logo logo

RI seeks closer trade ties with US

25 March 2006

RI seeks closer trade ties with U.S.

Anissa S. Febrina, The Jakarta Post, Jakarta

After four years of stagnant trade relations, the government plans to start intensifying talks with the United States and support a joint-study group on a possible free trade agreement (FTA) with the country, a minister says.

"This is an important meeting because it will be the first ministerial meeting after the one in 2002," Trade Minister Mari E. Pangestu said Friday.

A delegation, involving both the government and the private sector, will head for Washington, D.C., Chicago and New York in mid-April to meet with their counterparts to discuss matters under the Trade and Investment Framework Agreement (TIFA), the first in four years.

The U.S. is Indonesia’s second largest business partner, with exports to the country of US$9.46 billion accounting for 14.46 percent of total 2005 exports.

Meanwhile, import of goods from the country amounted $3.8 billion, or some 9.45 percent of Indonesia’s total imports in 2005.

"Before proceeding with FTA, we have to go through a process and it is through TIFA. We will first start intensifying senior official and ministerial meetings," Mari said, adding that the government would also support the planned FTA joint study group.

Unlike a study group established before the Indonesia-Japan economic partnership agreement, the Indonesia-U.S. FTA study is initiated by the private sector.

The U.S. committee head at the Indonesian Chamber of Commerce and Industry, Sofjan Wanandi, said previously that the two countries must study the benefits and impact of the FTA before agreeing to set one up.

According to a study by Centre for Strategic and International Study researcher Hadi Soesastro, FTA could not only help enhance Indonesia’s market access but also improve competitiveness due to the economic reforms undertaken in relation to the implementation of the FTA.

Hadi said Indonesia need not start from scratch because it could study existing economic agreements between the U.S. and Singapore, as well as between Australia and Thailand, which had a similar pattern.

The most important products to be discussed will be textiles and apparel, footwear, electronics, processing machines, telecommunication equipments, shrimp, cocoa, rubber and wood.

In the manufacturing sector the would-be-sensitive sectors are foods, beverages and tobacco, chemical products, and the automotive sector.

Exports of several products are experiencing problems in entering the U.S. "Standards are a main problem," Hadi explained.

Indonesian Food and Beverage Producers Association head Thomas Dharmawan said that many exporters were unaware of the FDA standards.

Commodities like cocoa have failed to meet the standards, even though the U.S. is the largest market for Indonesian cocoa.

Recent trade disputes on the alleged transshipment of textiles, apparel and shrimp are also high on the agenda for settlement.

The U.S. has threatened to impose premium import duties on exports of textiles and to temporarily halt exports of shrimp from Indonesia due to suspicions the commodities originated in China and Thailand.

"If we have a framework, it will be easier for us to settle trade disputes. We hope to settle them before they grow into big problems," Mari said.

"The U.S. should not punish us and our innocent exporters because we will take action against unlawful ones."

 source: Jakarta Post