The 13th World Trade Organization (WTO) Ministerial Conference (MC) will take place on 26th until 29th February 2024. Bringing several issues regarding the international trade regime, this edition of MC will discuss several pivotal issues, such as: 1) WTO Reform; 2) Agreement on Fisheries Subsidies, 3) Extension of E-commerce, 4) TRIPS Waiver, 5) Agriculture negotiations, and 6) Development related issues. This year’s conference will be held in Abu Dhabi, UAE, amidst the global uncertainty of international peace, fragmentation of the global economy, and deteriorating environmental sustainability. With the existence of these challenging issues, several argue that the conference will produce few progressive results and will likely fail to deliver much. 

Despite skeptical views by some, significant progress on important issues might still be produced from WTO MC13. For instance, the most pivotal issue of WTO reform regarding the dispute settlement mechanism. The US has blocked all new appointments to the Appellate Body as the terms of judges since 2017, whereas all seven seats of the body have been vacant since December 2020 and subsequently disabled the WTO enforcement. In consequence, the incapacitated Appellate Body leads to blockade by countries ruled against with filing an appeal known as “appealing into the void”. Failure to conclude progressive advancement regarding this issue will proliferate current practices of weaponization of trade by countries.

Another important issue is on the E-commerce topics. In Abu Dhabi, the WTO members will convene to address two pivotal issues: the continuation of discussions under the Work Programme on e-commerce and the fate of the Moratorium on Customs Duties on Electronic Transmissions, both initiated in 1998. While the Work Programme appears to proceed smoothly, the Moratorium on Customs Duties on Electronic Transmissions faces significant contention. The Moratorium, which has historically exempted digital products from tariffs, faces polarization. Some member states advocate for its permanence while others, notably developing countries such as India, South Africa, and Indonesia, argue that it deprives them of vital revenue, particularly as digitalization advances and new technologies emerge. Amidst these debates, the uncertain future of the Moratorium underscores the intricate dynamics of negotiations within the WTO and highlights the challenges of reconciling diverse perspectives on digital trade and revenue generation.

Supported by a considerable group of WTO members and business organizations, the Moratorium's extension faces uncertainty as wavering commitments, notably from the US, and concerns about the evolving digital trade landscape come into play. Despite the Moratorium's historical extension every two years by consensus, the prospect of its continuity appears increasingly vague, especially considering the complexities of revenue collection in the digital age and the rising importance of e-commerce in global trade. WTO MC13 should pave the way towards consensus between facilitating digital trade and addressing the developmental needs and revenue concerns of WTO member states to navigate the future of global trade effectively. 

For Indonesia, this MC is also important to address several issues that are closely related to national interest—one of them being the Agreement on Fisheries Subsidies. As a maritime country, Indonesia has an urgent interest in ensuring the economic activities in marine ecosystems are not hampering the sustainability of oceans. Failure to ensure the sustainability of marine resources will not only damage the environment, but also will negatively affect Indonesia’s coastal communities. There are around 120 million people or 50% of Indonesia's population who live in coastal areas, depending on the sea to make their ends meet. However, coastal communities in Indonesia face several challenges that impact their socio-economic development, environmental sustainability, and quality of life. These vulnerabilities are identified as poverty, education, environmental degradation, unsustainable development, and unconnected supply chains.

Regarding this issue, through the Circular Economy Forum 2023 (CEF 2023), Center for World Trade Studies Universitas Gadjah Mada (CWTS UGM) has explored problems that occur at the grassroots level regarding the paradox between Indonesia’s abundant coastal communities and the fact that many of the communities remain under-developed. Furthermore, several stakeholders exhibit an ambiguous understanding of the latent capabilities inherent in an archipelagic nation. Consequently, the current state of the Indonesian fisheries sector still cannot solve many societal uncertainties.

Given the urgency of this challenge, CWTS UGM collaborated with academics, local communities, and the business sector in formulating the “Podocarpus Initiative” in CEF 2023 as a recommendation for the Indonesian government to adopt WTO’s Agreement on Fisheries Subsidies. This initiative emphasizes the establishment of a multi-stakeholder policy forum aimed at promoting the blue economy in domestic policy formulation, with transparent and optimal law enforcement in marine resource extraction sectors to encourage sustainable trade, environmental conservation, business mentoring, and educational curriculum development. The Agreement on Fisheries Subsidies is deemed important due to its key provisions aimed at ensuring the sustainability of the ocean by curtailing harmful subsidies, which are in line with Sustainable Development Goals (SDG) 14. Moreover, the enactment of this agreement holds the opportunities to develop Indonesia's coastal community potential. Giving certainties to small-scale fishers, which become the most vulnerable ocean community in the barn of prosperity, should be navigated by implementing the Agreement and the Initiative. 

Another issue that is crucial to Indonesia is agriculture and Special & Differential Treatment (S&DT). Speaking at the Doha Trade Negotiations Committee (TNC), Indonesia’s Ambassador for WTO HE. Dandy Iswara reiterated the urgent need to ensure that the demands of developing countries can be met through fair S&DT, including S&DT on food security and rural development. In this regard, Indonesia emphasized that “resolving our homework on PSH (Public Stockholding) and SSM (Special Safeguard Mechanism), as well as achieving a balanced and fair outcome in domestic support and cotton (which is a pivotal commodity to Indonesia), should continue to remain high on our agenda.” 

In conclusion, the WTO MC13 outcome is vital to not only reform the WTO as an institution that ensures the effectiveness of international trade, but also to respond to climate change and agricultural issues. Despite skeptical views by some, WTO Deputy Director-General Angela Ellard mentioned that WTO’s current significant progress of informal technical negotiations among its state members are heading towards the goal agreed at MC12 and will be well-functioning in 2024. Every member of the WTO should work expeditiously to reform the WTO dispute mechanism and rebuild trust towards the institution.  Moreover, critical issues for Indonesia sh be properly addressed during the MC 13, especially regarding Agreement on Fisheries Subsidies and Special and Differential Treatment on Agriculture.

Trade wars, naval skirmishes, and escalating rhetoric have been at the heart of China-U.S. relations for over a decade. As is well documented, China’s rise following the turn of the 21st century has made waves throughout the international political economy, raising questions about the compatibility of the competing economic strategies of the two great powers. Where the United States has remained adamant in its espousal of a liberal international order, China prefers the approach of State Capitalism which underpins its Belt and Road investment initiative. 

Concurrent with the conflict between China and the U.S. is the rising economic power of the BRICS nations, including Brazil and India. As a result of this success, more and more countries are finding benefits in cooperation with BRICS rather than working exclusively within the United States’ existing economic framework. Accordingly, the number of countries seeking to join BRICS continues to grow, including Argentina, Indonesia, Saudi Arabia, and the United Arab Emirates. Working with BRICS may see a further boost in popularity as the group continues to investigate the creation of a new global currency, which would allow participating nations to trade independently of the USD.

Against this backdrop of tussling powers in the Indo-Pacific is Australia’s evolving approach to foreign policy and international trade. A Western nation, Australia is often portrayed as an outsider among its Asian neighbours and as a satellite state of the United States. There is truth to this. Historically, Australia has displayed discomfort regarding its place within the region and is the only nation to have supported the U.S. in all of its major military campaigns. However, where Australia has leant heavily on the U.S. for support in defence and politics, the same cannot be said for its trade relations. Instead, it has been heavily dependent on China to grow its economy in the 21st century, primarily by exporting its natural resources. 

