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Ministries at odds over market protection

Jakarta Post, Indonesia

Ministries at odds over market protection

By Mustaqim Adamrah, The Jakarta Post, Jakarta

13 December 2008

The Trade Ministry and Industry Ministry are at odds on how to protect the domestic market from a projected influx of imported goods as the global economic slowdown cuts demand, resulting in massive excess in supply in the international market.

The two ministries differ on the implementation of plans by the government to introduce cuts in import duties on certain product categories under the framework of free trade agreements (FTAs).

The Industry Ministry has proposed to the Finance Ministry that the scheduled cuts in import duties be delayed to help protect the domestic market, the ministry’s secretary general Agus Tjahjana said recently.

"A team at the Finance Ministry is discussing our proposal pertaining to the possibility of suspending the implementation of scheduled cuts in import duties to cope with the crisis," Agus told The Jakarta Post.

The Finance Minstry’s fiscal policy agency head Anggito Abimanyu, who chairs the team, confirmed the deliberation to the Post.

The Industry Ministry’s inspector general Sakri Widhianto previously said his ministry had drafted a proposal suggesting a postponement of cuts in import duties agreed under FTAs.

"The government should temporarily delay the implementation of low import duties stipulated by FTAs. Otherwise, local products may be threatened by imported goods," he added.

However, the Trade Ministry’s secretary general Ardiansyah Parman said Asia-Pacific Economic Cooperation members had agreed "not to impede trades by any means".

Scheduled cuts are usually locked in a free trade agreement (FTA), which is negotiated by the Trade Ministry and which requires a signatory country to lower its import duties on particular goods incrementally, in many cases, until reaching zero via a series of yearly adjustments to help provide wider market access for countries within the FTA.

Industry Minister Fahmi Idris said: "In three recent world meetings, leaders predicted many countries would resort to policies that may cut across WTO rules to save their markets and industries amid the current conditions."

By contrast Ardiansyah said: "We (signatory members) won’t take any steps to protect our respective domestic markets because it will harm global economic growth," he told the Post.

Ardiansyah argued that there are still many ways to protect the domestic market, without compromising the country’s commitments to global trade, citing for example a recent regulation by the Trade Ministry aiming to reduce illegal imports and dumping.

The ministry has issued a regulation — to take effect starting Feb. 1, on imports of particular products which stipulates that only five ports and certain international airports can serve as entry points for selected imported goods in five product categories, namely electronics, garments, toys, footwear, food and beverages.

The seaports are Belawan in North Sumatra, Tanjung Priok in Jakarta, Tanjung Emas in Semarang (Central Java), Tanjung Perak in Surabaya (East Java) and Soekarno-Hatta in Makassar (South Sulawesi).

Goods under these five categories entering through other ports will be considered illegal.