November 16th, 2012
06:14 PM ET

Will Thailand join the TPP?

By Peter A. Petri, Special to CNN

Editor’s note: Peter Petri is a nonresident senior fellow with the East-West Center, a professor of international finance at Brandeis University and visiting fellow at the Peterson Institute for International Economics. The views expressed are his own.

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.

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Topics: Asia • Economy • Trade • United States

soundoff (22 Responses)
  1. Francois T

    Isn't it extraordinary to read such vapid and non-specific tripe?

    No TPP should be accepted until the working drafts can be seen by other parties than big corporations. This concerned the lives of millions of people, yet, US negotiators absolutely refuse access to the drafts to anyone, but big business.

    What does the Administration has to hide? Wal Mart wages for everyone?

    This is totally unacceptable and members of Congress must be made to understand how short their political life would be if they allow the Administration to ram this treaty down our throats.

    November 17, 2012 at 12:01 am | Reply
    • Gary Clark

      you seem to be one of those who deem whatever endeavors President Obama embarks are must end in complete failure or national disaster? Primarily due to the color of skin he and his creator have agreed suits him best? If such is the case, my recommendations are that instead of "ramming this treaty down our throats" they might consider the opposite direction. It would be more apt to reach the thought process of those who maintain that the world has to be flat as long as President Obama represents the United States of America.

      November 17, 2012 at 1:24 pm | Reply
      • William Morgan

        The TPP is a bad idea – for the USA and for Thailand. It would lead to more US factories relocated offhshore (outsourcing) and higher pharmaceuticals prices for the people of Thailand. It would also limit the ability of signatory countries to regulate the big Wall Street/international bankers who are squeezing working people everywhere.
        The TPP is being pushed by the multinational corporations and financial interests who have no loyalty to any country, the US, Thailand or any other. They seek to erect a global legal structure that allows them top pursue their interest and place them beyond the reach of any local or national government that could regulate them.
        Many serious, thoughtful people from across the political spectrum and around the world are very critical of the proposed TPP agreement.
        I strongly suggest everyone do their homework and look into the record, the secrecy in which it's being drawn by corporate lobbyists, and the objections raised by environmentalists, Internet freedom advocates and others.
        Do not accept the assertions of Mr Petri at face value, assetions which bear a striking resemblance to the unfulfilled promises made to justify past, failed "trade" agreements.

        November 18, 2012 at 3:54 pm |
      • f'(x)

        I volunteered for Obamas re-election and election, I'm certainly no Obama basher.

        I'm Opposed to TPP. I have read the leaked draft and have been following the negotiations for over a year now.

        TPP is not being reported on in the large media outlets because they support TPP and Know the public would be opposed if they had any idea what was going on. Other than some propaganda supporting TPP you will read nothing about it from the major outlets.

        Frankly the silence on TPP from CNN makes me wonder about ALL of CNN content.

        November 19, 2013 at 11:45 am |
  2. yamalajatt

    In the absence of any movement in the WTO (Doha Round), TPP is a welcome move. Such regional agreements keep the forces of capitalism strong and relations between nations open. Also good for USA's "pivot" policy that focuses more on economic expansion than military presence in Asia.

    November 17, 2012 at 2:36 pm | Reply
    • f'(x)

      Did you cut and paste that from an RIAA brochure?

      How do you know it's a good thing? have you access to something the PUBLIC can't see? The only thing I have been able to access is the wikileaks publication of a draft of part of it and I read NOTHING in it that I would support or I can imagine the public (right or left) supporting.

      November 19, 2013 at 11:47 am | Reply
  3. j. von hettlingen

    The coup in September 2006, the airport closure of November 2008, and the demonstrations and crackdown of April-May 2010, had crippled the Thai economy. The coup itself was most serious, as investors had lost confidence in Thailand and the malaise can still be felt today.
    Last year's red-shirt protests looked far worse but sparked fewer business concerns.
    The current government under Yingluck Shinawatra carries on the policies of her brother, the former leader Thaksin Shinawatra: big spending on infrastructure and a welfare policy founded on the low-cost healthcare and cheap credit.

    November 17, 2012 at 6:17 pm | Reply
  4. William Morgan

    The TPP is a bad idea – for the USA and for Thailand. It would lead to more US factories relocated offhshore (outsourcing) and higher pharmaceuticals prices for the people of Thailand. It would also limit the ability of signatory countries to regulate the big Wall Street/international bankers who are squeezing working people everywhere.
    The TPP is being pushed by the multinational corporations and financial interests who have no loyalty to any country, the US, Thailand or any other. They seek to erect a global legal structure that allows them top pursue their interest and place them beyond the reach of any local or national government that could regulate them.
    Many serious, thoughtful people from across the political spectrum and around the world are very critical of the proposed TPP agreement.
    I strongly suggest everyone do their homework and look into the record, the secrecy in which it's being drawn by corporate lobbyists, and the objections raised by environmentalists, Internet freedom advocates and others.
    Do not accept the assertions of Mr Petri at face value, assetions which bear a striking resemblance to the unfulfilled promises made to justify past, failed "trade" agreements.

    November 18, 2012 at 3:49 pm | Reply
  5. land

    I do trust all of the ideas you have presented in your post. They are really convincing and can definitely work. Still, the posts are too quick for starters. May you please extend them a little from subsequent time? Thanks for the post.

    April 18, 2013 at 4:18 pm | Reply
  6. f'(x)

    I can't support any policy negotiated in secret, with the public deliberately excluded bypassing the democratic process.

    From the leaked draft I can honestly say, I don't think ANYONE I know who would support this legislation. Pollitically left right or center, this is a BAD deal for everyone except maybe the parent company of CNN and some of the other major media outlets. That is why CNN will not report on this policy other than some propaganda in blogs buried so you need to search specifically for TPP to find it.

    CNN and other media companies reporting (or lack of) is a disservice to their audience, and diminishes them to the point of junk journalism.

    November 19, 2013 at 11:53 am | Reply

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