Despite the importance of maintaining relationships with China and the U.S., there is growing recognition in Australia that reliance on two competing great powers can only continue for a while. Tensions between Australia and China have already bubbled over in the past, resulting in in diplomatic spats and trade sanctions against Australia. Further, as China and the U.S. continue to butt heads over freedom of navigation and Taiwan, Australia risks becoming stuck between its defensive interests (U.S.-aligned) and economic interests (China-aligned) in the event of escalation. Such an outcome would be catastrophic for Australia, which risks economic devastation should its relationship with its closest trading partner deteriorate before appropriate diversification can be achieved. 

As uncertainty plagues the future of the Indo-Pacific, Australia has realised that it must develop its own identity in international trade and foreign policy. This realisation is reflected in the pursuit of economic diversification by Australian businesses and policymakers. Australian policymakers have clearly taken note of the growing economic success of ASEAN member states, including Indonesia and Vietnam, with the region becoming a more significant priority for policymakers. Evidence of this pivot is growing. Most recently, Australia became a member of the Regional Comprehensive Economic Partnership Agreement (RCEP) alongside 14 of its Indo-Pacific contemporaries, with Australia’s Department of Foreign Affairs and Trade (DFAT) citing the agreement as pivotal for facilitating access to “the fast-growing and dynamic Indo-Pacific region.” Additionally, IA-CEPA, a comprehensive bilateral free trade agreement between Australia and Indonesia, came into effect in 2020. The intention is clear – Australia recognises the importance of Indonesia and wants to build a closer economic relationship. 

Outside of diversifying trading partners, these agreements also pave the way for economic cooperation outside the mining exports for which Australia is so well known. Following the implementation of IA-CEPA, Australian companies have already begun exporting their services to Indonesia in education and healthcare. Such an example is Aspen Medical, an Australian healthcare company that has since agreed to a $US1 billion deal with West Java for the build of over 600 healthcare clinics. Australian companies are also diversifying the location of their manufacturing away from China, as part of a global trend, with many choosing Vietnam as their new country of operations. Australia’s clothing company Cotton On and its foremost natural health company, Blackmores, are leading examples of this transition in effect.

However, despite a growing recognition in Canberra of the opportunity, there remains work ahead to ready Australian companies and investors for doing business with new trading partners in ASEAN. As a result, expect to see a greater focus from the Australian government in facilitating access to new ASEAN markets for Australian companies and exports. The growing economic relationship between Australia and ASEAN members offers hope for the Indo-Pacific through increased cooperation and integration, which could ultimately culminate in greater prosperity and understanding for all. 

As the Chair of ASEAN in 2023, Indonesia adopts the theme of “ASEAN Matters: Epicentrum of Growth” in accordance with Indonesia’s G20 Presidency theme in the previous year, which focuses on the acceleration of  economic recovery and prosperity. This theme underlines the vision of Indonesia’s leadership to accelerate economic recovery, financial inclusivity, and sustainable development in Southeast Asia by strengthening the cooperation of all ASEAN member states.

Indonesia prioritizes three predominant issues upon the regional economy front, namely regional economic development, digital economy, and sustainable development. Instead of merely focusing on regional economic growth, Indonesia should seize its opportunity as a Chair to organize regional cooperation for sustainable development. This article will discuss the importance of the green economy, as a means of sustainable development, in ASEAN and recommend diplomatic actions for Indonesia, as the Chair of ASEAN, to spur the development this year. 

The Urgency of Accelerating Green Economy in ASEAN 

Regional cooperation of ASEAN member states is of utmost importance to tackle climate change issues that will negatively affect many crucial sectors in ASEAN. For instance, ASEAN will potentially lose up to 35% of its regional Gross Domestic Product (GDP) in 2050 caused by climate change. Furthermore, a report from the COP26 Universities Network and the British High Commission to Singapore entitled “Adaptation and Resilience in ASEAN: Managing Disaster Risks from Natural Hazards” reveals that the increasing intensity of rainfall will remarkably reduce regional agricultural productivity. Agriculture production, particularly rice, is predicted to dramatically drop by 50% because of floods, prolonged drought, and extreme weather events. Similarly, these issues will significantly affect the fisheries sector. 

Moreover, climate change will restrict the access to nutritious food in ASEAN. In 2020, 46% of ASEAN citizens were deprived of healthy and nutritious nourishment. The occurrence of a massive migration wave prompted by inadequate food supply, starvation, poverty, and human security due to climate change will arguably complicate regional integration and economic growth. 

Green economy is a system that does not merely see the importance of economic growth, but also environmental sustainability and inclusivity. In practice, this system can be implemented through production efficiency, carbon emission reduction, and pollution minimization. Looking at recent ASEAN conditions, the green economy system becomes necessary for both ASEAN member states’ governments and society.

ASEAN has formulated various regional frameworks related to the development of green economy in Southeast Asia. One of which is the Framework for Circular Economy for the ASEAN Economic Community (AEC) during the 20th AEC Council Meeting. This framework acts as a guideline for ASEAN to enhance regional economic development based upon the green economy. In addition, ASEAN has regularly released annual reports of climate change impacts towards the ASEAN region. 

Through the implementation of green economy, ASEAN will potentially have more than 30 millions of new job opportunities related to green businesses and industry in 2030. According to a report from Bain and Company, ASEAN will possibly profit around $1 billion dollars by establishing green economy. In addition to economic profit, ASEAN will reduce 80% of carbon emission caused by the decreasing consumption of fossil fuel for vehicles in some of the main cities in the region. Furthermore, ASEAN will also increase the efficiency and competition level of regional companies vis-a-vis competitors from outside the region.  

Indonesia’s Chairmanship and Green Economy in ASEAN

There are three diplomatic actions that can be exerted by Indonesia during its 2023 chairmanship to enhance ASEAN’S regional economic development through green economy. 

Firstly, Indonesia should further strengthen regional cooperation and exchanges of ideas and practices of green economy that have been implemented across ASEAN countries. For instance, Vietnam has formulated Environment Protection Laws 2020 to provide a legal foundation for domestic green economy encouragement. Arguably, this legal product can enlighten other ASEAN nations on the importance of providing legal foundation in accelerating the green economy.

Secondly, Indonesia should involve regional MSMEs in green economy implementation efforts through the existing ASEAN cooperation framework. This move is crucial since 90% of ASEAN’s business and industry are MSMEs. Support from ASEAN member states' governments is utterly important due to the vulnerability of MSMEs to numerous obstacles, such as the lack of human capital and funds to set up green and sustainable business models. Furthermore, member state governments should embrace domestic efforts and policies to stimulate the transition of MSMEs conventional business model into green business. 

Lastly, Indonesia should augment collaboration and cooperation with ASEAN external counterparts, such as the European Union, which has implemented green economy. Attracting more investments and regional cooperation in both fronts, policy making and technology, will enable the proliferation of the green economy in ASEAN faster. Arguably, Indonesia with its diplomatic roles in the region can lay the foundation of sustainable economic development to overcome investment and resources barriers, trade barriers that are based on advanced environmental standards, and regional policies that are not on the same level. 

