Indonesia Calls For Rewrite of Free Trade Pact With China

Jakarta Globe

Many fear the domestic textiles sector will be hurt by the Asean-China Free Trade Agreement, which came into force last week. (Antara Photo)

Indonesia has asked to re-write a new regional trade pact with China, citing fears of job losses due to a flood of cheap Chinese imports across various sectors, officials said Wednesday.

The government has sought to maintain 228 tariff lines for another two years rather than cut them as required under the Asean-China Free Trade Area (ACFTA), which Jakarta first signed in 2002 and took full effect on January 1.

“The letter of notification on negotiations to discuss modifications to the 228 tariff items was submitted on December 31,” Trade Ministry official Gusmardi Bustami said.

Trade Minister Mari Pangestu has refused to comment on the pact and would not confirm that a formal request for further protection had been sent to the Association of Southeast Asian Nations (Asean).

“I won’t comment on the notification letter. I’ve informally discussed the 228 tariff items with Asean,” she told reporters in response to repeated requests for clarification of Indonesia’s position.

She had previously said only that Indonesia would honour its commitments under the free trade pact.

Industry ministry spokesman Muhdori said a two-year reprieve from zero tariffs was required in sectors including electronics, machinery, furniture, steel, textiles and chemicals.

Asean officials have said it would be strange for Indonesia, which has the biggest economy in Southeast Asia, to try to back out of its commitments at such a late date.

Any such request for a delay in tariff reductions would go against ASEAN’s long-standing drive toward more open regional markets and would require the agreement of the nine other Asean members, which is unlikely.

The ACFTA comprises a market of 1.9 billion people, making it the largest trade pact in the world in terms of population size.

It has a combined gross domestic product of some six trillion dollars and a total trade volume of 4.3 trillion dollars, according to Asean figures.

Indonesian industry bodies have complained that the government has failed to prepare domestic producers to compete with Chinese goods, a failure acknowledged by the industry ministry spokesman.

“The reason for the delay is because we want local industries to be ready for competition with imported goods,” Muhdori said.

Indonesian Furniture Producers Association executive director Tanangga Karim welcomed the government’s request for a delay amid fears that hundreds of thousands of Indonesian workers could lose their jobs.

“A local computer desk made from particle wood sells for about Rp 600,000 ($65). A Chinese computer desk made from similar materials can sell for about 400,000 here,” Karim said.

“The free trade agreement between Asean and China will spell huge job losses at the big furniture makers here. Tens of thousands of employees could be laid off soon.”

Indonesian Employers Association chairman Sofyan Wanandi said that while some sectors would benefit from cheaper Chinese inputs and access to Chinese markets, on the whole the ACFTA was bad for Indonesia.

“Our products can’t compete with cheap Chinese products and as a result many factories will close down and there will be unemployment,” he said.

Asean officials have said Southeast Asian consumers stand to benefit from cheaper goods such as Chinese-made mobile phones, while regional manufacturers would be better placed to piggy-back on China’s industrial development.

AFP

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