Balancing between Powers: Double Jeopardy

By Dioputra Ilham | 27 Mar 2017
Economy | 0 Responses | 728 Views

By Ramadinan Saptara

 

With the scrapping of the United States-sponsored Trans-Pacific Partnership (TPP) following the election of Donald Trump, countries in the Asia-Pacific are beginning to shift their focus towards a Chinese counterpart of the deal, the Regional Comprehensive Economic Partnership (RCEP). The RCEP is a trade agreement that involves the ten ASEAN member-states and six additional countries in the Asia-Pacific region (China, India, Australia, New Zealand, Japan, and South Korea) and commits them to the creation of one of the largest free-trade zones in the world.

 

A trade agreement, regardless of its size or significance, is essentially a contract that serves as law to the parties involved. On the other hand, the economic benefits of the TPP and RCEP can be compared and analysed to determine which is the most favourable to the Indonesian economy. However, Indonesia must also look into the legal implications as well as the rights and obligations being conferred in order to determine whether Indonesia has positioned itself as a significant party or a mere subject to a foreign legal construct.

The TPP was initially signed by twelve states along the Pacific Ocean rim a short while back in February of 2016 until the United States, one of Indonesia’s most profitable trading partner, withdrew from the agreement earlier this January. Should Indonesia decide to be an addition to the signatory list of this agreement now, Indonesia would then have to accept the existing provisions laid by existing members, which may or may not be in favour of its interests. The risk of being the later country to participate in the TPP would be adhering to rules written without taking into account Indonesia’s concerns. Consequently, the state then has lesser control over providing stipulations that would benefit Indonesia’s common people and domestic producers.

Contrary to the TPP, the RCEP seems to offer Indonesia a significantly greater position of influence. The framework of the RCEP is based on ASEAN centrality, the ulterior principle of the agreement that gives ASEAN member-states the upper hand in determining rules and objectives of the agreement that would render the most benefit. This degree of freedom, power, and influence offered by the RCEP to Indonesia and other ASEAN-countries was not provided by the TPP. The TPP was formulated without consultations with Indonesia, thus limiting Indonesia’s freedom in determining elements within the agreement that would work in favour of Indonesian interests.

As of the present moment, the RCEP is still in a rather elementary stage. The agreement is still currently under rounds of negotiations. This situation can serve to Indonesia’s favor. Indonesia, the largest economy and one of the most significant member countries of ASEAN, can propose rules to the framework of the agreement that can improve the conditions at home as well as set a path that would render long-term benefits. Nevertheless, Indonesia should be able to carefully observe the needs of Indonesians and the government’s capability in fulfilling such needs.

Perhaps Indonesia’s economic sector that requires further attention, encouragement, and development is the creative industry which is driven by small and medium startup enterprises and has actively involved the large domestic consumer base as shown by the growing favour for local goods. These businesses are mainly managed by young entrepreneurs—young people who possess innovative ideas, creativity, time, and energy, but lacks sources of finance aside from investors and capital venture funds. The limited domestic market also has the possibility of hindering the financial development of these enterprises.

By having a significant position in RCEP negotiations, Indonesia could perhaps propose the relaxing of tariffs and trade policies that would enable growing domestic businesses to enter foreign markets easily. However, Indonesia should encourage the strengthening of local products at home to prevent foreign brands from taking over the domestic market. By performing a ‘balancing act’ between utilizing the ASEAN centrality principle and its position in negotiations, and performing strong campaigns domestically, Indonesia is likely to harvest many benefits from the agreement.

The situation explained above is one possible way in which Indonesia can use diplomacy to generate positive growth for economic sectors that strongly involves the people. Indonesia can certainly utilize diplomacy and ‘exploit’ the ASEAN centrality principle in helping create a blueprint for the RCEP that will offer Indonesia benefits. However, this requires Indonesia’s active participation in the rulemaking process of negotiations.

 

In conclusion, the RECP stands to benefit Indonesia more than the TPP due to how it facilitates diplomacy of ASEAN states to other members of the agreement. Therefore, if played smartly, the RECP can become a tool to aid Indonesia in achieving national interests. Finally, the question to be proposed must then be: what should Indonesia propose to the negotiations with the RCEP that would benefit the Indonesian people most?


        




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