Doubts remain about estimated impact of TPPOctober 4, 2024 The Daily NNA Indonesia
This is not official translation (translated by using machine translation)
The Indonesian government has become proactive in participating in “Mega-FTAs”. large-scale Free Trade Agreements (FTAs). Following its intention to quickly conclude the Comprehensive Economic Partnership Agreement (CEPA, IEU-CEPA) with the European Union (EU), in September it applied to join the Trans-Pacific Partnership (CPTPP).
However, civic groups concerned about the negative impact of joining Mega-FTAs on the domestic market point out that there has been no policy dialogue between the government and civic groups. Economists also question the accuracy of estimates of the impact of joining, and call for a cautious approach.
Coordinating Minister for Economic Affairs Airlangga revealed that the country applied to join the CPTPP on September 25th. The application was reportedly sent to New Zealand, the depositary state of the agreement, on the 19th of the same month. In an announcement by the Coordinating Minister for Economic Affairs, the government estimated that joining the CPTPP would result in a 19% increase in exports to member countries, an 11% increase in foreign direct investment (FDI), and an increase of US$1.6 billion (approximately 234 billion yen) in gross domestic product (GDP).
On the 25th, Airlangga held a meeting with ambassadors and other diplomatic officials from CPTPP member countries, where he asked for their cooperation in Indonesia's membership. The CPTPP, which came into force in December 2018, already has 11 member countries, including Japan, Australia, Canada, and Mexico, and the UK is expected to join by mid-December this year, bringing the total to 12.
Indonesia for Global Justice (IGJ), a civil society group that raises issues surrounding free trade, said “We are deeply disappointed that the government submitted an official letter expressing its intent to join the CPTPP on September 19, and so far, the Indonesian government has never discussed this issue with civil society groups”.
Even in the case of the IEU-CEPA, for which negotiations were said to be 90% complete as of late June, the IGJ criticized the negotiating process for not being open to civil society groups and for not conducting a comprehensive assessment of the human rights, economic, and social impacts. Conduct risk calculations as well
The IGJ said Indonesia would not see much benefit from joining the CPTPP because it already has or is negotiating FTAs with 10 of the 12 CPTPP member countries, either bilaterally or through the Association of Southeast Asian Nations (ASEAN).
The IGJ also said it was unclear whether Indonesia was interested in joining the CPTPP. The government had originally sought preferential access to the United States through the TPP, so it is ; that it is showing interest in a CPTPP without the US. The US was initially involved in the TPP negotiations but withdrew from the agreement under the former Trump administration in 2017. Meanwhile, the Indonesian government claims that joining the CPTPP would give it indirect access to the US market through Canada and Mexico.
Mohammad Faisal, Executive Director of the Center for Economic Reform (CORE), an independent think tank, said Indonesia needs to calculate not only the export potential but also the risks of joining Mega-FTAs, but that incorrect and unrealistic calculations are common in Indonesia. He said Indonesia should then clarify what it wants to achieve by joining.
Airlangga explained that joining the CPTPP was a complement to Indonesian efforts to join the Organization for Economic Cooperation and Development (OECD), of which it is in the process of joining.
Concerns about shrinking policy-making space The IGJ’s concern about joining the CPTPP is not so much the liberalization of tariffs, but rather theimpact on policy aspects specific to Mega-FTAs, which it says will reduce the country’s policymaking room through the opening up of government procurement markets, accelerated liberalization of investment, and strengthened intellectual property rights.
For example, open bidding is the norm for government procurement, and national treatment in bidding(no discrimination between foreign and domestic businesses) is required. With regard to investment liberalization, specific examples of deregulation implemented by CPTPP member countries include Vietnam abolishing “Economic Needs Test (ENT)”, a screening system based on the number and size of stores in the area that was implemented before retail stores such as convenience stores and supermarkets could open, and Malaysia allowing foreign investment in convenience stores (changing from a ban on investment to a maximum of 30%).
Strengthening intellectual property rights is mandatory as part of the ratification of the International Convention for the Protection of New Varieties of Seed Plants (UPOV Convention 1991), which strengthens intellectual property rights for new plant varieties, a problem the IGJ also raised during the IEU-CEPA negotiations.
Another concern for the IGJ is the CPTPP’s investor-state dispute settlement (ISDS) clause, a system under which investors (companies) in FTAs signatory countries can refer a dispute between them and the host country to arbitration before a third-party organization (such as the International Centre for Settlement of Investment Disputes, a World Bank Group organization) against that country.
The IGJ said that “Even without the CPTPP, Indonesia has already faced lawsuits from foreign investors in sectors like mining. and we believe the CPTPP will exacerbate this situation.” The flip side of these concerns is that if Indonesia joins the CPTPP, deregulation will be inevitable, giving other member countries, including Japan, easier access to its market.
On the other hand, since the CPTPP is already in force, the Indonesian government is considered to have little room to negotiate the acceptance of each clause. A future issue is whether Indonesia can achieve consistency between protecting its own industries and joining Mega-FTAs