As the Chair of ASEAN in 2023, Indonesia should bridge the interest of economic prosperity and environmental sustainability by implementing green economy. Various initiatives and diplomatic activities in advancing the green economy are not only crucial in enhancing ASEAN economic prosperity, but also in ensuring that the economic advancement will not exacerbate ASEAN’s environment conditions.

The World Trade Organization (WTO)’s decision of Indonesia vis-à-vis the European Union (EU)’s dispute over the ban on nickel exports is expected to be announced soon. On November 22, 2019, the EU filed a lawsuit to the WTO regarding Indonesia’s raw nickel export ban policy which is considered detrimental to the nickel industry in the EU countries. The EU lawsuit covers five main topics, namely: (a) nickel export restrictions, including actual export bans; (b) domestic processing needs for nickel, iron ore, chromium, and coal; (c) domestic marketing obligations for nickel and coal products; (d) nickel export licensing requirements, and; (e) prohibited subsidy schemes.

Recently, the President of Indonesia Joko Widodo (Jokowi) mentioned that Indonesia will likely lose in this dispute. Despite the WTO decision, Indonesia still insists on banning nickel exports and applies similar rules to other raw commodities such as coal, bauxite, copper, and gold. "It looks like we will lose at the WTO, but it’s fine, the industry is already built," Jokowi said.

This article will discuss the nickel industry’s potential in Indonesia, the reasons behind the issuance of the nickel export ban policy, and other Indonesia’s nickel related issues. The nickel export ban policy indicates a protectionist move for the domestic nickel industry. The Indonesian government should pay attention to several risks that come with the policy. This article will comprehensively discuss these aforementioned points.

The Potential of Indonesia's Nickel Industry

Indonesia is a nickel exporting country that controlled up to 20 percent of world nickel exports before the ban was imposed two years ago. Indonesia produces 1 million metric tons per year and contributed to 37% of the world's total nickel production in 2021, which is around 2.7 million metric tons. Yet, despite the export ban, Indonesia has still been able to reap significant profit from nickel-based products exports with $20.9 billion in revenue in 2021. This value has increased dramatically, considering that the export revenue of Indonesia's nickel-based products 7 years ago was only $1 billion. Jokowi opined that Indonesia's consistency in this policy will lead Indonesia's gross domestic product (GDP) to reach $3 trillion by 2030.

Reasons for Indonesia's Export Ban

There are two main reasons behind the Indonesian nickel export ban policy: 

1. The development of smelter technology in Indonesia will likely propel domestic demand for nickel ore. Indonesia currently has 21 smelters out of the targeted 53 smelters in 2024. Domestic nickel ore demand from the increasing smelters is predicted to reach 100 million tons by 2022 and will continue to increase. Processed nickels have higher quality and price that will generate more export revenue for Indonesia compared to nickel ore. Instead of being sold abroad, the government aims to store domestic nickel ore for smelters.
2. Indonesia's nickel export ban policy aims to develop domestic downstream industries related to nickel commodities. The Indonesian government aims to attract more investment in the nickel downstream industry that is mainly related to the electric battery industry. Currently, Indonesia can only produce grade 2 nickel derivative products for stainless steel. Meanwhile, grade 1 nickel derivative products are needed for the manufacture of electric batteries. In his statement, President Jokowi wants Indonesian nickel to be upgraded to grade 1 nickel products for lithium batteries in electric vehicles. The level 1 nickel processing industry is considered lucrative for Indonesia nickel industry.

Based on these reasons, the nickel export ban policy implemented by the Indonesian government appears to be oriented towards the development of the domestic industry. The nickel processing industry, which has not acquired the resiliency to compete with other large industries, requires investment assistance and protection from the government. Protectionism policies, such as export bans, are carried out by a country to make its new industries reach economies of scale and sufficient capability to compete internationally

In a broader context, Indonesia's unchanging commitment is based on Indonesia's vision to shift its role from an exporter of raw materials to a producer of processed nickel with high economic value. This attitude is emphasised by Jokowi's statement, where "Indonesia always exports raw materials, while it is better to process and consume them through downstream industries or domestically". The export value of nickel ore is currently around $30 per tonne, whereas that value may increase to $100 per tonne if converted into ferronickel – an alloy of iron and nickel used as an alloying material in steelmaking. By advancing the downstream nickel industry, Indonesia expects to increase profits in this sector through the value of nickel processed products, job creation, and reduced carbon emissions.

Nickel Industry-related Issues

Besides the potential, the Indonesian government needs to pay attention to a number of important issues that come with the export ban. The issues include: (a) state revenue loss; (b) added value transfer, and; (c) employment.

First, Indonesia needs to consider the potential loss in government revenues. The ban on nickel exports risks the diminution of state tax revenue from companies and export duties so state revenues from downstream nickel industry must be able to replace the loss. One effort that can be done is to create incentives to attract investors. The government can offer tax holidays or tax leave – reductions to corporate income tax (PPh) exemptions for a certain period of time. In addition, government support in the form of ease of licensing to shorten the processing of investment permits can also minimise losses from reduced income. 

Several investors have shown interest in investing in nickel refining and processing in Indonesia. A Chinese company, GEM Co., has committed around $30 billion to invest and become partners in Indonesia’s nickel industry development projects. In mid-April 2022, Chinese battery giant producers, CATL, also began exploring investments in Indonesia for nickel mining and electric vehicle batteries production.

The second issue is the transfer of added value from mining companies to smelters. Indonesia’s local mining sector has to bear with the problems surrounding domestic nickel selling prices and the metal test grade assessment system. The export ban has forced mining companies to sell their nickel ore to domestic smelters at lower prices amid the current high world nickel price. Furthermore, national entrepreneurs have to deal with injustice in the nickel metal test levels assessment system. This discrimination shows when businessmen holding nickel mining business licences are required to use surveyors appointed by the government, while foreign smelter investors may appoint their own surveyors. The requirement caused different results of nickel content analysis, where the outcome of buyer surveyor analysis is often far below that of mining surveyors. Although the government aims to simplify the policies for foreign investors, the government must ensure that its policies will not affect domestic entrepreneurs negatively.

The third issue is related to employment. Although the ban on nickel ore exports is claimed to increase employment levels, especially in the smelting sector, the government should consider the impact of streamlining the mining sector. Despite the absence of credible statistics about workers in the nickel mining sector, data from BPS state that the proportion of the Indonesian manufacturing industry workforce in 2018-2020 has not increased significantly. Therefore, it is not certain that the export ban will benefit the community in this aspect.

Indonesia's policy to ban nickel ore exports is not a risk-free step. Indonesia's persistence will only bring benefits if it is balanced with special attention and risk mitigation from the Indonesian government on tax issues, ease of investment, transfer of added value from mining companies to smelters, and a concrete increase in the workforce. Synergy is utterly important to overcome risks and capitalise Indonesia's nickel export ban policy potential.

