The ‘elephant in the room’ for the AEC
While the Asean Economic Community (AEC), and the new kid on the block, the US-sponsored Trans-Pacific Partnership (TPP), are separate entities which should, in theory, not influence or impinge in any negative fashion on each other, there are distinct rumblings within Asean which suggest some serious concerns for the future.
The Trans-Pacific Partnership is a trade agreement which currently has 12 Pacific Rim countries as signatories. The idea for the TPP essentially started in 2005 with the creation of the Trans-Pacific Strategic Economic
Partnership Agreement (TPSEP or P4) between Brunei, Singapore, Chile and New Zealand. The P4 later expanded to include Malaysia, Vietnam, Australia,
Canada, Japan, Mexico, Peru, and the United States.
The TPP encompasses the world’s first- and third-largest economies, namely the US and Japan, and all-up the dozen member states represent 37 percent of the global gross domestic product (GDP) of US$27.8 trillion.
The TPP was signed on February 4 this year in Auckland, New Zealand and must be ratified by all members before it comes into force.
Thailand has yet to sign up to the TPP and there are compelling reasons both for and against joining this trade group.
One of the arguments for joining the TPP is that it would, in theory, increase Thailand’s competitiveness, although this would only be because businesses would be compelled to improve the standard and quality of their products. Increased competition would, supposedly, increase the efficiency of business, and that would, in turn, help Thailand’s economy to become more flexible in the current worldwide economic downturn.
The TPP, more than the AEC, could be a way to help boost the so-called advanced industry sector, attracting technology-based investors from TPP
member countries to invest in Thailand and thereby help develop advanced industries here.
Indonesia, one of Thailand’s fastest-growing competitors in the region, is being touted to join the TPP by about 2018. That would leave Thailand as the largest economy within the AEC to not be a member of the TPP, with all the potential issues that could come with that position.
In late March the prime minister did state that Thailand would probably be compelled to join the TPP. In his speech at a dinner held in Washington, DC, the prime minister said Thailand would likely encounter some difficulties with the TPP in some sectors. That’s a long from the initial misgivings and almost determined stance of staying out of the TPP which appeared to be the military-installed government’s stance as late as September 2015.
The question is probably not if Thailand will join, but when. Equally, for Thailand and other Asean member states, they will be starting to question the role of the new AEC and how it, and they, are going to fit into the TPP jigsaw.
Continued next issue