Following the visit of US Secretary of State Mike Pompeo to Jakarta last week, the country has officially extended Indonesia’s Generalized System of Preferences (GSP) status, which eliminates tariffs on thousands of goods the US imports from Indonesia.

The move comes after the Trump administration had considered ending the GSP status for Indonesia.

Indo-Pacific refers to the region straddling the Indian and Pacific oceans, where countries like Japan, Australia and India, together with the US, have published their respective Indo-Pacific strategies to counterweigh China.

Rooted in its free and active foreign policy principle, Indonesia has been adamant in ensuring that the region remains neutral amid the power struggle between the US and China. The GSP status extension, however, reflects the two countries’ shared interest in improving their trade partnership.

Foreign Minister Retno Marsudi said the US government, through the United States Trade Representative (USTR), officially issued a decision on Friday to extend the GSP facility to Indonesia.

She said the decision was a concrete form of strategic partnership between Indonesia and the US, and that the two countries sought “a more comprehensive and permanent” trade partnership, signaling a possible bilateral trade agreement with the US.

Last year, Indonesian exports under the GSP facility reached US$2.61 billion, or about 13.1 percent of Indonesia’s total exports to the US, Retno said, citing data from the United States International Trade Commission (USITC).

“From January to August this year, amid the pandemic, the value of Indonesian exports using the GSP facility reached $1.87 billion, marking an increase of 10.6 percent over the same period last year,” she said.

She added that the extension would benefit not only Indonesian but also US businesses.

Indonesia is one of many countries benefitting from the GSP facility, which eliminates duties on thousands of products to promote the economic development of the beneficiary countries and territories.

In 2018, President Trump said his administration would review the GSP benefits for several developing countries, including Indonesia, with which the US has a trade deficit. Jakarta has since lobbied the US in the hope of retaining its trade privileges.

Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman for international relations Shinta Kamdani said businesses welcomed the extension of the GSP status, which would support trade growth and the economic recovery.

However, since the GSP was a unilateral trade preference scheme that could be granted and revoked by the US at any time, she said, the two countries needed to develop other trade schemes that offered Indonesian business actors a higher level of certainty.

“As far as we understand, the trade scheme that is currently being studied with the US is a limited trade deal scheme that emphasizes the principles of fair and reciprocal trade, especially when forming a production supply chain between Indonesia and the US,” she told The Jakarta Post.

Deputy Foreign Affairs Minister Mahendra Siregar, who was appointed by Jokowi to oversee the economic portfolio of the ministry, including the GSP negotiations with the US, said Indonesia was the only country in Asia whose GSP status remained unscathed.

“This is very important for Indonesia, especially since the majority of the products exported using this GSP facility are products from small and medium enterprises,” he said.

Going forward, he said Indonesia and the US wanted to double the yearly trade value from around US$30 billion to US$60 billion within five years.

In a letter to Indonesian Coordinating Maritime and Investment Affairs Minister Luhut Pandjaitan, USTR Robert Lighthizer said the GSP extension was a recognition of Indonesia’s efforts to strengthen the trade relationship between the two countries.

With the recent amendments to Indonesia’s Horticulture Law through the Job Creation Law, he said, the US was seeking to see Indonesia open access to fruit imports from the US.

“This is a crucial issue in our bilateral trade relationship, and any delays in the issuance of 2021 import licenses and or imposition of any new barriers that restrict access to the Indonesian market for US fruit could prompt the immediate opening of a GSP review,” he said in the document received by the Post.