Indonesia Notifies Asean of Plan To Renegotiate China FTA

By webadmin on 12:10 am Jan 05, 2010
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Yessar Rosendar & Dian Ariffahmi

Indonesia has notified the Asean council of its plan to modify the implementation of the Asean-China Free Trade Agreement by renegotiating 228 tariff categories in eight industrial sectors, a senior cabinet minister said on Monday.

“We have sent notification for a renegotiation with Asean and China regarding the agreement because it has a potential to weaken local industries,” Coordinating Minister for the Economy Hatta Rajasa said.

The government is seeking to delay the implementation of tariff cuts on 228 categories of products to give local industries a chance to become more competitive to withstand the onslaught of cheap Chinese imports.

In return, it is offering to accelerate the implementation of tariff cuts on 153 tariff categories.

The trade deal took effect on Friday.

Hatta said the government was also planning to form a team made up of representatives from relevant ministries and the private sector to monitor and accelerate the competitiveness of local industries.

The team’s role would be to protect the domestic market from illegal goods, promote local products, and prevent unfair trade practices, he said.

Industry Minister MS Hidayat said it was important to compensate the other parties to the agreement, which was why the government was offering to accelerate tariff reductions in some categories. He said he was optimistic that the renegotiation efforts would result in a win-win solution for all parties.

The 228 tariff categories include steel, iron, textiles, electronics, basic inorganic chemicals, petrochemicals, furniture, footwear, machinery, cosmetics and herbal medicines.

Under the free-trade agreement, tariff reductions on categories included in track I were to be implemented from Friday. Track II categories were to see tariffs reduced from 2012, while categories on the sensitive list would not face tariff cuts until 2018. Categories on the highly sensitive list would not see cuts until 2020.

Hatta said the government was proposing to shift 146 tariff categories from track I to track II, and to shift 60 tariff categories from track I to the sensitive list. The government is also proposing that another 22 tariff categories, on which tariffs were already cut in 2009, should be transferred to the sensitive list.

In return, it is proposing that 153 tariff categories, in sectors such as textiles, steel, toys and footwear, face tariff cuts sooner than planned.

Most of the categories that the government is proposing enter the FTA sooner than planned are in the iron, steel and textiles sectors, Hatta said.

The government is proposing that 56 tariff categories be transferred from track II to track I, 16 tariff categories from the sensitive list be transferred to track I, a further 50 tariff categories from the sensitive list be shifted to track II, and 31 tariff categories from the highly sensitive list be transferred to the sensitive list.

The Asean-China Free Trade Agreement expands a limited agreement that came into force in 2005.

Since 2000, Asean’s trade deficit with China has increased by more than five times, to $21.6 billion, stoking fears that many local industries will be badly hurt by the agreement.