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US tariff policy looms over Jokowi visit
A recent United States decision to revoke Indonesia’s status as a developing country may have a dampening effect on the country’s trade interests, experts have said, as officials scramble to arrange a visit by President Joko “Jokowi” Widodo to the US next month
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span>A recent United States decision to revoke Indonesia’s status as a developing country may have a dampening effect on the country’s trade interests, experts have said, as officials scramble to arrange a visit by President Joko “Jokowi” Widodo to the US next month.
Few details of the plan for the President to meet US President Donald Trump have emerged, but the meeting has been backed by Jokowi’s senior aide, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan, who recently returned from the US with the promise of US investment.
Multiple meetings have been held between Indonesian and US officials in what some observers see as an apparent prelude to a visit by Jokowi. Others see it as a reaction to the removal of Indonesia’s “developing country” status at the World Trade Organization.
Luhut’s visit to Washington on Feb. 13 came just days after the US Trade Representative Office announced its decision to scrap Indonesia from its list of developing countries, which industry players and economists warned could put the country at a greater risk of being accused of excessively subsidizing trade with the US.
The Trade Ministry previously said that the new policy would lower the de minimis threshold to 1 percent — a percentage usually given to developed countries — as opposed to the 2 percent threshold in the previous policy. The threshold refers to the value of imported goods below which no duty or tax is collected.
Indonesian Chamber of Commerce and Industry (Kadin) vice chair for international relations Shinta Widjaja Kamdani said on Monday that the lower minimum threshold resulting from the US decision would make it difficult for Indonesia to defend itself at the WTO.
“So when Indonesia gains a larger US market share and dominates with certain products in the future or when the US receives complaints from its local industry players, the US will directly assume that there needs to be a countervailing duty or antidumping investigation on those imported products,” Shinta told The Jakarta Post.
The extent of Washington’s move is only beginning to be felt, although Coordinating Economic Minister Airlangga Hartarto has played down its potential effect on Indonesia, saying on Friday that the government “isn’t worried”.
However, there is reason to believe it could affect Indonesia’s trade balance, which enjoyed a US$9.6 billion non-oil-and-gas surplus with the US in 2019. The US is Indonesia’s second-largest non-oil and gas export destination, making up about 11.4 percent of Indonesia’s total non-oil and gas exports.
Bank Mandiri chief economist Andry Asmoro estimated that the 2020 current account deficit could widen to 2.88 percent of gross domestic product under the new conditions, adding to already flagging global growth and the economic effects of the novel coronavirus outbreak, which has lowered global trade volume. The 2020 estimate is higher than the 2.72 percent recorded in 2019.
The US policy, issued on Feb. 10, has excluded Indonesia from the developing and least-developed countries list. The policy recognizes certain nations as developed countries after the share of goods they export to the US exceeds 0.5 percent of total US imports. Indonesian products contributed about 0.8 percent to US imports in 2019 ($21.2 billion), Andry noted.
As a result, Indonesia is considered a developed country and is no longer eligible to receive Special Differential Treatment from the WTO’s Agreement on Subsidies and Countervailing Measures. “This [policy] may harm Indonesia’s export performance,” Andry concluded.
Speaking to the Post on Monday, Airlangga played down the effects of the revoked designation.
“We should be happy to be counted among the Group of 20, as the world’s 15th or 16th largest [economy],” he said, noting that the government should be pushing for wider recognition in its bilateral and multilateral dealings.
Indonesia has largely managed to sidestep being a target of Washington’s “America First” push in the trade sector, epitomized in the early days of the Trump administration by the release of a top-20 list of nations that had “unfair” trade balances with the US. Indonesia was — and remains — among those listed.
The US has placed Jakarta in its crosshairs in other areas, including in defense in foreign policy.
While some experts are confounded about how Jokowi’s visit to the US could even be possible at a time of seemingly cool US-Indonesia relations, Luhut insisted on Monday that President Jokowi still expected to visit Trump in the US. The Foreign Ministry has said, “The two governments are discussing a mutually agreeable date.”
When asked about whether the Palestinian issue was going to be discussed, Luhut said, “No. I don’t know.” (tjs)
— Riska Rahman, Adrian Wail Akhlas and Dian Septiari contributed to this report
