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Economy

ASEAN casts cold eye on TPP trade deal

SINGAPORE -- The administration of U.S. President Barack Obama and Congress remain mired in a standoff over trade policy.

     If Obama fails to get trade promotion authority from Congress, the proposed U.S.-led Trans-Pacific Partnership free trade agreement among 12 Pacific Rim countries, which is now in the final stage of negotiations, may fall through.

     The U.S. and Japan are the two biggest economic powers in the proposed TPP free trade zone.

     The political gridlock in Washington over the TPP issue makes the U.S., a global superpower, actually look smaller in the eyes of many people in other countries.

     The continuing uncertainty over TPP policy in the U.S. has also cast a chill over the 10-member Association of Southeast Asian Nations, which would be at the center of the proposed huge economic zone.

     The atmosphere surrounding the TPP is somewhat different now.

     A key Singaporean politician who helped to push ahead with trade liberalization in the 1990s remains unexpectedly cool toward the pact. He sees the current stalemate could put Japan at a disadvantage. "Japan will have a problem because it would be isolated, if the TPP negotiations fail," he said.

     Singapore is pinning its hopes on increasing trade and investment for future growth. The tiny city-state has already concluded bilateral trade liberalization agreements with major economies including the U.S., the European Union, China and Japan.

     Singapore's aggressive trade liberalization strategy has paid off, with its current-account surplus exceeding Japan's in 2013 and reaching $58.8 billion in 2014.

China pressure

The 10 ASEAN countries are slated to integrate their markets at the end of this year, creating the ASEAN Economic Community. They also pay due consideration to relations with China, as exemplified by their participation in the proposed China-led Asian Infrastructure Investment Bank.

     Even if the current TPP talks end up in failure, its 12 partners will probably have another chance to negotiate the trade deal after the 2016 U.S. presidential election.

     That's why Singapore, a self-proclaimed champion of free trade, seems to be in no hurry. The influential political figure in Singapore seemed rather fretful about Japan being influenced and tossed around by the U.S.

     Meanwhile, Indonesia, a major power in Southeast Asia with a population double Japan's, is finding high-level trade liberalization difficult to achieve.

     Half a year after his inauguration, Indonesian President Joko Widodo has already seen his popularity start to decline due to an ongoing economic slump. His administration cannot be expected to push through reforms of state-owned companies and the labor market, as it is becoming inward-looking.

     Malaysia is desperate to defend its "bumiputra" (son of the land) policy of favoring its Malays. In a move that runs counter to the ideals of the TPP, Prime Minister Najib Razak's administration is shoring up state-run companies.

     Former Malaysian Prime Minister Mahathir Mohamad, who still wields strong political influence in the country, has openly criticized this policy of the Najib administration, resulting in political instability.

     If emerging markets in Asia are to continue to grow their economies, they will inevitably have to promote structural reforms at home.

     As political tactics, regional leaders could use foreign pressure, especially from major powers, to overcome domestic resistance and carry out structural reforms. But such political tactics would only work if the major powers continue to unwaveringly advocate high ideals.

     In the eyes of many people in Asia, the current TPP grouping looks like a school class that is not united because the class president is rather arrogant and changes his or her stance easily in accordance with the teacher's wishes while the vice class president is undependable.

     In this analogy, the class president is the U.S. administration, the teacher is the U.S. Congress and the vice class president is Japan.

Bowing out

The Philippines and Thailand once showed interest in joining the TPP but no longer say anything positive about the pact. Cambodian Prime Minister Hun Sen, who is close to China, has said the real aim of the TPP "is to leave half of ASEAN on the outside. That is the point I would like [the world, and especially Asia] to debate."

      Hun Sen is wrong. Japan and the U.S. are not trying to divide Southeast Asia. The two countries are so preoccupied with reconciling their own political interests that they cannot yet see the future Asiawide trade landscape.

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