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Indonesia lobbying to maintain US trade ties

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Indonesian Trade Mi nister Enggartiasto Lukita met US Secretary of Commerce Wilbur Ross in Washington this week.
Published22 min ago

Amid an escalating global trade war triggered by the United States, Indonesia is going against the grain by lobbying Washington in a bid to maintain its trade ties with the world's largest economy.

Leading a business delegation to the US capital this week is Indonesian Trade Minister Enggartiasto Lukita. It includes representatives from, among others, the Indonesian Chamber of Commerce and Industry (Kadin), and organisations representing Indonesian exporters, importers, biofuel producers, textile producers as well as producers of key exports including tyres, palm oil, steel and aluminium.

Mr Enggartiasto's key focus for the trip is to discuss the review of US preferential trade tariffs, which Indonesia has enjoyed for decades, as well as explore new opportunities for local businesses in the US.

Indonesia and US sh are longstanding ties, but against the backdrop of what has been a series of tit-for-tat moves against the US by its trading partners, Mr Enggartiasto's mission is to seek another path to enhance their partnership.

After a meeting between Mr Enggartiasto and US Secretary of Commerce Wilbur Ross on Tuesday, both countries agreed to lay out a road map to boost bilateral trade to US$50 billion (S$68.2 billion) in the next few years, from nearly US$26 billion last year.

"We don't want to set a target without outlining clear steps to achieve it. So, we will produce a road map," Mr Enggartiasto was quoted as saying by The Jakarta Post.

According to Indonesia's Trade Ministry, two-way trade between Indonesia and the US reached US$25.92 billion in 2017, with Indonesia exporting US$17.79 billion worth of goods and commodities, while it imported US$8.12 billion, resulting in a surplus of US$9.67 billion.

While the US is among Indonesia� 39;s biggest trading partners, Indonesian goods and commodities accounted for only 0.88 per cent of overall American imports in 2017, according to Geneva-based International Trade Centre, which also showed that Indonesia's annual exports to the US contracted by 3 per cent between 2013 and 2017.

In April last year, the Trump administration released a list of countries with which it has considerable trade deficits. Indonesia, South-east Asia's largest economy, was ranked 15 out of 16 countries.

Observers say weighing trade relations between Indonesia and the US based solely on US deficit does not present a complete picture. Indonesia and the US trade complementary goods and commodities.

In 2012, American airplane maker Boeing signed a US$22.4 billion deal - its largest ever commercial airplane order - with Indonesia's Lion Air, the country's largest carrier by passenger volume. Indonesian steel, meanwhile, is part of the supply chain of America n companies, including Boeing.

The Trump administration's move to impose 25 per cent import duties on steel will eventually push up aircraft production costs in the US, say observers.

They add that should Indonesia be dropped from the US' preferential tariff scheme, called the Generalised System of Preferences (GSP), companies in America may end up paying extra import duties for goods from Indonesia. The US Trade Representative's Office had said in April that it was reviewing the eligibility of Indonesia, along with India and Kazakhstan, for the GSP based on concerns over compliance with services and investment criterion.

Details from the review are expected by the end of this year.

Indonesia has benefited from significant tariff reductions under the GSP scheme since 1980. Last year, for instance, the facility led to reduced tariffs on US$1.9 billion worth of Indonesian products.

"Actually, American consumers and entrepreneurs a re the main beneficiaries of the GSP facility," said Kadin deputy chairman for international relations Shinta Kamdani. Indonesia, she said, is hoping the GSP facility is maintained.

The trade delegation is expecting to expand its economic relations with the US through investments in areas such as the aviation sector.

A version of this article appeared in the print edition of The Straits Times on July 28, 2018, with the headline 'Indonesia lobbying to maintain US trade ties'. Print Edition | Subscribe Topics:

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