China to exclude CPO from ASEAN-China FTA plan

Zakki P. Hakim, The Jakarta Post/Jakarta

China is expected to exclude crude palm oil (CPO) products from a planned ASEAN-China free trade agreement by maintaining a tariff wall in a bid to protect its domestic vegetable oil industry from a massive inflow of cheaper CPO products from Malaysia and Indonesia.

Director for regional cooperation at Indonesia's Ministry of Trade, Eliver Radjagoekgoek, said China had included CPO on its sensitive and highly sensitive list of products to be protected against the trade liberalization scheme.

"China wants to put a brake on CPO imports from Malaysia and Indonesia. China has its own (vegetable oil) industry to take care of," Eliver said on Wednesday.

In addition to CPO, China also included wood and paper products on its sensitive and highly sensitive list.

On its accession to the World Trade Organization, China committed to apply the same import tariff on all wood and paper products.

If China applies a lower rate on wood and paper products from ASEAN countries, it must impose the same lower rate on products coming from countries outside the region. China also imports wood and paper products from Brazil and Canada.

Eliver said Indonesia had no objections to China including the products on the exclusion list, as long as all countries received equal treatment when exporting the commodities to China.

However, it was not immediately clear which specific CPO products and wood and paper products were excluded from the liberalization scheme.

CPO and wood and paper products are among Indonesia's top exports to China. Total trade between the two countries reached US$10.2 billion last year, producing a surplus over $1 billion for Indonesia.

Overall, China has 259 categories of sensitive and highly sensitive goods, said the ministry's deputy director for inter and intra-regional cooperation, Retno Kusumo Astuti.

Indonesia has 398 categories of sensitive and highly sensitive goods, including rice, sugar, soybeans, corn, automotive components, textiles, garments and ceramic tableware, Retno said.

The inclusion of certain goods on the sensitive and highly sensitive list was based on the request of local industry players, Retno said.

The ASEAN-China free trade agreement is expected to be formalized during a summit in Vientianne, Laos, later in November.

Under the agreement, most goods traded between ASEAN and China would have their tariffs slashed starting Jan. 1, 2005, eventually reaching zero import tariffs by 2010.

Meanwhile, tariffs on sensitive goods will be slashed starting in 2012, before being fully liberalized in 2017, with the exception of highly sensitive goods which would retain a certain level of import duties.