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Accords rest with Jokowi
President Joko “Jokowi” Widodo may have to find a balance between proving his commitment to supporting global free trade and maintaining his nationalist economic policies, as his administration is looking to expedite the ratification of several international agreements on commerce and services
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span>President Joko “Jokowi” Widodo may have to find a balance between proving his commitment to supporting global free trade and maintaining his nationalist economic policies, as his administration is looking to expedite the ratification of several international agreements on commerce and services.
As he will need to balance the two contradicting policy stances, Jokowi will have to decide whether to follow the recommendations of his top officials, who agreed in a recent meeting led by Coordinating Economic Minister Darmin Nasution to accelerate the ratification of seven multilateral and bilateral trade agreements.
The pacts, which involve a number of free trade agreements (FTA), are the ASEAN-Australia-New Zealand FTA (AANZFTA), ASEAN-India FTA (AITISA), ASEAN-Korea FTA, ASEAN-China FTA, ASEAN agreement on medical device directive, the ninth protocol of the ASEAN framework agreement on services and the Indonesia-Pakistan preferential trade agreement (IP-PTA).
Darmin said he would propose accelerating the agreements to Jokowi as the government had the authority to ratify international agreements through a government regulation if there was no decision from the House of Representatives after a 60-working day period, as stipulated in Article 84 of Law No. 7/2014 on international trade agreements.
All of the aforementioned agreements have passed the 60-day period. Since 2015, several pacts, such as the first protocol to amend the AANZFTA and agreement on trade in services under the AITISA, have been proposed by the government to the House to be ratified into law.
However, international trade agreements are often seen as a sensitive issue, according to University of Indonesia economist Fithra Faisal Hastiadi. He said there was an anxiety that the government would become more liberal in terms of international trade negotiations, so it was possible that Jokowi would not rush to ratify the agreements as the President is seeking a second term in office in 2019.
“Given the political situation, [the ratification of the agreements] could easily be perceived as a political issue, in which the public perception toward foreigners is rather negative,” Fithra told The Jakarta Post on Thursday.
Darmin acknowledged that Jokowi would not deliberately ratify the agreements but that it fully rested in the President’s hands.
Hendrawan Supratikno, a member of the House of Representatives’ Commission XI overseeing fiscal and financial affairs, said the government could go ahead and ratify the agreements under the law on international trade agreements despite having a weaker legal standing compared to ratification via legislation approved by lawmakers.
“If it is urgent, the government can ratify [international agreements] by issuing a regulation, despite having a weaker legal umbrella as there will be no ‘legal peg’ [to prevailing laws],” said Hendrawan.
In his reelection attempt, Jokowi appears to be building an image of being pro-international trade, as he told hundreds of participants in the plenary session of the Annual Meetings of the International Monetary Fund and World Bank Group in October of the importance of stronger global cooperation against rising protectionism.
However, at the same time, Jokowi has on many occasions ordered for the stronger implementation of policies to safeguard domestic interests, such as nationalizing oil and gas assets and taking majority ownership in the Grasberg gold and copper mine from United States mining company Freeport-McMoRan.
The cost of not ratifying the seven agreements was high, according to the government. For example, not ratifying the latest protocol of the IP-PTA will automatically terminate the agreement, closing access to the US$1.46 billion crude palm oil (CPO) market in Pakistan at a time when neighboring CPO producer Malaysia is seeking to upgrade bilateral trade ties with Pakistan.
Meanwhile, not ratifying the latest protocol of the AANZFTA will mean that Indonesian products exported to Australia or New Zealand will not benefit from preferential tariffs under the pact, effectively putting a barrier to exported goods worth $1.76 billion.
