific states? If we want to call RCEP a “bloc” lead by China, the group’s biggest economy, can we say that Indonesia is “siding” to a Chinese, bloc?

That is why, in the first place, the IAFP principle should not be used as a logical foundation why Indonesia should not join the TPP at the moment. While it may give the impression that the word “independent” should distant Indonesia from the two huge economic blocs, it does not have to be like such. Joining any economic cooperation, just like what Hatta stated, means that Indonesia, “… endeavor(s) to seek friendship with peoples belonging to either bloc, or to none, on a basis of respect for each other’s independence. In the process of strengthening such friendships, Indonesia is prepared to receive intellectual, material and moral assistance from any country whatsoever, provided there is no lessening of, or threat to, her independence and sovereignty.” This idea, written in 1953, still rings true until today.

Returning to the core discussion, why should Indonesia refrain from joining the TPP? Here are some of the reasons I want to discuss.

Firstly, Indonesia still has a number of more pressing priorities pertaining to Indonesia’s domestic economy that need immediate solution. The economic turmoil that has been ongoing for the past few months cannot be blamed solely to the American economic dynamics, without even seeing at various fundamentals of the Indonesian economy. Not only the strength of Rupiah, for instance, Indonesia still needs massive cutting in its red-tape policy, barriers of business and investment caused by law or governmental policies—if Indonesia indeed joins the TPP, Indonesia will be the most difficult country to start a business among the TPP member states, according to a data by World Bank. Ease of starting business should also be a driving force for Indonesian economy.

In addition, Indonesia’s economy is still relied upon agriculture and various exploitative-extractive sectors (mainly mining), which are volatile to external dynamics, such as weather, price fluctuation, among some. Serious consideration for Indonesia to become an exporting economy, relying on service, competitive manufacturing, and balance between domestic and export consumption are a number of homework for the Indonesian government.

These priorities will direct Indonesia’s preparedness regionally in facing economic contestation. In a much mature regional organization such as the European Union, it is mentioned that member states must have working market economy that is prepared to face pressure and competition from markets across the region. This kind of preparedness must be possessed by Indonesia, who seems frail now to face various other economic cooperation, such as the ASEAN-China Free Trade Agreement (ACFTA), or even the incoming entry into force of the ASEAN Economic Community by the end of this year. Therefore, the emphasis is not merely on choosing which regional cooperation to join (since both MEA, ACFTA, RCEP, or TPP are all essentially regional cooperation), but on shaping Indonesia’s preparedness to face tough competition economically inside those economic relations.

Secondly, it is also clear that some parts of the TPP will be seriously disadvantageous to the Indonesian society. To name one, protection of patent rights (protection of copyright and intellectual property right is among the cornerstones of TPP) which raises concerns that such patent enforcement will cause prices of medicines to go up, and complicates government’s efforts to make generic non-branded medicines. Considering that consumption of generic medicines—often 50% to 200% cheaper than their branded counterparts—are growing to around 70% today, these regulations in the TPP will raise more questions. Protection of intellectual property rights will also cause new complexities to the government, that must adjust its copyright standards to the United States, and it will severely prohibit various forms of fair use, especially to the education sector. This phenomenon, called by prominent economist Paul Krugman as “legal monopoly” is just one of a number of regulations contained inside TPP that will negatively affect not only a state, but directly to all people within that country.

Thirdly, there is no preferential treatment whatsoever given to developing countries such as Indonesia. If you take a look at member states of the TPP today, almost all of them are economically developed. If typically trade agreements will consider giving preferential treatment toward developing countries such as Indonesia to exclude certain rules that are disadvantageous to it, the TPP forcefully equalizes all state parties. This will be very detrimental to Indonesia, that is yet to possess the necessary capabilities to be in the equal playing field with the remaining member states.

Fourthly, and perhaps very crucial to understand is that TPP is nothing more than any other trade agreements, both bilateral and multilateral. Paul Krugman states in the same article that various trade relations between member states of the TPP are actually liberated enough, thus there is no need for a new trade agreement. Many forms of trade protectionism have been eliminated as well, thus it is perhaps accurate to say that TPP is a trade agreement about something else other than trade, among many, to protect the “legal monopoly” mentioned above (often seen as a way to protect corporations with commercial interests in patents and copyrights). Take a look, for instance, at the trade relationship between the United States and Indonesia. With the current bilateral arrangements, Indonesia possesses a trade surplus of US$ 9.8 billion in 2013.

Various trade relations between Indonesia and other countries, bilaterally or multilaterally in a regional context such as ACFTA or the ASEAN Free Trade Agreement (AFTA), and the ASEAN Economic Community starting by the end of 2015, should be sufficient to be the foundation for economic cooperation for Indonesia internationally. Not only the TPP will be redundant, Indonesia will be made busy with various non-trade issues that are attached with the TPP, and are difficult to be adapted by the Indonesian government.

To summarize, does Indonesia need the TPP? With the current domestic economy, Indonesia should really prioritize on what matters most: recovery of domestic economy. Strengthening its own fundamentals will enable Indonesia to at least compete and stand tall against various market pressures in Southeast Asia and Asia-Pacific in general. Looking from the perspective of the TPP, various parts of the agreement will be detrimental for Indonesia, thus if we see from the perspective of Indonesia’s national interest, it is better for Indonesia not to take part in this partnership. It will be sufficient for Indonesia to enact its current trade arrangements and agreements first, and focus on various regional cooperation that has been agreed first such as the ACFTA.

Even if Indonesia still decides to join the TPP later on, the process will be very lengthy and exhaustive. Not only Indonesia has to adjust and equalize itself with everyone else, it has to adjust its laws—significantly distant from what the United States will require, Indonesia will also face challenges from its own society, and of course from the legislatures, who may have to do the unenvious task of ratifying (or rejecting) the TPP agreement once it is signed.

Concluding this article, President Widodo’s statement that Indonesia is looking forward to join the TPP should be dissected critically, bearing in mind what is Indonesia’s national interest in conducting international relations with its neighbors and various other states around the world.

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