ASEAN member countries have signed RCEP (the Regional Comprehensive Economic Partnership) with non-ASEAN countries: China, Japan, Australia, New Zealand, and South Korea. The signatory countries are expected to benefit from this agreement by gaining higher efficiency and enhanced economic development. ASEAN initiated RCEP in 2011, which was later negotiated from 2012 and eventually signed in 2020.In the midst of negotiations, India decided to withdraw from the agreement. RCEP, which has been implemented since the beginning of 2022, covers more than 30% of the world's GDP with a combined value of US$ 26.2 billion and represents one third of the world's population. This article will discuss the role of ASEAN and its interest in RCEP.

Prior to the signing of RCEP, ASEAN had established separate trade agreements with each of the RCEP signatory countries. Known as ASEAN+1 FTAs ​​(Free Trade Agreements), ASEAN cooperated with Australia and New Zealand under the framework of AANZFTA (2010), with China under ACFTA (2015), with South Korea under AKFTA (2007), and with Japan under AJCEP (2008). Besides initiating cooperation through ASEAN, ASEAN member countries also have bilateral trade agreements with  RCEP members such as IA-CEPA by Indonesia and Australia, which was also agreed in 2020. Furthermore, ASEAN also has exclusive trade agreements between its members such as AFTA (ASEAN Free Trade).

It is feared that the existence of RCEP will lead to the so-called spaghetti bowl effect, in which the increasing number of free trade agreements will be counterproductive to the goal of increasing regional trade because their contents overlap and are out of sync. Yet, RCEP has the potential to become a catalyst for ASEAN's trade efficiency  and provide a way out of the spaghetti bowl effect. Arguably, RCEP will not hinder the flow of ASEAN international trade, but will further support the improvement of ASEAN trade relations with its partners because RCEP has the ability to  unite each trade agreement that each country has previously made. 

ASEAN has a very big role in determining the success of RCEP, both through initiating and leading the negotiations by adhering to the concept of ASEAN Centrality. ASEAN Centrality is a principle that locates ASEAN at the core of every cooperation to protect its interests, especially from the interventions of world’s major powers.  This principle requires other parties, such as China and the United States, to follow the mechanisms that apply in the ASEAN region. ASEAN's leadership in the RCEP negotiation process is not merely driven by ASEAN’s high concern for regionalism in Asia-Pacific. Instead, ASEAN moves based on the motivation to improve its economy and trade because ASEAN  views that the implementation of its multilateral trade agreements have not been significantly impactful. Thus, it can be said that ASEAN's main interest is to enhance trade facilitation between ASEAN with its trading partners. ASEAN Centrality in the RCEP negotiation process signals ASEAN's determination to place itself as a leader and facilitator of RCEP to achieve its interests.

The manifestation of ASEAN Centrality in RCEP is not only present in ASEAN’s duty to fulfill its responsibility of promoting international trade as a leader. ASEAN Centrality should also be viewed from ASEAN's opportunities to encourage the creation of agreement clauses that can benefit ASEAN in securing its position. According to Mueller, ASEAN is in danger because RCEP actively involves world's powerful economic countries that will only use ASEAN as a market destination. It is true that RCEP does not revolve around ASEAN benefits alone, but ASEAN through its centrality will strengthen RCEP which guarantees the accommodation of ASEAN interests. This can be seen from the achievement of RoO (Rules of Origin) or provisions on the origin of goods as part of ASEAN's interests.

Similar to other trade agreements, RCEP is formulated to reduce tariffs and trade barriers to increase the volume and economic gains from international trade. For ASEAN, RCEP is notably influential in increasing the integration of ASEAN’s preceding agreements. At the same time, RCEP eliminates trade barriers related to both tariffs and non-tariff barriers. The agreement on RoO (Rules of Origin) in Chapter 3 of RCEP regulates the identity of traded goods and commodities. RoO provides identification of the goods’ origin country to indicate where a commodity comes from. However, RoO can be a trade barrier when the regulations are strictly binding and detailed. Therefore, RoO becomes one of the most complicated RCEP negotiations because each country can be committed to one to three trade agreements with various parties. The complexity of RoO negotiation comes from RCEP's obligation to reconcile the interests of the countries involved since neither party wants RoO to jeopardize their future trade.

RoO provides a standard for a product set to be marketed to other countries by providing an integrated channel of various information according to the standards and criteria stipulated in a trade agreement. RoO gets extra attention in an FTA due to its ability to help countries of origin attain preferential and special treatment from countries that have agreed on the same international trade agreement. This is highly beneficial for each country in RCEP because RoO is prone to add quite a lot of trade costs, ranging from 1.4% to 5.9%. RCEP’s RoO arrangement is estimated to reduce export costs and accelerate trade between countries within the RCEP framework by US$ 90 billion per year. This certainly benefits ASEAN in increasing trade volume and simplifying international cooperation. The harmonization of RoO between ASEAN and fellow RCEP members as trading partners who previously had different regulations made trade more efficient, away from the spaghetti bowl effect.

As a leader in the RCEP negotiation process, ASEAN is considered successful for bringing many countries to agree on one agreement that is not simple. At the same time, ASEAN can also implement the value of ASEAN centrality to ensure the advancement of its interests. In addition to removing trade barriers such as with the RoO agreement, RCEP makes it easier for ASEAN to increase trade efficiency with its partners. The number of ASEAN+1 FTAs strengthens ASEAN’s drivein uniting its trading partners into a new trade cooperation. These factors allow RCEP to pave the way for achieving more of ASEAN's objectives instead of hindering the progress.

The swift influence of globalization encourages the creation of fashion trends that are changing very quickly. To survive, various fashion companies not only compete with competitors who offer low prices, but also compete to meet consumer demand in accordance with the latest trends or called fast fashion (Barnes & Lea-Greenwood, 2010). The phenomenon of fast fashion continues to grow with two main characteristics, namely reducing production process delays and increasing consumer choice by ensuring the stocks of goods constantly (Hines, 2004). Therefore, various fashion companies mass-produce 52 “micro-seasons” every year or equal to one new collection every week and it is estimated that by 2050 the production can reach 160 million tons.

Mass fashion production comes with consequences. UNEP notes that the fashion industry accounts for 8-10% of carbon emissions globally – more than the amount of carbon emitted by international aviation and sea freight. In the production process, this industry also requires abundant water resources and contributes to 20% of global wastewater as a whole. To produce synthetic textiles, this industry requires 42,534 kilo tons of plastic annually which then ends up as waste in the sea. Environmental problems in this industry also arise in the post-consumption phase with the accumulation of end-of-life fashion waste. These various data indicate that mass production in this industry has a significant impact on the environment without any serious handling efforts.

In order to support sustainability, the fashion industry which has been running a linear approach to the manufacturing, distribution and consumption processes must switch and be replaced with a circular economy approach through 3 main concepts, namely reduce, reuse, and recycle or called circular fashion. Circular fashion implementation requires strong support and commitment from various parties including the government as a regulator. This concept is implemented in a complex manner in every continuous phase starting from the early stages of the fashion product life cycle, namely at the design stage until when its use is complete by ensuring that the product will not end up polluting the environment (Brismar, 2017).

