Transpacific Partnership: A Key Policy Tool for US Engagement with ASEAN


The trade ministers of twelve TPP member economies met recently in Singapore, and pledged to ‘intensify engagement’ and resolve outstanding issues in the coming months. One such issue is for the US administration to secure the establishment of the Trade Promotion Authority (TPA), a ‘fast track’ procedure that pre-commits the US Congress to implement legislation without amendment and within a specified time frame. The partner economies are worried that the TPP may face roadblocks from Congress, especially on issues such as intellectual property rights, and labour and environmental standards.

For the US, the TPP is a key policy tool for future engagement with ASEAN, the hub of FTAs in Asia. Within APEC, while as many as seven ASEAN economies work with the US to maximize preferential treatment, that forum remains non-binding in nature; and with as many as 21 members, consensus is not easily reached. In contrast, TPP is structured to be a binding agreement that will benefit the US in trade and foreign policy matters. This concerns not only those ASEAN members currently involved in the negotiations but also ASEAN as a whole.

ASEAN is a diverse region, and all the four economies currently negotiating the TPP Agreement have unique paths of development. Vietnam, for example, is expected to double its middle income and affluent consumers to more than 30 million by 2020. It has no doubt been on the upswing for 20 years, but the trajectory steepened after 2007 when it joined the WTO. This caught the attention of many investors, including American franchises such as KFC, Starbucks, Pizza Hut, Burger King, McDonald’s.

In the meantime, Malaysia continues with its ambition of attaining developed-nation status by 2020. Its target of hitting US$15,000 per capita Gross National Income is calculated to be achievable through attracting US$444 billion in investments. The government is aiming not only to create 3.3 million new jobs but also increase private spending in healthcare, transportation, education, housing, consumer and luxury goods and infrastructure.

Singapore and Brunei may be small countries but both have first world per capita GDP. Singapore has superb business infrastructure and is furthermore centrally located in the region. This has led major international businesses to base their Asian operations headquarters there. US-based firms ranging from manufacturing to services and to financial services, for example, are increasingly investing in the city-state. Furthermore, it has ‘avoidance of double taxation treaties’ with more than 70 countries and boasts of a trusted legal system and a sound intellectual property protection regime.

Through the TPP, these four ASEAN economies will become a gateway for US companies into the region. ASEAN is undergoing rapid regional economic integration and already has a consumer base of 626 million and enjoys a combined GDP of US$2.45 trillion. It is already Asia’s third largest economy and ranks seventh globally. According to McKinsey, ASEAN is on track to become the fourth largest economy in the world by 2050. Although intra-regional trade in ASEAN is only half that of NAFTA, it is expected to deepen significantly once the comprehensive ASEAN Economic Community is in place at the end of 2015.

ASEAN countries, taken together, rank fourth only after Canada, Mexico and China as a goods export market for the US. The US in turn is ASEAN’s third largest trading partner. Most tellingly, the total value of US-ASEAN bilateral trade has increased by 71 per cent since 2001—from US$137 billion to US$ 234 billion in 2012.

Indeed, the US has high stakes in the TPP Agreement. Not only will the pact be a key component in the US ‘rebalancing’ strategy towards Asia, it is expected to increase US business opportunities significantly in four different continents. At the same time, given political changes in East Asia, US presence in the region through the TPP will be a comforting factor for ASEAN economies.

Sanchita Basu Das is a Fellow and Lead Researcher (Economic Affairs) at the ASEAN Studies Centre of the Institute of Southeast Asian Studies, Singapore.