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RI not serious about FTA with US, says USAID

28 August 2004

RI not serious about FTA with U.S., says USAID

Zakki P. Hakim, The Jakarta Post/Jakarta

The United States perceived Indonesia as half-hearted in its commitment to establishing a free-trade agreement (FTA) between the two countries, thus leaving the talks in limbo, an official of the U.S. Agency for International Development (USAID) said on Friday.

USAID economic consultant Stephen Wendel suggested that Indonesia should take immediate action to accelerate the talks or face the risk of losing market share in the U.S.

"Indonesia is not serious. If both are serious, it is possible for an agreement," Wendel told The Jakarta Post.

According to Wendel, the U.S. was very concerned about the violation of intellectual property rights in Indonesia, and if the government remained passive in tackling the issue, the U.S. would most likely be reluctant about further FTA talks.

Wendel went on that it was important for Indonesia to pursue an FTA deal with the U.S.; otherwise, Indonesia’s market share could shrink, as other countries were making aggressive moves to forming an FTA with the U.S.

For example, he pointed out that Thailand was now closer to establishing an FTA with the U.S., which might threaten half of Indonesia’s exports to the U.S.

Under the FTA with Thailand, the U.S. is to cut significantly import tariffs for several of Thailand’s export commodities, which would make them more competitive than similar products from Indonesia.

Wendel said the tariff cut, for instance, would make Thai footwear products about 20 percent cheaper than Indonesian products in the U.S. market, while Thai-made women’s and girls’ clothing would be 12 percent lower.

Indonesia exported about US$1.1 billion worth in women’s and girls’ clothing to the U.S. last year, and $602 million in footwear exports. According to latest data at the Ministry of Industry and Trade, the country’s total exports to the U.S. reached $6.4 billion from January to November in 2003.

USAID senior economist, William E. James, said Indonesia had a lot to gain and less to lose in establishing an FTA with the U.S.

As the majority of Indonesia’s top exports to the U.S. were subject to pay high duties, significant cuts under an FTA mechanism would surely boost export volume, he said.

On other hand, U.S. exports would not experience much of a boost, as most key American products have entered Indonesia with low tariffs. Only cars and other motor vehicles, which only accounted for 0.3 percent of U.S. exports to Indonesia, reached $2.4 billion in the first 11 months of last year.

Wendel added that since the U.S. might not gain much from the trade deal in terms of export of commodities, it would propose wider market access for its services including transportation, travel and commercial services.

According to a study by the University of Indonesia, some 50 products had the potential to be included in the planned FTA with the U.S, including textile, apparel, furniture sound recorders or reproducers, natural rubber latex, telecommunication equipment and mollusks and fish.

 source: RI not serious about FTA with U.S., says USAID