However, the implementation of circular fashion still faces challenges (Kirchherr, 2018). For example, companies tend to buy new synthetic textile materials because they are cheaper than recycling as a result of the government's policy of subsidizing fossil fuels being used to produce these materials. Therefore, public and business people's awareness of the importance of circular fashion needs to be accompanied and supported by regulatory readiness as the main supporting factor that has binding coercive power. Environmental problems in the era of sustainable development need to be resolved through the role of law as a social engineering tool. In this case, law is used as a scientific formulation, logical approach, and inventive skill to regulate, manage, and move society towards various reforms (Pound, 1965).

Researchers argue that the fast fashion phenomenon needs to be handled with smart regulatory solutions or smart regulation (Preston, 2017). Through this approach, while most of the investment, innovation and implementation of circular fashion is carried out by the private sector, the government plays an important role in passing policies that support innovation, investment and sustainable business activities. Policies to deal with fast fashion are designed as a whole through a series of policies that support the use of environmentally friendly materials and other innovations, fiscal policies by disincentivizing activities that are contrary to resource protection efforts, to end-of-life product regulation. 

The concept of smart regulation is no longer just an idea along with the publication of the European Union Strategy for Sustainable and Circular Textiles by the European Union last March. By 2030, the European Union has a vision to ensure that all textile products on its market are long-lived, made from recycled fiber, free from hazardous materials, and produced in a process that respects social and environmental rights. In this strategy, the European Union succeeded in designing a comprehensive policy and showing full support for the implementation of circular fashion.

The European Union regulates the start of the textile life cycle by implementing stricter product design rules to reduce microplastic waste from synthetic materials. In order to answer the cultural challenge in the form of public awareness, Digital Product Passport (DPP) is implemented to collect data about products and their supply chain and share it throughout the business chain so that all business people including consumers have a good understanding of the product, its supply chain, and environmental impact. As for dealing with end-of-life waste, the European Union applies Extended Producer Responsibility (EPR) which requires producers to be responsible for managing end-of-life products marketed in the country with the concept of reuse and recycle. This comprehensive policy from upstream to downstream has implications to 16 legislative actions which include the creation of new regulations such as the Eco Design for Sustainable Product Regulation, as well as revision and harmonization of related regulations, including the Textile Labeling Regulation, Waste Framework Directive, Best Available Techniques Reference Documents, and Taxonomy Regulation.

On the other hand, regarding the policies of the European Union, Kerry Bannigan, Executive Director of the Fashion Impact Fund––an organization that supports the role of women in the fashion industry––noted that fashion is a global issue that requires commitment from other countries to cooperate in building a circular economy infrastructure. Currently, 15 developed and developing countries along with various European Union member countries who are members of the Global Alliance on Circular Economy and Resource Efficiency (GACERE) have committed to implementing and advocating for circular fashion in 2020. In addition, G20 countries also held workshops in circular fashion which discuss the role of the state to contribute through supportive policies in 2021. However, to date, apart from the European Union, only the United States has regulated circular fashion through the New York Fashion Sustainability and Social Accountability Act which is currently entering the legislation process. Therefore, although various countries are currently committed to circular fashion through international cooperation, there are still many developed and developing countries that have not implemented this concept at the level of formation and harmonization of regulations.

As a reflection, Indonesia as one of the developing countries has paid attention to solving the problem of textile waste in a sustainable manner in the green industry program, precisely through the Regulation of the Minister of Industry of the Republic of Indonesia Number 13 of 2019. More broadly, the responsibility of the textile industry in relation to wastewater quality standards is regulated through Law Number 32 of 2009 concerning Environmental Protection and Management jo. Minister of Environment Regulation Number P.16/MENLHK/SETJEN/KUM.1/4/2019. However, these various regulations have not included new breakthroughs in relation to ongoing efforts to deal with the current fast fashion phenomenon. On the other hand, the development of environmental law in Indonesia has also been carried out partially, as evidenced by the fossil fuel subsidies that are still being implemented by the government, which reached USD 8.6 billion in 2019 and at the beginning of the pandemic, the G20 countries allocated USD 318.84 billion to support fossil energy. This indicates that the existing policies have not been compiled in a systematic and integrated manner to address environmental problems. Whereas on the one hand, this phenomenon continues to be worrying, supported by the fact that Indonesia has produced 2.3 million tons of textile waste in 2021. In fact, the Indonesian government's efforts to give an appeal about the circular economy to the people in Indonesia have been carried out in collaboration with the Danish government. However, the cooperation that has been established has not been able to encourage Indonesia to implement real policies and harmonize regulations so that this cooperation still needs to be strengthened.

In closing, a legal adage “het recht hink achter de feiten aan” describing legal conditions that are always struggling to follow reality. However, law as a tool of social engineering has been able to answer the modern problems that are happening today. Based on the description above, regulation and international cooperation play a central role in implementing circular fashion. The urgency to overcome fast fashion problems that have a major impact on the environment needs to be supported by the government's strong commitment to being on the pro-environment side and translating it into a holistic regulatory level. Furthermore, circular fashion is an effort that must be encouraged by cooperation between developed and developing countries. Thus, it is hoped that countries around the world have the same vision and mission to create an atmosphere that supports the implementation of circular fashion globally.

References

“A New Textiles Economy: Redesigning Fashion’s Future,” 2017. https://ellenmacarthurfoundation.org/a-new-textiles-economy

Barnes, L., and G. Lea‐Greenwood. “Fast Fashion in the Retail Store Environment.” International Journal of Retail & Distribution Management 38, no. 10 (2010): 760–72. https://doi.org/https://doi.org/10.1108/09590551011076533

Boucher, Julien, and Damien Friot. “Primary Microplastics in the Oceans: A Global Evaluation of Sources,” 2017. https://portals.iucn.org/library/sites/library/files/documents/2017-002-En.pdf

Brismar, Anna. “What Is Circular Fashion?,” 2017. https://greenstrategy.se/circular-fashion-definition/

Directorate-General for Environment. EU Strategy for Sustainable and Circular Textiles (2022). https://ec.europa.eu/environment/publications/textiles-strategy_en 

Institute for Essential Service Reform. “Subsidi Energi Fosil Menghambat Transisi Energi,” 2021. https://iesr.or.id/subsidi-energi-fosil-menghambat-transisi-energi 

Kirchherr, Julian, Laura Piscicelli, Ruben Bour, Erica Kostense-Smit, Jennifer Muller, Anne Huibrechtse-Truijens, and Marko Hekkert. “Barriers to the Circular Economy: Evidence From the European Union (EU).” Ecological Economics 150 (2018): 264–72. https://doi.org/https://doi.org/10.1016/j.ecolecon.2018.04.028

Kompas. “Kurangi Limbah Tekstil, Bappenas Ajak Industri Terapkan Konsep Fashion Sirkular,” 2022. https://money.kompas.com/read/2022/02/24/083300926/kurangi-limbah-tekstil-bappenas-ajak-industri-terapkan-konsep-fashion-sirkular?page=all 

“New York Fashion Sustainability Act: Now In Committee,” 2022. https://www.natlawreview.com/article/new-york-fashion-sustainability-act-now-committee

Preston, Felix. “A Global Redesign? Shaping the Circular Economy.” Chatham House Briefing, 2012. https://www.chathamhouse.org/sites/default/files/public/Research/Energy, Environment and Development/bp0312_preston.pdf 

Pound, Roscoe (1965) "Contemporary juristic theory," in Dennis LLOYD (ed.) Introduction to Jurisprudence. London: Stevens and Sons. Second edition, pp. 247-252.

