Why Indonesia Should Join the TPP

Retno Maruti

Trade, Asia Pacific

President Joko Widodo has sought to make a virtue of free trade. 

When Indonesian president Joko Widodo expressed an interest in joining the Trans Pacific Partnership (TPP) to Barack Obama in November, he triggered a heated debate in Indonesia. Former president Susilo Bambang Yudhoyono even stepped in via Twitter to advise Widodo that he should not be too ambitious when it comes to opening up the country’s trade.

Widodo has sought to make a virtue of free trade. His government believes free trade agreements can stimulate the business sector in two ways. Firstly, they encourage—at least in theory—the process of market selection; eliminating weak enterprises, bolstering strong ones and encouraging efficiency and innovation. Secondly, the government believes such agreements provide an opportunity to work across the business sector to prepare it for international competition. The latter strategy seems likely to inflict fewer casualties, but it will be slow going. 

Recently, however, it is Indonesia’s increasing closeness to China that has attracted attention. Indonesia is, for example, actively engaged in the China-led negotiations over the Regional Cooperation Economic Partnership, and it is also a member of the Beijing-led Asian Infrastructure and Investment Bank. When it comes to direct trade, China recently defeated Japan to secure the contract to build Indonesia’s first bullet train, valued at US$5 billion. One school of thought holds that Widodo's interest in the TPP reflects, at least in part, a desire to show Indonesia has its own, independent position in the world economic order and no wish to be grouped with either China or the United States.

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