Jakarta opts not to confront China on trade
Financial Times | December 15 2009
Jakarta opts not to confront China on trade
By Taufan Hidayat and Joe Cochrane in Jakarta
The Indonesian government will not attempt to renegotiate a free trade agreement between Southeast Asian nations and China that will go into effect on January 1, but will request a delay in eliminating import tariffs on more than 300 Chinese products, officials said on Tuesday.
The Jakarta government had been under increasing pressure during the past week from domestic industry players who warned that more than a dozen sectors, including steel and textiles, could collapse because they were not ready to compete with low-cost Chinese imports.
Under the free trade agreement between China and the Association of Southeast Asian Nations, Indonesia is required to remove import duties on 6,682 Chinese products. The Indonesian ministry of finance is scheduled to issue regulations to remove all the duties before January 1 despite plans to request a delay on some products, officials said.
Officials from Indonesia’s trade, finance and industry ministries had met late last week to discuss sending a delegation to renegotiate with Asean’s Free Trade Council in mid-January. However, there was little public support within President Susilo Bambang Yudhoyono’s cabinet to back away from the agreement.
“Indonesia is still committed to the [agreement] that will be implemented on January 1,” said Edy Putra Irawadi, deputy for industry and trade at the Co-ordinating Ministry for the Economy.
“But we will ask for a tariff modification on 303 products whose competitiveness we considered has declined because of the global economic crisis,” he said.
Irawadi said his ministry would spend the next few weeks reviewing the 303 products to determine what impact the free trade agreement would have on them, and submit a letter to the Asean council before January 1 asking for a delay in eliminating tariffs on some or all of them.
He said the review would determine the length of the delay that Indonesia will ask for.
Agus Tjahayana, secretary-general of the ministry of industry, told reporters on Tuesday that the government had identified 314 products from eight industries for which it wanted to keep tariffs in place: food and beverages, petrochemicals, textiles, inorganic chemicals, footwear, electronics, furniture, and steel and iron.
The free trade agreement was signed between China and six of Asean’s 10 member nations in 2002, and some parts of it went into effect in 2005. The agreement does allow signatories to delay reducing tariffs on products through negotiations, but countries that wanted to do so were supposed to make the request months in advance of the January 1 2010 implementation date.
Indonesian analysts have criticized the government for even considering delaying the implementation of the agreement, saying it could affect its economic relationship with China.