Smitts, Helene. “Fashion Industry, We Must Prepare for New Regulations,” 2022. https://sourcingjournal.com/topics/sustainability/recover-texiles-recycling-fashion-industry-regulations-waste-337870/

Stanton, Audrey. “What Is Fast Fashion, Anyway?,” n.d. https://www.thegoodtrade.com/features/what-is-fast-fashion.

United Nations Environment Programme. “Financing Circularity: Demystifying Finance Fort The Circular Economy” 2020. https://www.unepfi.org/publications/general-publications/financing-circularity/

———. “UN Alliance For Sustainable Fashion Addresses Damage of ‘Fast Fashion,’” 2022. https://www.unep.org/news-and-stories/press-release/un-alliance-sustainable-fashion-addresses-damage-fast-fashion

Webb, Ella. “EU Moves to Legislate Sustainable Fashion. Will It Work?,” 2022. https://www.voguebusiness.com/sustainability/eu-moves-to-legislate-sustainable-fashion-will-it-work 

The development of cryptocurrencies adoption is increasingly massive in recent years. With various positive aspects of cryptocurrencies such as transparency, transaction speed, and also security, some countries such as El Salvador have begun to adopt cryptocurrencies as a domestic payment instrument. Since the emergence of Bitcoin in 2008, various cryptocurrencies have emerged with their various uses and advantages. One issue that comes with the proliferation of the use of cryptocurrencies and the expansion of adoption in the world's economy is the electrical energy used to keep the blockchain system running. According to information from the Columbia Climate School, the energy required to run the Bitcoin system alone exceeds Argentina's annual energy consumption. Furthermore, such massive consumption of electrical energy produces 65 megatons of carbon dioxide every year, which is equivalent to the total emission produced by Greece each year. Even the energy used in the Bitcoin mining process per minute is enough to meet the energy needs of the average United States household for 17 years. Furthermore, based on research conducted by Cambridge University, Bitcoin mining uses more electricity than the combined electricity consumption of Ukraine and Norway per year.

In addition to the use of cryptocurrencies, with their various advantages and conveniences, it has brought with it a more fundamental issue in recent years, namely the increasing use of energy. In addition, the issue of where the energy comes from is also important because the majority of energy sources in the world still come from extractive mining products such as coal. According to Coinbase, the use of energy in the crypto system is because the majority system is still oriented towards the Proof of Work system rather than the Proof of Stake system.

It is clear that the massive use of energy to keep the cryptocurrency system running requires an increase in the amount of energy produced. This has in fact triggered an increase in the production of electrical energy, such as from coal. The revival of a coal mining company, for example, occurred in the United States where one of the power plants that almost went bankrupt since closing, Hardin, who suffered a loss from 2018 again, got profits in his business due to the increasing energy demand for crypto miners. Even in 2020, the energy generated from this coal power plant is only intended for crypto miners. According to The Guardian, Hardin is a small part of the revival of coal-fired power plants due to the increased use of crypto in recent years.

Efficiency of Cryptocurrency

Cryptocurrencies are still developing massively in the last 10 years. The wider adoption of the community shows the potential for the financial system which actually started because of the financial crisis in 2008 with the emergence of Bitcoin which was allegedly developed by Satoshi Nakamoto (could be the name of the group/person). With systems that can still be developed, such as from Proof of Work to Proof of Stake, the blockchain system can reduce the consumption and energy required by the cryptocurrency system to keep the system running. This was conveyed, for example, in the “Change the Code not the Climate” campaign coordinated by Greenpeace United States and the Environmental Working Group that Bitcoin and cryptocurrencies need to improve the system in cryptocurrencies to make system efficiency, which then reduces energy consumption in the running of the system.

To NBC News, researchers from the Ethereum Foundation said that by using a proof of stake system, the energy used can be reduced to 99.99% lower than using a proof of work system. This certainly gives optimism for those who support crypto and also pays attention to the environment. Some cryptocurrency systems will and have used proof of stake systems such as Ethereum and Cardano. Reporting from Forbes, Proof of Stake removes the system elements of computing competition and makes one machine only work to solve one coding problem at a time. This is different from Proof of Work where many computer machines try to complete many transactions at one time which of course requires a lot of energy.

Utilizing renewable energy

With the massive amount of energy used, the use of environmentally friendly energy is important and pivotal, especially to support the cryptocurrency transaction system which is increasingly being adopted by the community. This has been done, for example, in Costa Rica, which has a surplus of renewable energy. According to DW News, the energy needed to carry out crypto mining is obtained from energy generated from hydroelectric power plants. However, Jose Daniel Lara, a researcher from UC Berkeley said that Costa Rica is a special country because it has a surplus of renewable energy and the logic of crypto mining with renewable energy is possible.

Therefore, it is important for countries that want to adopt the use of cryptocurrencies to not only pay attention to the convenience and advantages of using cryptocurrencies and blockchain technology, but also to pay attention to energy sources to keep crypto technology systems running well.

It is expected that in May 2022, President Biden will formally announce a new economic cooperation framework with Indo-Pacific countries named Indo-Pacific Economic Framework (IPEF). Previously, President Biden submitted the IPEF proposal during the East Asia Summit in 2017 as a strategy to enhance the cooperation of economic and international trade with Indo-Pacific nations. Despite not being formally announced and itemized, according to the United States statement there are four main pillars that become crucial in IPEF, namely fair and resilient trade, resilient supply chain, infrastructure, decarbonization and renewable energy, and taxation and anti-corruption. This policy, however, also depicts the shifting of the US cooperation  policy towards the Indo-Pacific countries which previously have been dominated by security and defense cooperation. 

According to the research report by Centre for Strategic and International Studies (CSIS), the inclusivity of cooperation matters for the countries particularly in gathering the developed and developing nations that will support all countries in the Indo-Pacific. Hence, this cooperation will also push to include countries such as Australia, Japan, South Korea, and also all of 10 ASEAN member states to join IPEF. Indonesia Foreign Minister, Retno Marsudi also hopes that IPEF will also support the existing cooperation framework such as ASEAN Outlook on Indo-Pacific (AOIP). 

Beside strengthening conventional trade and economic cooperation, IPEF cooperation will also acknowledge regional digital economy advancement. This will also give opportunities towards digital economy advancement which has massive potential. Digital economy advancement within ASEAN countries such as Indonesia, Vietnam, Malaysia, Singapore, and Thailand can be a leeway 

Contender for China in the Indo-Pacific

Most of the US policies in recent years seem inalienable from the strategic balancing towards China in the Indo-Pacific, including IPEF cooperation. In recent years, China has been gradually dominating the economic aspect in the Indo-Pacific by actively forging regional cooperation such as Regional Cooperation Economic Partnership (RCEP). This is arguably apprehensive for the US in the context of the Indo-Pacific. Furthermore, integration and dependence from some of the Indo-Pacific countries towards China is also worrying for the US, geo-economically and strategically. 

Other countries such as South Korea, Japan, Australia have been not only gradually increasing their dependence on China economically through bilateral trade but also joining the RCEP mechanism which to many analyzed is perceived as China’s economic statecraft in the region. Therefore, the US propels Japan, South Korea, and Australia to join the IPEF in order to balance China's influence towards these countries. According to South China Morning Post, IPEF is also utilized as an alternative to fill the void left by the US since withdrawing from TPP uner President Trump administration.  

