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What Is the Impact of the U.S. Withdrawal from the TPP on Indonesia?

Blog, Global Trade, ONESOURCE June 23, 2017

It was not a surprise to most countries when President Trump withdrew from the Trans Pacific Partnership (TPP) Agreement. His withdrawal was a signal that he intended to follow his approach with ‘Americans First”, by protecting American workers from competition from low-wage countries such as Vietnam and Malaysia.

Indonesia had not officially joined the regional free trade agreement in the Pacific. However, after a visit to the United States to meet with President Barack Obama, President Joko Widodo expressed interest in Indonesia joining the TPP Agreement.  At the time, it was believed that all countries participating in the TPP Agreement would benefit from the fast-track approval expected from U.S. Congress, only to note the withdrawal of the U.S. a few short months later.

The question now remains, is Indonesia still interested in joining this free trade agreement with the remaining participants, since many of these countries have agreed to continue negotiations?

RCEP is more strategic for Indonesia

According to the Indonesia Trade Minister Enggartiasto Lukita, the framework of the Regional Comprehensive Economic Partnership (RCEP) would be more strategic for Indonesia than the TPP Agreement.

RCEP was initiated by Indonesia early in 2012. RCEP members consist of 10 ASEAN countries[1] and six ASEAN partner countries.  The current RCEP negotiations have entered the final phase and are targeted to be completed by 2017 and expected to begin immediately.

Through RCEP, Indonesia is expected to gain greater international market access in comparison to what was expected Indonesia hoped to gain from any of the other regional free trade agreements (i.e. ASEAN, MITRA) and the TPP Agreement.

China is invited to join The TPP

Despite the withdrawal of the United States, Australian Prime Minister Malcolm Turnbull remains committed to continuing discussions on the TPP Agreement. China and several other countries have been asked to join the new negotiations.

However, as Indonesia is currently discussing the RCEP with China through ASEAN, it is unlikely that China’s entry into the TPP will affect Indonesia’s position.

Conclusion

Indonesia’s hope to join the TPP Agreement was triggered by a desire to improve competitiveness of the country’s domestic products in international markets and to improve Indonesia’s position as a stronger player with other countries.

Currently Indonesia has a positive outlook on achieving those same goals with the current negotiations of other agreements.

However, seeing the latest situations on negotiations, the Indonesian government is likely to halt their plans in joining the other countries who have decided to pursue the Trans Pacific Partnership (TPP) without the United States.

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Sources:

https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html?_r=0

http://bisnis.liputan6.com/read/2833553/usai-pelantikan-donald-trump-as-umumkan-keluar-dari-tpp

http://www.australiaplus.com/indonesian/berita/prospek-kelanjutan-tpp-pasca-terpilihnya-trump/8011452

http://www.cnnindonesia.com/ekonomi/20161112144217-92-172202/trump-menang-pemilu-as-semangat-ri-gabung-tpp-jadi-kendur/

https://m.tempo.co/read/news/2017/01/24/090839151/as-mundur-australia-undang-indonesia-dan-cina-gabung-tpp

http://industri.bisnis.com/read/20170125/12/622708/indonesia-akan-setop-rencana-ikut-tpp

[1] Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam