Thailand will undoubtedly welcome President Barack Obama warmly this
weekend, and is expected to announce its interest in pursuing membership in the
Trans-Pacific Partnership trade agreement. This is an important milestone: it
boosts the TPP’s prospects for success; improves the chances for Asia-Pacific
free trade; and gives a further “thumbs up” to economic ties between Southeast
Asia and the United States.
Originally a four-country trade
agreement among Brunei, Chile, Singapore and New Zealand, the TPP now has 11
negotiating members on both sides of the Pacific, and could become the biggest
trade agreement since the Uruguay Round. It is a huge, positive-sum game that
promises benefits to all members and could help to define the trading rules of
the 21st century.
If Thailand joins the TPP, it
would be one of its biggest beneficiaries. Estimates that colleagues and I have
done at the East-West Center and the Peterson Institute for International
Economics show that the TPP would generate global income gains of $451 billion
per year in 2025, assuming that Japan, Korea, Indonesia, the Philippines and
Thailand eventually join the 11 countries now negotiating. That is more than what the Doha Round could
deliver, even if completed.
We also estimate that Thailand would
have the second-largest percentage gains among potential members, with incomes
rising by 7.6 percent as a result of a TPP agreement – only Vietnam would do
better. The United States would gain more in dollar terms, but its percentage
gains would be only 0.5 percent of GDP.
Thailand’s large potential gains
are explained by its unusual trading position. As Southeast Asia’s main
mid-level manufacturing hub, Thailand has powerful clusters in automobiles,
computers and telecommunications, industries with fluid global production
bases. Due partly to rising wages and
slowing growth in China, Thailand is now poised to gain market shares,
particularly in North America. These manufacturing strengths are also
reinforced by Thailand’s strategic role in services – banking, transport and
logistics – including in the dynamic, emerging economies to its west.
But is Thailand entering the
negotiations too late? In the past two and a half years of negotiations much
groundwork has been done, but the truth is that the hardest issues have been on
hold until now, awaiting the outcome of the U.S. presidential election. So if
Thailand moves quickly enough – and it is still unclear whether it can do so –
it can still make its opinions count on important choices.
It will not be easy to finish the
TPP negotiations, or for Thailand to join. The goals include high, “21st
century” standards for many economic linkages, including services, investment,
and intellectual property. What makes the TPP so complicated to negotiate is
that it is designed to benefit both emerging and advanced economies. But that
is also its most valuable feature; a successful TPP could help to grow trade
across a wide range of partners.
The United States and other
partners have strong positions on many key issues, and have yet to make the
concessions needed to make the agreements work. But there is a way to get
there. The best strategy for Thailand – and others – is to trust their
negotiators and allow concessions. The agreement promises such large benefits
that all sides can win, even if all compromise.
Thailand would be the fifth ASEAN
country to join the TPP, and in the process it would enhance ASEAN’s role in
regional trade diplomacy. This may sound counterintuitive, since not all ASEAN
economies would be members. But a likely consequence of Thailand’s membership
would be to attract more ASEAN countries, and to accelerate the progress of the
ASEAN Economic Community itself.
Economically smaller than China,
Japan, or the United States, ASEAN is crucial to cooperation because of its
dogged pursuit of economic integration and talented diplomacy. For example, its
new framework for a Regional Comprehensive Economic Partnership is helping to
create an integration model for the “ASEAN plus six” economies as well.
Eventually, with a foot in both
tracks of agreements, ASEAN could help to facilitate convergence between them.
By our estimate, that’s where the largest benefits would lie, reaching up to $2
trillion per year.
Large Asia-Pacific economies,
including China, Japan and United States, should ultimately welcome such
immensely profitable convergence to common rules.
Of course, China and the United
States will have to work closely together in the meantime, reducing the
differences that make a single free trade agreement unreachable today. But
those issues, too, are solvable. China will hopefully resume reforms to open
its economy and to level the domestic playing field for private and foreign
companies. The United States, in turn, should settle into a new role in Asia as
another partner – albeit an important one – in the region’s rise.
Asia’s prospects are strong and
the economic clouds are now lifting in America. A commitment to partnership
could reinforce these trends by brightening expectations – which can generate
direct economic gains. Progress on trade cannot displace security concerns, but
it can refocus attention on those fruitful aspects of cooperation that yield
concrete gains to everyone.
A partnership with Asia is
important to President Obama personally. As he explained three years ago, on
the first of his five trips to the region so far: “I was born in Hawaii and
lived in Indonesia as a boy. My sister Maya was born in Jakarta, and later married
a Chinese-Canadian. My mother spent nearly a decade working in the villages of
Southeast Asia, helping women buy a sewing machine or an education that might
give them a foothold in the world economy. So the Pacific Rim has helped shape
my view of the world.”
It is also important for the
United States. America’s economic future, of course, depends in part on Asia.
But the ties are deeper: there
are more than 17 million Asian-Americans now living in the United States, and
their numbers are growing faster than those of any other ethnic group. Earlier
this month, 73 percent of Asian-Americans voted for President Obama. America’s
complexion is changing, and we are becoming a little more Asian every year.
Peter A. Petri
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, you may contact us at: sbc.pte@gmail.com, provisionally. Many thanks.
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