The Chinese government argues that the initiation of IPEF is an effort to alienate China from its regional partners in the Indo-Pacific. The Chinese Foreign Minister said that IPEF is a “Cold War mentality” strategy that still exists in the US foreign policy strategies. 

More than a mere “jargon”

According to the South China Morning Post, the governments of Indo-Pacific nations hope that the IPEF cooperation should give economic incentives more than support for domestic trade only. Instead of merely a “jargon” that depicts the US revival in the region, the US through IPEF should also broaden market access to Indo-Pacific nations. This is indeed in line with the research conducted by CSIS that Indo-Pacific have welcomed the IPEF, but at the same time they are expecting the US to broaden market accession to their domestic products that will also benefit the US by enhancing the trust between Indo-Pacific nations towards the US government. Vietnam Prime Minister, Pham Minh Chinh mentioned that Vietnam is ready to fully support the IPEF but still need more time to reconsider the benefit of joining the initiative. 

The clarity of IPEF cooperation that differs from other existing regional cooperation will be politically lucrative for the US in the Indo-Pacific region. The benefits and economic incentives for the Indo-Pacific nations such as market access and trade facilitation will depict that the IPEF cooperation is not merely for the US strategic purpose in the Indo-Pacific but also can be portrayed as the US commitment to  assist economic advancement in the region.

On September 16, 2021, China has officially submitted the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) – a forum that consists of 11 nations that agreed in 2018 –  membership proposal. This proposal surprises many as Beijing submitted the membership proposal when not only the geopolitical tension particularly with the US is being vigorously debated but also because it is done towards the regional cooperation that is principally forged to encounter China’s increasing influence in the international economy and trade. The process of being a CPTPP member, regardless of being accepted or denied by other CPTPP members, obviously has shown a clear geo-economy tension in the Indo-Pacific region. Despite the lucrative economic potential of China’s membership, the international political rivalry is and will dominate China’s proposal in joining CPTPP.  

CPTPP is the succession of regional economic cooperation initiated by the US called TPP (Trans-Pacific Partnership). TPP not only aims to enhance the trade and investment cooperation amongst the members but also to revive the US leadership in the Indo-Pacific region. Furthermore, it also forged to counter China’s expanding economic influence in the region. Concurrently with the formation of TPP, China was also negotiating the trade agreement called RCEP (Regional Comprehensive Economy Partnership), a trade agreement that involves all ASEAN countries such as Japan, South Korea, Australia, and New Zealand, which was agreed upon in November 2020 and effective from January 2022. For many US foreign policy analysts, the success of the TPP negotiation will enhance Washington’s strategic leverage as Beijing’s presence is increasing rapidly in the Asia-Pacific region.

Despite being the initiator of TPP during the Obama administration, his successor, President Donald Trump with his “American First” approach formally left the negotiation process. His administration argued that joining TPP was futile and overburdened the US itself (Narine, 2018). However, in spite of the US withdrawal, the remaining countries are continuing the negotiation and eventually agreed upon CPTPP. Recently, there are some countries that propose to join CPTPP namely the UK, Taiwan, and China.

Beijing, after the triumph in orchestrating RCEP negotiation, has visions to enlarge and strengthen its presence in other international trade such as CPTPP. The Chinese government has officially submitted the membership proposal to join CPTPP the day after the AUKUS (Australia, United Kingdom, and the United States) agreement has been publicly announced. Being a member of CPTPP after joining RCEP will give huge advantages to China, notably diminishing the trade war impact that is currently still in progress between China and the US, and further enhancing China’s influence in the international trade sphere.

Responses towards China's membership proposal have varied widely, from positive views that there will be a market expansion to skeptical views about China's membership in the CPTPP. The positive outlook was conveyed by Singapore and Malaysia which believed that China would bring a positive contribution to the CPTPP, especially in the context of market expansion just as when China joined the WTO. On the other hand, some countries that are skeptical, such as Australia and Japan, view that China will not be able to meet the regulations and conditions agreed upon by the CPTPP members with its strong state role in economic and business activities.

China's efforts to sign up for CPTPP cooperation demonstrate China's eagerness to take a greater role in the world economy by joining various international cooperation forums, especially those involving aspects of trade and investment. Instead of simply wanting to become the world's largest economy, China is trying to augment its influence and role in the broader aspect. Since joining the WTO in 2001, China has increasingly demonstrated active economic capabilities and participation in international trade. Even for some observers, China has the potential to alter the international trade landscape that has been too dictated by the influence of the United States and Western countries (Akita, 2021).

Concerns about China's utilization of economic dependence are quite reasonable because China's economic capabilities have surpassed other countries in the world in recent decades, including the United States. Conceivably, China's accession to international agreements such as the CPTPP and RCEP makes it has a higher bargaining power compared to the United States which in recent years has chosen not to get deeply involved in various regional cooperation agreements. Even China's success in joining the CPTPP could also illustrate a symbolic ascendancy victory from the United States by taking on a bigger role (Hopewell, 2021).  Furthermore, it is viable that China will, in the near foreseeable future, gain a bigger role or even become the leader of an international trade regime supported not only by its economic advancement but also with an increasingly visible role in every multilateral cooperation forum both, regionally and internationally.

Although China can meet the provisions to become a member of the CPTPP, some observers argue that China will find it arduous to join the CPTPP. China's frequent politicization of the economic sector to achieve national interests in aspects that are sometimes extraneous to the trade and economy also provokes concerns for countries that have joined the CPTPP. This, for example, is indicated by the sanction for Australia in terms of exported goods because Australia provides support to the United States in revealing the origin of the COVID-19 virus. The utilization of economic dependence provokes concerns for some countries with increased economic and trade dependence on China. Economic dependence on China will further lower the bargaining power of some countries that are close allies of the United States. The strategic utilization of trade entanglement with China, therefore, foments concerns of some countries within the CPTPP, despite China’s membership will benefit CPTPP's other members. 

According to research conducted by the Peterson Institute for International Economics, by 2030, cooperation in the CPTPP will generate a profit of 147 billion US$ annually and will be 617 billion US$ if China can join the CPTPP (Petri & Plummer, 2019). Furthermore, China's joining the CPTPP will make the CPTPP a trade cooperation agreement that is slightly larger, in terms of market than the RCEP. Market access and ease of trade with China can improve cost efficiency in CPTPP trade cooperation.

Amid considerable economic potential for both China and other CPTPP member states, it will be difficult for China to join in seeing Beijing's relations with Tokyo, Canberra, and Ottawa that have in recent years become increasingly hostile. Arguably, the three countries will pay more attention especially when Beijing uses aspects of trade in achieving national interests in other aspects such as security and geopolitics.

It will be interesting then to see China's entry into the CPTPP in the coming years. Obviously from the aspect of international trade, China's accession to the CPTPP is a very lucrative opportunity, especially to expand the market in cooperation agreements. Meanwhile, at the same time, the process of China's entry into the CPTPP is also inseparable from the tension factor between several Western countries and China in recent years, especially those with close ties to the United States.  

