ASEAN-Wide talks on TPP pushed

American companies doing businesses in ASEAN have strongly urged the US government to conclude Trans-Pacific Partnership (TPP) negotiations with ASEAN by late 2013 in an effort to strengthen its presence in the world's fastest growing region in what seemed to be a race against China whose Regional Comprehensive Economic Partnership (RCEP) initiative, which is seen moving quicker in ASEAN than TPP.

''Complete the ambitious TPP negotiations by late 2013,'' stated the US-ASEAN Business Council in its ''Statement of Priorities Policy Paper -2013'' recognizes ASEAN's growing importance to U.S. businesses and lays out actions that need to be taken within a five-year period to ensure continuing success for U.S. business in Southeast Asia.

Developed by a committee of senior executives, along with the support of three former U.S.Ambassadors to ASEAN countries, the paper focuses on the fundamental need to address constraints on expanding two-way trade and investment flows through a set of coordinated actions by the U.S. business community, the U.S. government, and ASEAN nations that will reinforce the U.S.-ASEAN relationship and encourage shared growth in the years ahead. The paper focuses on the most vital priorities for US business in ASEAN, including the desire for higher-level engagement, the importance of greater ease in travel between the US and ASEAN, and the need for the US to articulate a clear strategy for creating a free trade agreement that includes all 10 ASEAN nations.

The TPP, which is the centerpiece of the US Trade Agenda in southeast Asia, has only attracted a few countries in the region as it sets high level of standards for members. The Philippines, which is expected to encounter serious difficulties, has not sought membership in TPP yet.

The United States should continue its aggressive push to conclude a high -standard TPP agreement this year, facilitated by the rapid passage of a Trade Promotion Authority bill, and including the full spectrum of market access for goods and services, intellectual property, investment, and other trade policy issues, the Council added.

''The United States should contemplate how best to accomplish free and open trade and investment with an integrated ASEAN, either as part of TPP, APEC 2020, or as US-ASEAN free trade agreement,'' the policy paper sated.

Virtually all of America's leading trade competitors in the region are conducting sophisticated, multi-faceted, and successful economic diplomacy with ASEAN as a single entity.

Australia, China, India, Japan, Korea, and New Zealand have all signed free trade agreements with ASEAN.

Moreover, particularly in the cases of China, Japan, and Korea, competitors' trade agreements are often bolstered by focused aid and infrastructure programs.

The policy paper particularly cited the huge Chinese aid to Southeast Asia run at $7 billion a year - ten times the US figure of $600 million.

While the TPP and RCEP are not inherently mutually exclusive, the Council's Policy Paper, stressed that, ''If RCEP were successful, for example in creating a common set of Rules of Origin, it could create massive economy of scale opportunities for Asian based manufacturers and exporters.''

RCEP, China's initiative, announced at the November, 2012 ASEAN Summit, between ASEAN and its six regional free-trade partners will further tilt the field of trade away from American businesses, in particular as exporters from the United States to the region. This ''ASEAN centrality'' based initiative, got underway in May, 2013, will seek to harmonize and enhance ASEAN's existing FTA agreements in Asia into a single arrangement.

Some of these agreements may be criticized as simple and focused principally ontariff elimination. That is no reason for complacency. To choose an illustrative example, ASEAN tariffs on drilling and mining equipment, an $850 million U.S. export in 2011, include rates of 5 percent in Indonesia, 10 percent in Malaysia, and 15 percent in Brunei Darussalam.

American-based makers of these goods are at a substantial disadvantage when matched against zero-tariff Korean or Japanese products. Condensed milk, the largest American processed -food export to Southeast Asia, faces tariffs of 5 percent in Thailand and 20 percent in Vietnam, but will likely come in duty -free under new ASEAN agreements with Australia and New Zealand.

American automobiles, a very large long -term export growth opportunity, face tariff rates as high as 40 percent in Myanmar and 30 percent in the Philippines -which is to say penalties as much as ten thousand dollars or more per car in comparison to zero-tariff competitors.

''The imbalance of policy has contributed to a visible growth in the influence and engagement of other major economies in Southeast Asia, and in the future -if it is not redressed -to a corresponding diminution of the U.S. role,'' the policy paper added.

Since the turn of the millennium, U.S. export market share in almost all Southeast Asian countries has declined -not sharply, but incrementally and steadily -as has the U.S. role as a buyer of Southeast Asian goods. ASEAN's top trading partner in 2000, the United States now ranks fourth behind China, Japan, and the European Union.

Some of this is natural, given the pull of the Chinese economy and the greater integration of ASEAN as a region. Some, however, is due to policy, and the policy effects are likely to accelerate as tariff-based trade diversion deters American exports of products from automobiles and power equipment to meats and processed foods, while access for information and services industries, areas of great American strength, remains highly limited and investment barriers become more common and often more onerous, the policy paper stressed.

Meanwhile, though the United States remains the largest source of foreign direct investment in ASEAN on a cumulative basis, others have surpassed U.S. investment in the region in recent years, investment barriers are spreading, and ASEAN investment in America remains quite low. 
Without a new effort and a broadened policy, the coming years could see an accelerating erosion of American ability to tap ASEAN's growth for jobs and investment at home through exports, to see technical standards set and major contracts won by competitors, and ultimately to have America's ability to be a strategic partner in the region's future diminished.

The Council, which represents all the major American firms doing business in the region, is chaired by Even Greenberg, chairman and CEO of ACE Group.

''Given the robust growth of ASEAN's middle class and expanding private sector, the U.S. needs focused action in order to successfully meet the challenge of growing competition for the ASEAN market,'' said Greenberg.

Other programs that can be done within a five year period include include addressing policies inconsistent with creating the AEC; simplification of visa policy and facilitate business travel; focus on strengthen regional ''connectivity; comprehensive US engagement; Promote engagement through inclusion of all ASEAN 10; and elevate engagement.

June 25, 2013

Source: Manila Bulletin