logo logo

ASEAN and China FTA to ignite ‘tug of war in trade’

THE JAKARTA POST | Mon, 07/27/2009

ASEAN and China FTA to ignite ‘tug of war in trade’

Mustaqim Adamrah , 11:59 AM | Business

A free trade agreement between the Association of Southeast Asian Nations and China (ASEAN-China FTA) will likely ignite a trade war between Indonesia and China, says an association.

Ade Sudrajat, deputy chairman of the Indonesian Textile Association (API), said last week local producers would likely ask the government to impose a number of tariff and non-tariff barriers — Indonesian National Standards (SNI), anti-dumping measures, or safeguards — as Chinese products would further injure the domestic market once the FTA became effective.

On the other hand, he said, China might consequently retaliate by imposing similar measures.

Dumping occurs when a manufacturer in one country exports its products to another country at a price below the one it charges in its home country or below its production costs, while anti-dumping refers to measures that counter dumping practices by imposing (additional) import duties.

“They [China] may retaliate [by imposing trade barriers] on Indonesian fish and shrimp products if Indonesia promptly imposes anti-dumping [duties] when imports of Chinese textiles soar,” Ade said.

He added Indonesia was currently in a similar trade war against Turkey. Turkey has now imposed anti-dumping duties on Indonesian tires and textiles after Indonesia imposed additional import duties on Turkey’s flour.

“In the end, a trade war is inevitable,” Ade said.

The FTA, which will come into effect on Jan. 1, 2010, will scrap all import duties on textiles, footwear and leather products, ceramics, food and beverages, iron and steel products, petrochemicals and electronics shipped out of China to Indonesia.

Indonesian Anti-dumping Committee (KADI) and Indonesian Trade Security Committee (KPPI) chairwoman Halida Miljani has not responded to The Jakarta Post’s inquiries.

Trade Minister Mari Elka Pangestu also refused to comment.

For Indonesia’s textile industry in particular, according to Ade, the FTA would likely bring more harm than good, as it would lead to the influx of more textile imports into the market, which is already suffering from illegally imported textile products from China.

Imports of Chinese textiles are currently worth about US$900 million, or 15 percent of the $7 billion domestic textile market.

Quoting Chinese Excise and Customs Office data processed from Central Statistics Agency (BPS), Ade said Indonesia’s total imports from China amounted to $14.3 billion last year, mostly manufactured products, while Indonesia exported mostly natural resources to China, like coal, worth $17.2 billion in the same year.

Industry Ministry director for the textile industry, Arryanto Sagala, said his ministry had sent a letter to the Trade Ministry’s international cooperation administration center and secretariat general, asking for the FTA’s implementation to be delayed.

“It’s better to delay the FTA for another five years [due to the ongoing global economic crisis] to protect domestic manufacturers,” he said.

“Also, Indonesia and China are not comparable,” he said.

China’s textile and garment exports amounted to $115 billion in 2006, he said, accounting for about 30 percent of its total production, while Indonesia booked “only” $9.47 billion in textile and garment exports in the same year, accounting for 70 percent of its total production.

 source: Jakarta Post