Instead of paying attention to the advantages of the international economy and trade, the discussion of China's proposals for CPTPP membership revolves around political competition and the balance of power between countries that have close ties to the United States vis-à-vis China. Accordingly, the dominance of strategic calculations of various countries is much more discussed than the calculation of the potential for economic cooperation, particularly to gain benefit from China's membership in CPTPP.

References 

Akita, H. (2021, October 30). Can the CPTPP change China, or will China change it? Nikkei Asia.https://asia.nikkei.com/Spotlight/Comment/Can-the-CPTPP-change-China-or-will-China-change-it 

Hopewell, K. (2021, September 27). Analysis | Would China’s move to join this transpacific trade pact push the U.S. to rejoin? It’s complicated. Washington Post. 

Jiang, H., & Yu, M. (2021). Understanding RCEP and CPTPP: From the perspective China’s dual circulation economic strategy. China Economic Journal, 14(2), 144–161. https://doi.org/10.1080/17538963.2021.1933055 

Narine, S. (2018). US Domestic Politics and America’s Withdrawal from the Trans-Pacific Partnership: Implications for Southeast Asia. Contemporary Southeast Asia, 40(1), 50–76.

Petri, P. A., & Plummer, M. G. (2019, January 30). China Should Join the New Trans-Pacific Partnership. PIIE. https://www.piie.com/publications/policy-briefs/china-should-join-new-trans-pacific-partnership 

Solís, M. (2021, September 23). China moves to join the CPTPP, but don’t expect a fast pass. Brookings.https://www.brookings.edu/blog/order-from-chaos/2021/09/23/china-moves-to-join-the-cptpp-but-dont-expect-a-fast-pass/ 

Recently, the public got thunderstruck by a report that went viral about a cargo ship that got stranded in the Chesapeake Bay. On March 13, 2022, the Ever Forward ship, a fleet member of the Evergreen Marine Corp. reportedly got stuck in the shallow waters of Chesapeake Bay. According to NPR, Ever Forward was departing from Baltimore after loading their cargo when the crew miscalculated the ship’s navigation. Eventually, the Ever Forward arrived in the Chesapeake Bay and was stuck in shallow waters near the beach for four weeks. Various efforts have been made to set this cargo ship free so that it will be able to sail as per normal in accordance with the trade routes. However, until this exact day, the ship still shows no avail of going back on the sail and still remains stranded in the Chesapeake Bay.

Although it did not cause any loss and damage to other cargo ships, this incident caused delays in the supply of raw materials and products of essential commodities for life due to the time-consuming ship rescuing attempts. As reported by CBS News, the Ever Forward ship currently wields 5000 containers on the deck and by being stuck in the same position for a month, they have caused a loss of 1 billion USD per day. In order to avoid a greater amount of loss, the crew and the Chesapeake Bay coastal guards took the initiative to evacuate the containers using another ship for immediate distribution to respective recipients.

The incident that happened to Ever Forward again made the public aware that maritime transportation is crucial in supporting export and import activities in trade. Export and import activities are essential processes in international trade to channel the produced commodities to consumers in order to meet their daily needs. To make the whole process more efficient, transportation facilities are required, especially sea transportation which has been deemed to be the most efficient transportation for various types of products at the same time.

Quoted from a press release on the UN's official website, Former UN Secretary-General, Ban Ki-Moon conveyed the importance of maritime transportation in the realm of international trade in his speech on September 29, 2016, coinciding with World Maritime Day. Ban Ki-Moon stated that maritime transportation is the backbone of global trade activities. Maritime transportation helps ensure that the benefits of trade are more evenly distributed due to its large capacity and relatively lower costs compared to other types of transport. In addition, the shipping industry has also played an important role in the improvement of global living standards that have brought millions of people out of acute poverty in recent years. This article will discuss further the importance of maritime transportation in the world of international trade.

Importance of Maritime Transport in Trade

Barely any economic activity and industrial sector in the world can last for an eternity without the involvement of maritime transport in their export and import activities. This statement was reinforced by the International Chamber of Shipping (ICS) which explained that the international maritime transportation industry is responsible for the transportation of around 90% of commodities produced from world trade activities. In this figure, 80% of them are commodities destined for export and import activities. The statement implies that trading activities are completely dependent on sea transportation which is an important component to drive their economic activities.

ICS also stated that among the 90%, there are 11 billion tons of commodities transported by cargo ships every year, of which 1.5 tons represent the necessities of life for every single person in the world per year. Every year, the shipping industry transports nearly 2 billion tons of crude oil, 1 billion tons of iron ore, and 350 million tons of wheat, where these raw materials are the basic ingredients of almost all basic human needs such as clothing, food, and shelter. This proves that a person's survival is highly dependent on world trade activities, especially on the process of export and import through maritime transportation.

In addition, ICS also mentioned that currently, there are more than 50,000 international cargo ships that carry every type of commodity in their cargo capacity. There are 150 countries in the world that have a fleet of registered cargo ships as a means of distributing commodities in the economy. In addition, each existing fleet employs more than one million human resources from almost every country. The statement elaborates that the maritime transportation industry in expedition activities is strongly supported by its existence to keep world trade activities alive.

What Happened the Year Before

During this year, the world of commerce and the general public was shocked by news about cargo ships that got stuck in the waters where they sailed. Prior to the stranded incident of the Ever Forward ship in the Chesapeake Bay, there was an incident that happened to another Evergreen ship, where this incident was considered far more fatal. Reporting from The Washington Post, at the end of March 2021, one of the Evergreen Marine Corp. ships, Ever Given, was reportedly caught in the Suez Canal which caused a blockade of the canal for 6 full days. The blockade caused by the snagging of the giant carrier managed to disrupt the shipping activities of more than 300 ships so some ships were forced to take alternative routes, requiring them to circle the African continent to reach Asia and increase their sailing time by three weeks.

Reporting from CNBC, the amount of losses borne by Evergreen Marine Corp. After experiencing this incident, of course, not a few, because not only their companies suffered losses, but also the economy around the world. Despite paying a fine that includes compensation for damage and loss of revenue for the Suez Canal, as well as rescue costs totaling $916 million, Evergreen Marine Corp. cannot immediately restore the state of world trade as before. The losses caused by the entanglement of Ever Given to the world economy did not only last a day or a week after that but the impact was felt for months.

According to Business Insider, the losses caused after the Ever Given snagged were estimated at 400 million USD per hour. Lloyd's List, a shipping news journal based in London, estimates the value of cargo goods passing through the canal daily at an average of 9.7 billion USD, with a total of 5.1 billion USD moving into the western hemisphere and 4.6 billion USD moving into the western hemisphere. moving to the eastern hemisphere. Multiplied by more than 300 other cargo ships, of course this number of losses is not something trivial. This event affects global supply chains that have been struggling with shortages and delivery delays since the pandemic began in 2020.

Maritime transportation is the best transportation option for distribution activities in world trade in terms of its function. As the main driver of commodity distribution activities in international trade, human needs are almost entirely dependent on the smooth running of the process. However, if trading activities involving maritime transportation are disrupted while carrying out their functions, the losses incurred will be fantastic. In the future, maritime transportation companies must be better prepared to face situations that can endanger international trade flows.