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| Indonesia and S Korea apparently seek a seat at this table now. |
It appears as though the United States is gaining the upper hand in signing FTAs in the Asia-Pacific after the TPP enlargement. With China's pan-Pacific equivalent not gaining any traction, the undecideds--countries that sat out the TPP negotiations to see how matters progress--appear to be more favorably disposed now to the American effort. Chalk this one up to the "bandwagon" effect: non-participants in the TPP negotiations fear being left out will cause their exports to be less competitive as those within the FTA benefit from lower tariffs. Make no mistake that the US swaying Japan greatly involved the former playing up the latter's
fears about China:
[Former US trade negotiatior Ira Shapiro] believes that it was the rise of China that ultimately convinced Japanese Prime Minister Shinzo Abe to pursue TPP. If the TPP becomes reality, "China will have a choice of either making the changes necessary to join TPP or intensify its leadership of competing arrangements, as we've seen with the Asian Infrastructure Investment Bank," he said. "For the U.S. and Japan, it is important to set a model."
Let's begin with
South Korea. Like Japan, it has traditionally been very careful about the terms of FTAs given the mandate not to offend domestic agricultural interests. However, with Japan making such concessions already with TPP, the Koreans are now more willing to do the same--at least slightly. In particular, the Japanese seek more automobile exports to Korea. In a manner of speaking, Japan got a head start over Korea and can now help dictate the terms for the latter's entry to its advantage:
South Korea's effort to be welcomed into the Trans-Pacific Partnership trade pact will provide Japan with an opportunity to regain lost ground in that country's automobile market. South Korean President Park Geun-hye expressed hopes that Japan will cooperate on this matter during her meeting with Japanese Prime Minister Shinzo Abe on Monday.
By cooperation, she is presumed to have meant Japan's quick approval, since all 12 TPP members need to agree to the entry of new members. Japan's stance is that it welcomes South Korea, since Abe has said before that he hopes to broaden the TPP's reach in Asia as a high-level trade pact. Japan had to promise that it will open up its market to the U.S. before joining the TPP.
Likewise, "South Korea will need to promise to drop tariffs on Japanese industrial products in exchange for approval of its participation," said a Japanese TPP negotiator. Currently, South Korea levies a tariff of 8% on Japanese autos and around 6.5% on Japanese chemical products.
Meanwhile, Indonesia's new President Joko Widodo is also in a
semi-rush to get in after the conclusion of the aforementioned deal:
On his first official visit to Washington, however, Widodo pulled a surprise out of his hat. "Indonesia is an open economy," he was quoted as telling U.S. President Barack Obama. "We are the largest economy in Southeast Asia, and Indonesia intends to join the TPP..."
Indonesia, which has the world's fourth-largest population, has long been wary of free trade. This is largely because natural resources are its only major exports. When it comes to big multilateral deals, Jakarta has favored the Regional Comprehensive Economic Partnership -- a proposed agreement involving the Association of Southeast Asian Nations, China and India -- over the TPP due to its lower degree of trade liberalization.
But Widodo, recognizing the global liberalization momentum, appears concerned that staying out of the TPP would put Indonesia at a disadvantage. When he travels abroad, Widodo urges foreign businesses to invest in Indonesia as an export base. The TPP, though, will increase the appeal of member countries by reducing or eliminating tariffs on goods, provided a certain ratio of parts are made within the zone.
Nuff said:
advantage America. China, what's your counter-proposal?
