Indonesia may seek tariff delay in Asean-China pact

The Straits Times, January 6, 2010

JAKARTA: Indonesia may lodge a formal request with its South-east Asian neighbours to delay some tariff reductions under a free trade agreement with China, an official from the country's Trade Ministry said yesterday.

The pact between China and Asean forms a trade bloc worth US$200 billion (S$281 billion) affecting 1.9 million people, making it the world's biggest trade deal by population and third largest by trade volume after the European Economic Area and the North American free trade zone.

The agreement, which should help China secure supplies of raw materials and open new markets for Asean countries in their huge neighbour, was initially signed in 2002 and covers about 7,000 product lines. It came into force this year.

But Indonesia has led resistance after sectors such as textiles and garments complained that the agreement left the industries vulnerable to cheap Chinese imports.

Indonesian Trade Ministry director of regional cooperation Iman Pambagyo said Jakarta was considering asking for the implementation of the pact to be delayed for some sectors.

Indonesian Coordinating Minister for the Economy Hatta Rajasa said last week that a team had been set up to investigate whether the pact would damage the economy.

'If it's unfair, we can reject it. We'll do something to protect our national interest,' he said without elaborating.

Under the pact, Indonesia, Malaysia, Brunei, the Philippines, Singapore and Thailand have to reduce to zero tariffs on around 90 per cent of imported goods. Laos, Vietnam, Cambodia and Myanmar have up until 2015 to make the cuts.

Manufacturers of goods such as textiles, footwear and steel in countries such as Thailand, Vietnam, Cambodia and Indonesia appear vulnerable to cheap Chinese imports.

But each country also has a list of between 150 and 250 goods that can be excluded, and certain goods are deemed as sensitive and will continue to be protected.

Mr Ahmad Tirmiko Indra of Asean's External Economic Relations Division said checks would soon be started to ensure signatories to the agreement had complied. He did not elaborate on the potential impact of a country seeking delays now.

Indonesia's customs and excise unit has warned that the agreement could cause state losses of 15 trillion rupiah (S$2.3 billion) this year, Bisnis Indonesia reported last Saturday.

Mr Bambang Soesatyo, chairman of the domestic trade committee at the Indonesian Chamber of Commerce and Industry, said the agreement could threaten at least one million jobs in the country.

REUTERS