Indonesia Will Seek Negotiations on China Tariffs

Dian Ariffahmi & Dion Bisara

The government will seek to negotiate at least partial restoration of tariffs on some Chinese products due to be abolished as the China-Asean Free Trade Agreement comes into effect on Jan. 1.

Anggito Abimanyu, head of fiscal policy at the Finance Ministry, said the government would honor its commitment to enact the free-trade deal with China on Jan. 1, as scheduled.

However, he said the government would ask that the restoration of import tariffs on 314 product categories in eight industry sectors be renegotiated. The industries that may win a partial reprieve are food and beverages, petrochemicals, textiles, footwear, electronics, furniture and steel and iron.

In recent weeks, domestic manufacturers have called on the government to delay the implementation of the trade agreement, which will remove import tariffs on thousands of Chinese-made products. They argue that they will be at a disadvantage against Chinese companies that enjoy lower production costs.

The Industry Ministry, which had previously expressed support for the idea of postponing the FTA, on Tuesday said that it must be implemented as agreed.

“This is a multilateral agreement that should be respected,” said Agus Tjahayana, secretary general of the Industry Ministry.

Under the terms of the trade agreement, a member state has the right to ask for temporary modification of tariff concessions if it encounters unforeseen difficulties implementing them.

Any such request must be made to the Asean Free Trade Agreement council, which in this case could negotiate with China on Indonesia’s behalf, or simply reject Indonesia’s request. It has 180 days to make a decision. Meanwhile, the trade deal will be implemented as planned.

If negotiations are held, China is certain to seek concessions in other areas in exchange for allowing Indonesia to modify its tariff obligations.

Eddy Putra Irawady, a deputy to the coordinating minister for the economy, confirmed that the government would submit such a request to the AFTA council and was prepared to offer the necessary concessions in return.

Agus said the 314 product categories that could receive some tariff protection had been determined after a careful study of every industry to determine their readiness to compete with Chinese imports. Those sectors were deemed unprepared for the threat posed by Chinese competition, he said.