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NEWS UPDATES 19 September 2009

Indonesia to delay tariff cuts under Asean-China FTA

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Indonesian Industry Ministry is carrying on with it’s  initiative to delay the timing of tariff reductions under the free trade agreement (FTA) between the Association of Southeast Asian Nations (Asean) and China; while the Trade Ministry says that renegotiation is not the only solution to protect local industry, the Jakarta Post reported.

The Industry Ministry has been holding meetings with business groupings representing textiles, steel, chemicals and electronics to determine which items in the FTA, planned to become effective next year, should be reviewed as regards the timing of  their implementation .

The ministry’s director general for metal, machinery, textile and miscellaneous industries Ansari Bukhari said the FTA actually allowed a country to “withdraw from or make modifications to the pact” under certain circumstances.

“It is possible to modify tariff cut schedules but with one condition; there must be compensation,” he told The Jakarta Post recently.

The compensation, he said, could be in forms of swaps with items in the normal track 1, the normal track 2 and the sensitive list, all with different implementation time lines .

“For instance, if [the Indonesian Textile Association, API] wants [to do so] by moving particular textile items out from the normal track 1 to the sensitive list, they must move other items in the sensitive list into the normal track 1,” said Ansari.

He added that the proposed swaps could apply to items within one sector, or between industries.

According to Ansari, items in the normal track 1 will gradually start having zero tariffs on Jan. 1, 2010, followed by items in the normal track 2 and the sensitive list.

The FTA, which was signed in 2004, will gradually scrap import duties on, among others, textiles, footwear and leather products, ceramics, food and beverages, iron and steel products, petrochemicals and electronics from China.

Domestic manufacturers claim the influx of products from China, like textiles, electronics and iron and steel, already hurts domestic firms.

API deputy chairman Ade Sudrajat told the Post that he might propose “between 10 percent and 20 percent of tariff lines” in the normal track 1 be moved to the sensitive list.

The ministry’s director general for transportation and telecommunication and informatics industries Budi Darmadi said electronics firms should see if their electronic products were sensitive to competition under the FTA or to illegal products.

“If their products are sensitive then a review on tariff schedules is necessary,” he told the Post.

“But if their electronic products are sensitive to illegal products, as has been happening all this time, then stricter quality standards are what we need.”

In response to the Industry Ministry’s initiative, Trade Minister Mari Elka Pangestu said renegotiations were not the only solution.

“The negotiations had been going on since 2003, so [manufacturers] should have known what will happen,” she said.“If finally the problems still remain, [industries] need to assess what their problems are and to find the solutions.”

She said earlier that industries could, for example, improve their competitiveness through an industrial revitalisation programme by revamping their old machinery.


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