Amid calls for boycott, RI plans trade pact with U.S.

Adianto P. Simamora, The Jakarta Post, Jakarta

The government is planning to establish a free trade pact with a number of countries outside the region including the U.S., Japan, Chile and South Africa in a bid to help increase exports.

Minister of Trade and Industry Rini Soewandi has set up a special team to study the costs and benefits of the plan. The team include officials from related ministries and independent economists such as Mari Pangestu from the Centre for Strategic and International Studies (CSIS), and Sri Adiningsih from the Gadjah Mada University (UGM).

"We need to expand our free trade pact with other countries so that we'll not be left far behind our neighboring countries," Pos M. Hutabarat, director general for multilateral trade affairs at the ministry, said over the weekend.

A couple of ASEAN countries have set up free trade pacts with other countries outside the region. The Association of South East Asian Nations has already launched its own regional free trade area called AFTA.

Singapore, for example, has set up a free trade pact with Japan, Australia, New Zealand. Singapore is also now in formal talks with Canada, the United States and China to make similar trade mechanism, is studying the possibility to expand it to include Chile and Mexico.

Thailand is also in talks with India, Japan, Australia, New Zealand, South Africa, Brazil, Croatia, Czech and Russia.

"Indonesia's free trade pact so far is only within the AFTA framework," Pos said.

He said that Indonesia would benefit from expanding the free trade pact with other countries because the country has some 130 trading partner countries.

"We are still in a surplus position in our trade with 85 countries," Pos said.

The special team held its first meeting last week, and is expected to submit a proposal to Rini in November this year.

Rini had previously talked with U.S. Trade Representative Robert B. Zoellick about setting up a bilateral free trade pact between the countries.

A report said that the U.S. welcomed the plan, and had in fact promised to help finance the feasibility study for the plan.

The U.S. is Indonesia's biggest export market, accounting for around 16 percent of the total export sales.

Rini has also had similar talks with Japan, another major export market for Indonesian products.

But some analysts have warned that expanding free trade pacts with other countries outside the region could bring damage to local industries which are, for the most part, unprepared for head-on competition with foreign players.

Under the free trade mechanism, the country's market would have to be fully opened for products from the trading partner countries.

The analysts urged the government to put a priority first on improving the efficiency of domestic businesses and eliminating the high bureaucratic costs of doing business here.