Asean torn over TPP trade pact

Jakarta rightly decided a few years ago not to join the TPP negotiations, instead focusing on the development of the Asean Economic Community and negotiations of Asean-led regional comprehensive economic partnerships.

But now that four Asean members – Brunei, Malaysia, Singapore and Vietnam – have become TPP members and others, including Thailand and the Philippines, are considering joining, we should no longer rule out the possibility of adding our name to the TPP list.

However, a special team of experts from the ministries of foreign affairs, trade, industry, manpower, forestry and the environment must first thoroughly assess whether the TPP’s clauses – especially those on intellectual property rights (IPR), labour and environmental rules and settlement dispute mechanisms – are in line with our national interests.

The IPR clause could result in steeper prices for drugs because the provision allows pharmaceutical firms to extend their monopolies on patented medicines up to eight years and keep cheaper generics off the market.

The clause on dispute settlement also requires special attention because it allows investors from TPP members to settle any disputes they may have through the investor-state dispute settlement mechanism. This is precisely the dispute-settlement mechanism that Indonesia has been fighting to delete from its bilateral investment and trade pacts.

The government should also rigorously examine the often-stringent TPP provisions on labour and environmental rules, in order to ascertain whether nation institutions are currently capable of enforcing such tough requirements.

The TPP is designed to lower trade barriers for goods and services and set commercial rules, but like most other regional free-trade agreements, it could disadvantage non-members like Indonesia in trade with members. With more Asean countries considering entry to the TPP, Indonesia may find it loses out to Malaysia, Vietnam and Singapore when it comes to trading with large economies such as the US, Canada and Japan.

It is a pity that the biggest news amid the failure of the Doha round of World Trade Organisation (WTO) talks is the emergence of a regional free-trade pact that has in the past been widely shunned as a bad alternative to global trade rules.

Regional free-trade agreements have been criticised for distorting the flow of trade, and inhibiting businesses from exploiting the comparative advantage and production capabilities, in favour of seeking the best combination of tariff rules from among competing regional frameworks.

But with the collapse of the WTO trade talks in the face of European agricultural protectionism and related concerns among other developed countries, regional free-trade agreements such as the TPP have been eagerly embraced as an alternative.