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Govt plan to sign free-trade deals with Japan, EU questioned
Members of the House of Representatives have questioned a government plan to sign free trade deals with a number of countries this year, saying that such initiatives could further increase imports
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M
embers of the House of Representatives have questioned a government plan to sign free trade deals with a number of countries this year, saying that such initiatives could further increase imports.
During a hearing between the House Commission VI overseeing industry, investment and business competition and Trade Minister Agus Suparmanto in Jakarta on Jan. 30, commission member Evita Nursanty questioned the urgency of the agreements.
“The government has so far signed 14 international agreements, but our trade volume and exports continued to decline somehow,” she added.
The government plans to sign protocol agreements that will pave the way for the amendment of the ASEAN-Japan Comprehensive Economic Partnership (AJCEP), the Indonesia-European Free Trade Association (EFTA) Comprehensive Economic Partnership Agreements (IE-CEPA) and ASEAN agreement on electronic commerce (e-commerce).
The amendment will further allow the movement of natural persons (MNP) and the flow of investment between ASEAN and Japan under the AJCEP. Indonesia would, for example, open 48 of its service subsectors in exchange for access to 147 service subsectors in Japan.
The MNP refers to the temporary presence of individuals in another country in order to supply services such as business visitors, intracorporate transferees and contractual service suppliers.
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“There are 11 free-trade agreements that are on the line, but the trade minister has to convince us about this trade strategy.”
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Lawmakers feared that the amendment of such free trade agreements would further worsen the country’s trade deficit due to an increase in the flow of goods to Indonesia. This will also hurt local producers, they said.
Agus explained that the amendment of the AJCEP would result in an increase in service exports to Japan by 45.5 percent this year and 60.2 percent in 2025.
“Can the government guarantee that the agreement won’t result in another deficit? Can it guarantee the forecasted numbers?” asked commission member Darmandi Durianto, who represents the Indonesian Democratic Party of Struggle (PDI-P)
Meanwhile, lawmaker Mufti Anam asked the trade minister to elaborate on the 48 subsectors the country would open under the agreement’s amendment for fear that the government would open strategic service subsectors.
Evita said the difference in quality standard certification might reduce exports to japan as a lot of local products still use the Indonesian National Standard (SNI) while Japan uses the International Organization for Standardization’s (ISO) standards.
House Commission VI vice chairman Aria Bima also suggested that the trade minister instead focus on securing prices and increasing the competitiveness of local commodities before opening more markets through international trade agreements.
“There are 11 free-trade agreements that are on the line, but the trade minister has to convince us about this trade strategy.”
According to Agus, the amendment was also expected to attract $6.25 million in investments from Japan in 2024, an increase by up to 5 percent.
During the hearing, legislators proposed that the Indonesia and Europe CEPA agreement allow full access of Indonesia’s palm oil to Iceland and Norway and to reduce import tariffs for stearin, kernel and other palm oils in Switzerland
While commission member Lamhot Sinaga hoped that the agreement could be a starting point for the country’s palm oil in the European market, fellow lawmaker Tomy Kurniawan felt that the country was not ready to sign more free trade agreements for now.
He added that Indonesian products were still unable to compete in the domestic market, let alone abroad.
The trade minister also discussed the ASEAN e-commerce agreement, which would facilitate e-commerce trading and encourage its development. The trade minister expects the agreement to open the regional market for micro, small and medium enterprises (MSMEs) through e-commerce.
The lawmakers, however, doubted that MSMEs would be able to compete in the regional market as imported goods sold in e-commerce were much cheaper than those produced by MSMEs.
After the meeting, Agus said he appreciated the input given by lawmakers and would further discuss the agreements with them on a later date. “We needed that input. The House is our partner and we need that type of feedback from them.” (mfp)
