Friday, November 16, 2012

Welcome to the TPP, Thailand

This week the Thai government announced that it would enter into the Trans Pacific Partnership (TPP) FTA talks.  The Thai cabinet voted to support a formal announcement of Thailand’s participation during US President Obama’s visit to Thailand this weekend.

I think this is a positive step forward for US-Thai relations, ameliorating some of the friction left over from the suspended US-Thailand FTA talks (I say “suspended” rather than terminated, because so long as the US-Thailand FTA talks remain suspended, the US-Thailand treaty of amity remains in force; this very important agreement gives US investors better treatment, a key investment advantage for the US in Thailand).   Thailand’s participation will be a strong expression of US commitment to a long-standing ally in the region.

However, nothing about the TPP, which involves a large number of diverse countries, is ever easy. Thailand’s impending participation is no different.

First, the participation of Thailand may introduce into the TPP talks perhaps the trading partner with the most internal angst about the TPP, other than the US itself. The Thai constitution requires consultations with parliament and public hearings before the government can negotiate and conclude an FTA.  This is a legacy of the suspended US-Thailand FTA talks.  Thailand has a large number of FTA opponents in the NGO community, as well as in the opposition parties, and they will be vocal this time as well.  The Thai business community, which has been reacting with “Thai anxiety” to the ASEAN Economic Community, will also be split on its merits.  Expect a new cottage industry in TPP workshops in Thailand soon.

Second, Thailand’s participation means that four of the ASEAN-6, plus Vietnam, will be TPP negotiating parties.  This will put pressure on the remaining ASEAN-6 members Indonesia and the Philippines to join the TPP talks.  Yet both countries have great difficulties with the depth and breadth of the TPP’s scope.  Both countries would benefit from the economic and regulatory rigors the TPP would offer, but domestic interests in both countries will be against entering the talks.  The impending election season in Indonesia makes it that much more difficult for the country.

Third, Thailand’s participation may complicate the politics involved in ASEAN’s Regional Comprehensive Economic Partnership (RCEP) talks, if not the mechanics. I say the latter because the intended scope of the RCEP and existing scope of the TPP talks will be rather different.  RCEP will likely be more modest but achievable, especially when compared with the TPP.  Hence mechanically it will be quite possible for the soon-to-be five ASEAN members in the TPP talks to participate in the RCEP talks as well, and eventually (!) they can be unified under APEC.  Politically, this may be a different matter, particularly since the RCEP talks involve China, Korea, Japan and India, who are not part of the TPP and currently not interested in the TPP either.  This may change if and when Japan joins the TPP talks; the current Japanese government supports joining the talks (as does the opposition) but Japan is now headed for an election and anything could result.

Finally, for the US, the addition of Thailand into the TPP talks brings with it all of the issues that arose during the US-Thailand FTA talks.  Expect automobiles, intellectual property and agriculture to be major issues, with automobiles being most prominent (due to Thailand’s large auto industry) and a newish issue for the TPP.  The intensity of opposition and concern in the US may be a good thing, as it could force the Obama administration to work with Congress to get Trade Promotion Authority (TPA).  Without TPA, the TPP’s implementing legislation could suffer from the death of a thousand amendments in Congress.

All in all, Thailand joining the TPP talks is a good thing, but the move brings with it more considerations and complications.  Just wait until Japan shows up. Then we’ll have a real barnburner.